Transcript CDH’S THE HEART REPORT

THE
CDH RESEARCH
YEARBOOK
2013/2014
CONTENT
• Foreword
• Ghana’s Political Scene
• Economic Review
• Stock Market Performance
• CDH Research Strategy 2014
FOREWORD
•
• The CDH Research Yearbook
•
highlights key issues in Ghana’s
economy and the stock market with a
view to presenting a summary account
of the preceding year, while looking
forward to the year-to-come. It is put
together by the research arm of CDH
Financial Holdings Ltd; a financial
Services Company in Ghana operating
in the asset management, stock
brokerage, corporate advisory,
commodities trading, short-term
finance, and insurance segments of •
the economy.
•
Ghana’s economy in 2013 faced a high
budget deficit (12% of GDP), a ballooning
wage bill (70% of tax revenue) and
significant increase in public debts and
interest payments. Growth however
remained robust at 7.4%, with the target
for 2014 set at 8%. Inflation climbed back
to double digits (13.2% in November
2013) and may be around 10% for 2014.
Yields on the Government of Ghana
treasury bills could climb back to around
22% in 2014 from 19% as at the close
of 2013.
On the global front, economic growth has
been weak. Advanced economies, buoyed by
significant stimulus packages, bail-outs,
quantitative easing, improved consumer
sentiments and low interest rates, have
started back on the growth path while
emerging countries have slowed with
challenges arising from domestic and
external developments; cyclical growth
patterns, reduced capacity and the aftereffects of capital reversal to the developed
world.
Developing economies still maintain strong
growth despite the weak global recovery.
This has been mainly due to structural
policies fostering favourable business and
investment regimes as well as relatively
better macroeconomic policies. However, the
external environment has become less
favourable for commodity exporting
countries as commodities prices decline and
external financing costs increase.
GHANA’S POLITICAL SCENE
• John Dramani Mahama was
confirmed as the winner of the 2012
Election Polls by the Supreme Court of
Ghana after eight months of legal
challenge launched by the New
Patriotic Party (NPP) disputing the
results as declared by the Electoral •
Commission. The outcome restored
and further enhanced Ghana’s
credentials as a stable democracy with
growing respect for the rule of law.
•
•
The role of the labour unions as civil
society organisations and political pressure
groups came to the fore in 2013 with the
disputes over hikes in Utility prices and the
sale of Government owned Merchant Bank
to private equity firm, Fortis Ghana. There
are indications that in 2014, labour will
continue to be a major pressure point for •
Government to contend with as the issues
surrounding the payment of market
premiums for labour are negotiated in a
January review by Government’s Fair Wages
& Salaries Commission.
The major political parties, the National
Democratic Congress (NDC) and the New
Patriotic Party (NPP) have already began
jostling for the votes of the People in
2016, by trying to hang the tag of
corruption around each other’s neck.
Recent investigations into allegedly corrupt
activities at GYEEDA & SADA have put the
Government under pressure to explain the
reported excesses, and for the President to
prove his declared intolerance for
corruption by moving swiftly to have the
culprits prosecuted.
It will be very important for the
Administration that the measures it has
instituted for addressing the current
allegations of corruption, such as the
Judgment Debt Commission and the GYEEDA
prosecutions, begin to show credible results
to enable the government regain the
confidence of Ghanaians
POLITICAL PARTY ELECTIONS
• Most Political Parties in Ghana are
expected to conduct their internal
elections for polling stations,
constituencies, regional and national
executive officers in 2014. These are to
precede and provide the foundations
for the election of the flag-bearers for
the 2016 General Elections. The
importance of these internal exercises
is more pronounced following the
outcome of the Supreme Court ruling
on the Election Petition which brought
into sharp focus the role of Party
Executives, down to the grassroots
level, in ensuring victory for their
•
parties in General Elections.
•
The ruling National Democratic Congress
(NDC) is expected to have a less terse
internal electioneering period as current
executives are perceived as ‘winnable’
following the 2012 victory and will face
less competition in retaining their seats.
However, there are indications that the
National Chairmanship position will be
keenly fought between incumbent, Dr.
Kwabena Adjei and another stalwart of the
Party, NADMO Boss – Kofi Portuphy. This is
expected to be the highlight of the
elections and if tensions between the two
continue to simmer, could filter down to
the lower level elections. The NDC elections
could also see the introduction of biometric
registration for members and the use of
total member suffrage in electing officers
The New Patriotic Party (NPP) has already
started the process of electing party
officials for the local to the National level.
It is clear that these elections have been
overshadowed by the issue of retaining the
2012 flagbearer, Nana Akufo Addo or
electing a new candidate. However, the
most critical issue for the Party could be
the election of the National Executives as
this is expected to go a long way to
determine who leads the Party.
Special Report – The Global
Picture of Corruption
•
• The 2013 Corruption Perceptions
Index (CPI) measured the perceived
levels of public sector corruption in
177 countries and territories.
• Ghana was ranked 63rd out of the 177
countries with a score of 46 points out
of a 100. Ghana scored 1 point higher
than the previous year, inching to 46
from 45. Ghana was again ranked •
seventh in Africa according to both
the 2012 and 2013 Indexes.
• “We highlight people’s perceptions
and experiences of corruption from
around the world” according to the
Global Corruption Barometer, a
•
research survey also carried out by
Transparency International .
•
Bribery is Widespread - Overall, more than
one in four people (27 per cent) report
having paid a bribe in the last 12 months
when interacting with key public institutions
and services.
Police & Judiciary are the Most Corrupt
Public Institutions – According to a survey,
among the eight services evaluated, the
police and the judiciary are seen as the
two most bribery-prone. An estimated 31
per cent of people who came into contact
with the police report having paid a bribe.
For those interacting with the judiciary, the
proportion is 24 per cent.
Political Parties are the most corrupt
Institutions - Around the world, political
parties, the driving force of democracies,
are perceived to be the most corrupt
institutions. Religious organisations and
Chieftaincy are also seen as among the
most corrupt.
People state they are ready to challenge
the status-quo - Nearly 9 in 10 surveyed
say they would act against corruption. The
majority of people said that they would be
willing to speak up and report an incident
of corruption. Two-thirds of those asked to
pay a bribe say they refused. In Ghana,
most people said they will be willing to
join an organisation to fight corruption.
ECONOMIC REVIEW
• The last review of the economy by the 3. Depreciation of the Cedi – The Cedi
depreciated by an average of 12% against
Bank of Ghana’s Monetary Policy
major trading currencies in 2013. Further
Committee (MPC) maintained the
depreciation is expected in 2014
policy rate at 16%; with the view that
there where no significant risks to the 4. High Public Sector Wages & Labour Agitations
– Public Sector Wages for 2014 is
country’s economic growth prospects
projected at GHC 11 billion or 70% of
in 2014 (Set at 8% by the
non-earmarked tax revenues. Efforts by
Government). However, inflationary
Government to control the impact of this
pressures have increased, Consumer & recurrent expenditure in 2014 is expected
Business Confidence in the economy
to result in further labour disputes and
agitations.
have declined in 2013 and there are
possible vulnerabilities appearing in 5. High Public Debt & Interest Payments –
Public Debt is currently at $23.50 billion
the country’s foreign exchange
(53.5% of GDP). Total Interest Payments for
markets.
2014 is projected at GHC 6.2 billion (20%
of Total Expenditure)
• There are 7 Major Challenges facing the
6. Rising Utility Prices – Electricity & Water
Ghanaian Economy in 2014
Tariffs were increased by more than 50%
1. High Budget Deficits – There was a record
in 2013. The Automatic Adjustment Formula
Budget Deficit in 2012 of 12% of GDP. The
is also expected to result in further
provisional figure for 2013 is 10.2% with a
increases early next year
projected 2014 deficit of 8.5% of GDP
7. The Issue of Unemployment – There have
(GHC 9 billion)
been layoffs in the mining industry; hurt by
2. Inflation on the Rise – November 2013
the low price of gold in 2013. Youth
Inflation rate was 13.2%, above the singleunemployment remains a big issue for
digit target set by the Bank of Ghana. End
government to address.
of Year Inflation for 2014 is also projected
at 9.5%
2014 BUDGET HIGHLIGHTS
• The 2014 Budget Statement was
presented under the theme; “Rising to
the Challenge: Re-aligning the Budget
to meet Key National Priorities”. The
following are summaries of major
policies outlined in the statement;
•
•
•
•
•
•
•
•
Establishment of the Ghana Infrastructure
Fund (GIF) primarily funded by 2.5%
increase in Value Added Tax (VAT)
Removal of taxes on HIV prevention imports
and Printing Materials
Capping of National Stabilisation Fund at
GHC 250 million and using the excess for
debt repayment and the setting up of a
Contingency Fund
Completion of the Gas Infrastructure Project
within the First Quarter of 2014
Issue 10-12 year Government of Ghana
Bonds and the third series of Ghana’s
Eurobond
Weaning off about 12 Subvented Agencies
from Government Payroll
Construction of 2 modern farmers’ markets
in the Brong Ahafo and Northern Regions.
Setting up of a GHC 50 million SME Fund
Indicators
2013
Prov.
2014
Proj.
Real GDP Growth (inc. oil)
7.4% 8.0%
Real GDP Growth (non oil)
5.8% 7.4%
Real GDP (GHC)
32.3b 34.91b
Nominal GDP (GHC)
87.16b 105.50b
Agriculture Sector
3.4% 4.2%
Industry Sector
9.1% 9.1%
Services Sector
9.2% 8.9%
Inflation
13.1% 9.5%
Broad Money Supply (M2+)
17.7% n.a.
Credit to the Private Sector
13.1% n.a.
US Dollar/Cedi
10%* n.a
Pound/Cedi
10%* n.a.
Euro/Cedi
14%* n.a.
Trade Deficit
$2.74b $2.80b*
Balance of Payment Deficit
$884m $1.0b*
Gross International
Reserves
$5.21b $5.60b*
Fiscal Deficit (% of GDP)
10.2% 8.5%
Public Debt Stock
$23.50b $30b*
Public Debt (% of GDP)
53.5% 51%*
Total Revenue & Grants
GHC
GHC 26b
20.8b
Total Expenditure & Arrears
GHC
GHC 35b
29.7b
S p e c i a l R e p o r t – Ta m i n g
G h a n a ’s H i g h I n f l a t i o n
• Ghana has for much of its economic •
history recorded very high rates of
inflation. High Inflation stifles
economic growth and the creation of
employment. We highlight some
important issues that need to be
considered in tackling Ghana’s high
inflation
•
•
Depreciation of the Cedi - The depreciation
of the Ghana Cedi results in higher costs of
imports which feed into prices of imported
goods and therefore high inflation. The
weakness of the cedi against the major
trading currencies is mainly due to excessive •
fiscal spending, strong demand for foreign
currencies and speculative investor activities
(especially in election years). To buck this
trend, the Bank of Ghana must tighten
regulation to ensure business and
commercial transactions done in Ghana are
done using the Cedi as the medium of
exchange; prevent foreign investors from
accumulating major holds in money-market
instruments and bonds, and significantly limit
the repatriation of profits arising out of
business activities that do not provide export
revenues or enhance export activities.
Austerity and Inflation – It can be argued
that Ghana’s foray into single-digit inflation
in 2010 was due to significant austerity
measures in 2009. Government expenditure
in 2009 was 34% of GDP as compared to
41% in 2008. This happened despite the
fact that revenue figures remained at the
same level. There is an argument therefore
for government to employ some austerity
measures in years where inflation is
particularly difficult to tame. This must be
balanced with the view that less government
expenditure can result in short term loss of
growth and employment (Growth in 2009
was 4.1% as compared to 7.2% in 2010).
Growth & Long Term Inflation - A simple
definition of inflation is ‘more money chasing
relatively few goods and services’. By
inference, when we increase the volume of
goods and services, inflation should fall. For
example, the period from 1992 to 2002
witnessed average growth of 4.2% and
average inflation of 27.8% on average.
Ghana’s improved growth of 7.01% on
average from 2003-2012 corresponds with
average inflation rate of 13.40%. Ghana
could therefore look at growth as a long
term strategy in running ahead of
inflationary pressures.
THE GLOBAL ECONOMY IN 2014
• The International Monetary Fund’s
review of the global economy in
October 2013 highlighted the
transitional issues and tensions as the
world emerges finally from the ‘Great
Recession’ that began in 2007. An
analysis of the report reveal possible
structural changes to the world
economy as we know it and it is
Countries with large fiscal deficits must
important for, especially developing
consolidate and undertake prudent inflation
countries, to take note of these
targeting measures.
changes.
3. High Public Debt and in some instances,
high private debt, have become features of
1. There is a stabilisation of commodity prices
most economies and will remain a source
following the upsurge experienced from
of concern for many years to come.
2000 to last year. Countries that are
4. There is a need for a rebalancing of the
dependent on the commodities exports
world economy, with a realignment of
would face less buoyant revenue inflows in
growth sources from consumption to
the future.
investment in advanced economies, and a
2. Global Financial conditions are expected to
reversal from investment to consumption in
tighten and as less money (or more
countries like China. Developing countries
expensive money) becomes available for
must identify and keep strategic positions
developing and emerging countries, there
during this period of transitions.
will be a need for more fiscal discipline –
Special Report – Doing
Business in Ghana: 2014
• The World Bank Group’s Doing
Business Report for 2014 highlights
issues concerning doing business in
189 economies across the world. It
measures and tracks changes in
regulations affecting 11 areas in the life
cycle of a business: starting a business,
dealing with construction permits,
getting electricity, registering
property, getting credit, protecting
investors, paying taxes, trading across
borders, enforcing contracts, resolving
insolvency and employing workers,
among others.
•
Ghana ranks 67th on the index, out of 189
economies – down 5 places from last year.
This is mainly due to the new requirement
for local entrepreneurs to acquire a Tax
Identification Number before registering a
company. Ghana is the highest ranked
country in West Africa and the 5th in Sub
Saharan Africa.
Key Indicators for Ghana (in comparison with
the world’s best performers)
INDICATORS
TIME
COST
Starting a Business
14 Days
[0.5 Days
in New
Zealand]
GHC 250
[$0 in
Slovenia]
Dealing with
Construction
Permits
246.5
Days
[26 Days
in
Singapore]
GHC 7,081
[$995 in
Qatar]
Getting Electricity
79 Days
[17 Days
in
Germany]
GHC
62,614.4
[$0 in
Japan]
Registering
Property
34 Days
[1 Day in
New
Zealand
GHC 200
[$0 in Top
5
Economies]
Paying taxes
224 Hours
per year
[12 hours
per year
in UAE]
22.9% of
Profits
[41.3% in
OECD
Countries]
Enforcing Contracts
495 Days
[150 Days
in
Singapore]
23% of
Claim
[0.1% in
Bhutan]
GHANA STOCK EXCHANGE
• Trading activities on the Ghana Stock
Exchange in the 2013 financial year
was impressive , with a resultant
78.81% upsurge in the GSEComposite Index, to end the year at
2,145.20 points. This compares
favorably with a market return of
approximately 24% in 2012. The
financial stocks also experienced an
upward trend, as indicated by a
71.81% increase in the GSE-FSI to
1,786.60 points; surpassing the 21%
return of the index in the 2012
Financial Year.
•
The sturdy price changes resulted in a
GH¢3.89 million boost in the total market
capitalization to GH¢61,158.29 million in
2013, from GH¢57,264.22 million in the
preceding year.
Indicators
Level
(Dec 31 2013)
% YTD
Change
2,145.20
78.81%
GSE Financial
Stocks Index
1,786.60
71.81%
Volume Traded
280,000,000
-
Value Traded
GHC400 million
-
Market
Capitalisation
GHC 61,158.29
6.80%
GSE
Composite
Index
Top Gainers for 2013
PZ Cussons (339%), Enterprise Group (292%),
CAL Bank (155%), Mechanical Llyod (153%),
Guinness Ghana (137%) Ghana Commercial Bank
(131%), Benso Oil Palm (129%), Unilever
(115%), HFC Bank (113%), Ecobank Ghana
(87%), Fan Milk (86%)
Top Losers for 2013
TRANSOL (-25%), Starwin (-20%), African
Champions (-14%), Trust Bank (-13%)
* Figures as at 31 December, 2013
S TO C K S O N T H E G S E
Listed
Companies
African
Champions
AngloGold
Ashanti
Aluworks
YTD
Change
(2013)
Outlook for
2014
-14.3%
NEGATIVE
Golden Web
0.0%
NEUTRAL
HFC Bank
113.3%
POSITIVE
153.3%
POSITIVE
0.0%
NEUTRAL
-5.6%
NEUTRAL
338.89%
POSITIVE
Standard
Chartered Bank
29.9%
POSITIVE
SIC Insurance
14.7%
POSITIVE
POSITIVE
Starwin
Products
50.00%
NEUTRAL
POSITIVE
Societe Generale
56.3%
POSITIVE
Sam Woode
50.00%
NEUTRAL
Trust Bank
Gambia
-12.5%
NEGATIVE
Total Petroleum
72.3%
NEUTRAL
-5.6%
NEUTRAL
129.3%
POSITIVE
155.3%
POSITIVE
Clydestone
0.0%
NEGATIVE
Camelot
Cocoa
Processing
Company
Ecobank Ghana
Enterprise
Group
Ecobank
Transnational
Fan Milk
Ghana
Commercial
Bank
Guinness Ghana
Ghana Oil
Golden Star
14.3%
NEUTRAL
87.0%
Outlook for
2014
NEGATIVE
NEGATIVE
0.00%
YTD
Change
(2013)
0.0%
0.0%
Ayrton Drug
Benso Oil Palm
Plantation
CAL Bank
Listed
Companies
NEGATIVE
291.7%
Mechanical
Llyod
Pioneer
Kitchenware
Produce Buying
Company
PZ Cussons
58.3%
POSITIVE
86.5%
POSITIVE
131.0%
POSITIVE
Transaction
Solutions
25.00%
NEGATIVE
136.6%
43.5%
0.0%
POSITIVE
POSITIVE
NEGATIVE
Tullow Oil
Unilever Ghana
UT Bank
-8.1%
114.9%
18.4%
NEUTRAL
POSITIVE
POSITIVE
* Figures as at 31st December, 2013
Call
(302) 667 426/668 437
for Further Details on Our Recommendations
CDH RESEARCH STRATEGY 2014
• CDH Research is a dedicated team for
the CDH Financial Group providing
analysis and services in a wide range
of economic, stock market and
industry issues. Its flagship products
include the CDH Economic & Market
Strategy Daily & Weekly, Corporate •
Analysis of Listed & Unlisted
Companies, Indexes & Ratings,
Seminars and Research into very
topical and relevant areas such as
•
Health, Education & Retirement
•
•
CDH ECONOMIC & MARKET STRATEGY DAILY
& WEEKLY
A Report on the Performance of Companies •
listed on the Ghana Stock Exchange as well
as analysis of current economic issues.
CDH CORPORATE ANALYSIS
Regular reports on quarterly and full year •
financial statements of listed companies, as
well as stock recommendations
CDH KNOWLEDGE
Economic, corporate & stock market Indices
tracked on a daily basis
CDH’S HEART
Research on the issues of Health, Education,
Accommodation, Retirement and
Transportation
SHADOW MONETARY POLICY COMMITTEE
A review of Ghana’s economy and prospects
for the future with other industry players
and experts
BUDGET SEMINAR
Presentation & Analysis of the Annual
Budget with our major stakeholders
OUR PEOPLE & CONTACTS
EXECUTIVES
• Emmanuel K. Adu-Sarkodee
Group Chief Executive
LLB, MBA, BA (Hons.)
RESEARCH TEAM
• Prince N. D. Abbey
CDH Research
PhD (Ongoing), MSc. BSc.
[email protected]
• Desmond Nartey
Executive Director, CDH Securities
MBA, MA, BA, CVA
[email protected]
• Peterson Adjabeng
CDH Research
MBA, BSc.
[email protected]
• Martin Asamoah
Executive Director, CDH Commodities
CA, MBA, Bcoms, DEdu
[email protected]
• Seth Aryittey
Executive Director, CDH Asset
Management
MBA, CIMG, ID, BA
[email protected]
CDH House
36 Independence Avenue
North Ridge
Accra
P.O. Box 14911
Accra
Tel: (302) 667 426/668 437
Fax: (302) 662 167
Email: [email protected]
Website: www.cdhgroup.co