REPORT OF THE WEEK (from 08/07/13 to 12/07/13) ABOUT ECONOMICS NEWS ON GHANA
by Dario Galluccio
GCB will target other profitable markets outside Ghana
The GCB (Ghana Commercial Bank) is positioning itself to target identifiable growth opportunities outside Ghana; the Managing Director of Ghana Commercial Bank said GCB was currently focusing on the Ghanaian market, after which the brand would be exported into other markets where it identified profitable growth opportunities.
Instead the Minister of Finance and Economic Planning, Mr. Seth Terkper called on banks to consider ways to increase lending to small and medium scale companies in the export sector as sources of foreign exchange for the country; moreover Mr Terkper noted that currently commodity prices continue to soften which means that export revenue was likely to be lower than planned this year.
Businesses will pay 5% of profits as tax
Businesses (banks, financial institutions, mining firms, Telecom company and brewery firms) will by the end of this year have to set aside five percent of their profits as stabilization levy. It would be applied for a period of 18 months. Government is hoping to raise 88 million Ghana cedis from the Stabilization Levy. (This levy was already introduced by Government in 2009 but was later abolished in 2011 after compliance from businesses).
The Government won’t shut down VALCO
The World Bank thinks that the Volta Aluminum Company (VALCO) has to be shut down because has a “high economic cost” for the country in view of a “hidden” power subsidy Government gives the company, thereby harming the viability of power sector utilities.
The Minister for Energy and Petroleum, Emmanuel Armah Kofi Buah, and the Energy Minister, the chairman of the Parliamentary Select Committee on Mines and Energy, Dr. Kwabena Donkor, has also rejected the World Bank’s position, saying instead of shutting down companies the country should rather think about creating more.
The West African Gas Pipeline has completed the repair works
The West African Gas Pipeline, the first regional natural gas transmission system in Black Africa, has completed the repair works that stalled the supply of gas for well over ten months to Ghana, Benin and Togo.
South African investors pay compensation
The Western Development Consortium Limited, a South African investment firm, has paid a total of GH¢100,000 as compensation to property owners at Tanokrom Kokompe in the Sekondi-Takoradi Metropolis; the payment would pave way for the investors to start clearing the 21.5 acre land to start the construction of an ultra-modern shopping mall in the city, that would be created over 1,000 direct and 10,000 indirect jobs.
5,315 Rural communities to get electricity
The government will connect over 5,315 rural communities to electricity by the end of December 2016. This would increase the access rate from 72 percent to over 93 percent, thereby achieving universal access ahead of the United Nation’s stated world target of 2013. The government intends to increase generation capacity to 5,000 megawatts through a number of strategies, that they include the provision of short to medium-term annual generation road maps with specific planned projects and ensuring that the VRA effectively delivers its mandate of ensuring generation sufficiently and reliably, among others.
Government provides incentives for Real Estate developers
The Government has put in place incentive packages for investors and real estate developers who are ready to partner it to deliver low income affordable housing to the people of Ghana. The incentive packages include tax holiday for five years, exemption from payment of import duty on plant, equipment, machine and other supplies subject to approval by Parliament, exemption from the payment of rent and property rates on temporary by the developers for the sole purposes of the project and land for housing.
The TUC says to Government to abandon the failed economic policies
The Trades Union Congress (TUC) has cautioned government over the general state of Ghana’s economy in the past few years. The TUC said the economy, even if in the last five years has made an aggregate improvement as measured by the 8.7% increase in the GDP and the relative stability in the inflation rate which shot up from 8.8% in January this year to 10.6% in April, has made no real gain in job creation and living conditions among others. The agricultural sector has performed poorly in these years with a decline in growth from 7.2% in 2009 to 1.3% in 2012, also the industrial sector’s growth as observed by the TUC has been fueled by oil and mining sectors largely but the sector is dominated by foreign firms and is highly capital intensive with limited job creation potential.
Ghana is not broke, but economy is challenged
To response to critics, the Minister of Finance and Economic Planning, Mr. Seth Terkper, said Ghana is not broke, but the economy is facing some challenges. He admitted that there were some slippages in the economy in respect of the wage bill and corporate income tax, particularly in the petroleum sector, and the government had discussed that.
The wage bill was a major source of the fiscal slippage of 5.1 per cent of Gross Domestic Product (GDP) in 2012, as it constituted 2.7 percentage points of the slippage and the increasing of that could be eroding the gains of the economy, which grew by 6.7 per cent in the first quarter of last year.
To arrest the situation the government had made some significant interventions, such as the adjustment of the subsidy on petroleum or the re-introduction of the five per cent national fiscal stabilization levy on the profit before tax of selected companies, such as banks, insurance companies, non-bank financial institutions, breweries, mining, tobacco and communication companies.
Furthermore the government had placed a moratorium on the award of contracts and tasked the Ghana Revenue Authority (GRA) to take administrative measures that would help shore up its revenue collection.
Moreover the $1 billion Eurobond came in handy as a critical resource to undertake development projects; the government would not use the entire money for public debt financing, but also a part of the funds would be used to finance the amortization of domestic bonds, pay for counterpart funding for some identified projects and meet capital commitments in the budget.
Mining companies could cut more than 3,500 jobs
Mining companies in the country will begin a massive downsizing of their operations from next month as renewed pressure to cut down on cost heightens with falling gold prices; more than 3,500 permanent jobs will be lost.
Gold prices, which at the beginning of April, was hovering around US$1,600 an ounce has now crashed to low record price of below US$1,200 and if gold remains at current price levels it will be imminent job losses.
Moreover several big companies have canceled or delayed projects, closed mines, and put assets up for sale and fired several workers as the outlook for major commodities worsened.
UK Minister ends Ghana visit
The United Kingdom’s Minister for Africa, Mark Simmonds has completed a successful two-day visit to Ghana. Discussions focused on building mutual prosperity and boosting trade, investment, growth and jobs through a new high-level UK-Ghana partnership.
Mr Simmonds said that Ghana is an ideal partner for the UK not just because of the strength of our existing relationship and the ties between our people but because of Ghana’s impressive economic success and stability.
During his visit to Ghana, Mr Simmonds met Vice President Paa Kwesi Amissah-Arthur, Ministers for Foreign Affairs and Regional Integration and Trade & Industry; he also visited the UK agri-business, Blue Skies, where he set out how £10 million of DFID funding for agricultural investment in northern Ghana would be channeled through the Agricultural Development Company. The funding will help boost investment to boost production and economic growth in some of the country’s poorest areas.
Ghana’s Eurobond issue at risk
Nigeria, Africa’s most populous country and the continent’s largest frontier market on July 2, raised $1billion from the global capital markets in two Eurobond issues – a $500 million 5-year bond at a yield of 5.375 per cent and a $500 million 10-year bond with a yield of 6.625 per cent. The offering was four-times oversubscribed due to Nigeria’s strong fiscal position, structurally sound macroeconomic fundamentals and low debt-to-GDP ratios.
Despite Nigeria’s success, Ghana who is looking to tap the increasingly volatile international debt markets for cash in coming months may be in for a rougher and more costly ride. Ghana has a budget deficit of almost 12 per cent and its current president has a legal cloud hanging over him. Moreover complicating Ghana’s scheduled July Eurobond issue is the changing outlook for the government’s near-term revenues, GDP growth and forex reserves.
The gold mining sector, the country’s second largest export earner, is facing imminent contraction due to falling gold prices. In 2012, Ghana’s mining sector contributed 42 per cent of total merchandise exports and it was the leading contributor to domestic tax collections in 2012, with a total approximate revenue of GH¢1.5 billion ($737million).
With gold prices plunging towards $1,000/ ounce, FDI inflows into Ghana’s gold mining sector and new investments by gold companies will be likely significantly cut back to 2008/2009 levels by about $600million as all global gold companies re-align country units, shut down costly mines, lay off staff and cut back on rising production costs. Total gold mining sector revenues in Ghana in 2012 was over $5.3billion, it is now expected to plunge towards $3billion – a difference of almost $2.3billion.
If the Eurobond scheduled for issuance in July is delayed for whatever reason, the Cedi will plunge and a supplementary budget may have to be laid before parliament to raise extra revenues from energy telecommunications and banks companies and importers.
However in recent years the country’s debt-to-GDP load has risen again and is nearing 60 per cent of GDP. By contrast, Nigeria’s debt-to-GDP ratio is 17 per cent and its budget deficits are around two-three per cent In 2017 Ghana will also have to rollover its $750million 2007 Eurobond issue.
With US monetary authorities in disarray and the squabbling on the FOMC likely to increase rather than abate ahead of Chairman Ben Bernanke’s 2014 exit, Ghana may yet still plunge ahead with a July Eurobond issue even if it means that it pays eight per cent and subscription for the issue is somewhat tepid.
Ghana’s economy is in tatters
According Yaw Osafo Maafo, the former Finance minister, under the Kufuor-led NPP administration, Ghana’s economy under the John Mahama-led National Democratic Congress government is facing a myriad of problems including the huge public debt, the lamentable fiscal deficit, the humongous arrears, unbridled overspending, worsening unemployment, deteriorating utility services, and failing social services.
He explained further that the problems confounding the economy were expressly stated in the Bank of Ghana’s Monetary Policy Committee (MPC) report of 22nd May 2013, where the governor of the Bank of Ghana admitted that “Economic activities have slowed down, and both business and consumer confidence have weakened”; moreover on the report it explicitly clear that lending rates are hovering around 30 percent because of excessive domestic borrowing by government; there is rising cost of business as a result of erratic electricity and water supply; and the inability of business to borrow and grow their activities due to the drying up of credit.
Moreover to alarm the country’s economic situation is that public debt, that under the Mills-Mahama administration it was grown, within 4 years and a half, from GH¢9.5billion at the beginning of 2009 to GH¢38.5billion, meaning that under the NDC, Ghana is adding GH¢6.4billion every year to its public debt.
Investors adopt ‘Wait And See’ attitude
Investors on the Ghana Stock Exchange are expected to adopt a ‘wait and see’ attitude in the next couple of weeks before buying or selling shares on the capital market; the investors are curious about the half year results of the listed companies, that are expected to be released from now till the end of July.
The market had looked good this year, recording an annual return of 57 percent for investors so far.
Meanwhile, the oil and gas sector ended the first half of the year as the worst performing sector on the Ghana Stock Exchange; the major cause of this performance is caused by the poor performance of Tullow Oil, which its annual return was negative 15.9 percent, whereas there was a good performance by Total and GOIL.
However, the insurance sector accrued a 77 percent return for investors to become the best sector followed by the Fast Moving and Consumer Goods Sector.
Ghana will offer first 7-Year Bonds with two second-half sales
Ghana will sell 200 million cedis ($98 million) in two issues (the first next month and the second one in November) of seven-year bonds, the first time the West African nation is offering debt of the duration as it seeks to extend the yield curve on government debt. No dates for the sales, which will be open to foreign and domestic investors, were given.
Moreover three-year and five-year bonds, which are traded over-the-counter by banks, are also listed on the Ghana Stock Exchange for secondary trading. Ghana will sell 600 million cedis five-year bonds in September, according to the Bank of Ghana, following on three sales of three-year debt in the first half of the year: the country also plans to offer $1 billion in its second Eurobond sale this month, according to the Finance Ministry.
PEF wants government to stop application of new tax increases
The Private Enterprise Federation, PEF, wants government to halt implementation of new tax hikes, because they would not help businesses: in fact the levies increase the cost of doing business and negatively affect the operations of businesses, as they reduce the amount of returns to finance business expansion and create jobs.
Mining sector contributes 27% of national revenue
According to Aljhaji Inusah Fuseini, Minister of Lands and Natural Resources, the Mining industry in 2012 contributed 27 per cent of government revenue collected by the Domestic Tax Division of Ghana Revenue Authority. The mining sector has produced 4,313,190 ounces of gold, which is the highest ever in the history of the country, resulting in export revenues of more than 5.6 billion dollars.
Ghana’s NTE earnings fall in 2012
Ghana’s non-traditional exports, NTE, earnings fell 2.43 per cent to $2.364 billion in 2012 compared with $2.423 billion in 2011. The main cause is the drop in the average price levels of some key product, as the cashew nuts, cocoa paste and canned tuna; to be precise the cashew nuts drop 16%, the cocoa paste 11% and the canned tuna 33%.
However Mr Gideon Quarcoo, Chief Executive Officer of the Ghana Exports Promotion Authority (GEPA) is still optimistic that despite the 2.43 percent decline in NTE earnings for 2012, the target for 2013 which is $3.3 billion is achievable; but Ghana needed to redouble her efforts.
First Capital Plus will start to be universal banking
The First Capital Plus, the largest Savings & Loans Company, is ready to go into universal banking probably by the end of this year.
Ghana’s economy is robust
To response to critics by the main opposition New Patriotic Party (NPP) , the Minister of Finance and Economic Planning, Mr. Seth Terkper, said Ghana’s economy is not in tatters. Mr Terkper said the stabilization levy introduced by the former Kufuor administration, during the global food crisis, is no different from what the current Mahama administration is doing. Moreover he told that the government is only making efforts to “re-align the budget” and added the refinancing a loan is not borrowing to pay interest.
The minister also denied claims that the government has introduced five new taxes to shore-up revenue due to the precarious nature of the country’s coffers.
Government will conclude Interim EPA by 2014
Government would by the end of the first quarter of 2014, conclude a deal with the European Union (EU) on an interim Economic Partnership Agreement (EPA) to protect the country’s export products to the EU market. The EPA is a scheme to create a free trade area between the EU and the African, Caribbean and Pacific Group of States.
Government approves Gh¢22 million for skills development
The Government through the Skills Development Fund (SDF) has approved GH¢22 million grants for skills development; this is to support the acquisition of new and innovative skills and technology by 78 small, medium and large scale industries, training and research institutions. Moreover it will also be used to acquire new and innovative technologies in informal and formal sectors of the economy, specifically in agriculture, textiles, science and technology and service sectors respectively.
Inflation rises to 11.4% in June
The Ghana Statistical Service (GSS) has announced an increase in the general price level of goods and services for June 2013. The year-on-year inflation rate grew to 11.4% in the month of June compared to 11.1% in May 2013.
The monthly change rate for the month also stood at 2.6 percent in relation to the 2.8 percent recorded for May.
The increase in fuel prices contributed largely to the recent inflation figures; but, anyway, the analysts predict that inflation will reduce during the harvest season.
Minister calls for investment in manufacturing sector
Mr Haruna Iddrisu, Minister of Trade and Industry, has called on foreign investors to venture into the manufacturing industry to help create jobs for the unemployed youth.
Mr Iddrisu on Wednesday had a meeting, at his office in Accra, with Mr Ian Lee, the Centre Director of International Enterprise (IE), Singapore.
During the meeting the minister said that Ghana, as a lower middle income country, needs for investors to invest in the manufacturing industry for the growth of the economy; he also promised that government would give two -year tax incentive to any company that would invest in the agro-processing industry.
In the other part Mr Lee said IE is a government agency with the objective of driving Singapore’s external economy and its office in Ghana aims to be Singapore’s window to the ECOWAS (Economic Community of West African States) sub-region to promote and facilitate economic partnerships on a governmental and private sector levels. Moreover he said 534 Ghanaian civil servants have been sponsored by Singapore to build their capacity in the various sector of the economy.
Royal Jordanian Airline upbeat about Ghana
Royal Jordanian Airline is upbeat about business prospects in the country as it becomes the latest airline from the Middle East to join the fleet of airlines flying in and out of the country.
Ghana is the first station in West Africa where the airline would be plying the Accra-Lagos-Amman route.
Last Wednesday, during the inaugural flight in Accra country and Airport Manager of Royal Jordanian, Mr Anir Nosrati, stated that the airline would introduce two flights a week and increase the number as business improved.
Ghana will benefit from the US power initiative
Ghana and five other African countries, Ethiopia, Kenya, Liberia, Nigeria and Tanzania, are to benefit from US President Barack Obama’s new initiative dubbed: “Power Africa,” which aims at building on Africa’s power potential.
The purpose of this action is to to double access to power in sub-Saharan Africa and to build on new discoveries of vast reserves of oil and gas as well as the potential to develop clean geothermal, hydro, wind and solar energy.
After the President Obama’s trip, which was done in Senegal, South Africa and Tanzania, Mr Grant Harris, who doubles as the Special Assistant to President and Senior Director for African Affairs, said that this trip showed a strong signal of the significance of sub-Saharan Africa to US interest. Moreover it was also to make a push to deepen US investments in Africa’s development, strengthening democratic institutions and investing in the next generation of African leaders.
Ghana and the rest of the five countries have been chosen because they had set ambitious goals in electric power generation and are making the utility and energy sector reforms to pave the way for investment and growth.
“Power Africa” initiative is expected to also partner Uganda and Mozambique on responsible oil and gas resources management.
According to Mr Harris had promised to commit more than $7 billion in financial support over the next five years to the effort, moreover the United States Agency for International Development would also provide $285 million in technical assistance, grants and risk mitigation, to advance private sector energy transactions and help governments to adopt and implement the policy, regulatory and other reforms necessary to attract private sector investment in the energy and power sectors.
Additionally, the Millennium Challenge Corporation would invest up to one billion dollars in African power systems through the country compacts, to increase access and the reliability and sustainability of electricity supply through investments in energy infrastructure, policy and regulatory reforms and institutional capacity building.
The Stanbic Income Trust Fund rises
The Stanbic Income Trust Fund (SIFT), a unit trust, rose by 24 per cent in value from GH ¢3.8million in 2011 to GH¢4.7million in 2012.
Announcing the performance of the fund at the second Annual General Meeting of SIFT, Portfolio Manager at SIMS, Mr Kwabena Boamah, said despite a minor drop in the fund’s net returns from 20 per cent in 2011 to 16 per cent in 2012, the fund had outperformed its benchmarks over a two-year period by cumulatively returning 39.5 per cent.
The breakdown in the asset distribution at year end 2012 was GH¢3.2million in bonds, GH¢0.2 million in equities, GH¢1.1 million in fixed deposits and GH¢0.2million in treasury bills.
Ecobank Ghana celebrates excellence
Ecobank Ghana is considering the extension of its services to the Upper East and Upper West Regions in the near future, as part of its branch expansion drive. Currently, the Bank has 78 branches and 205 automated teller machines (ATMs) in eight out of the country’s 10 regions.
As far as the three northern regions are concerned, Ecobank has a branch in Tamale that caters for its customers in that part of the country.
Mr George Mensah-Asante, Executive Director and Head of Domestic Banking of Ecobank Ghana , said the Bank’s Management was presently studying the local environment in those parts of the country to enable it to finalize its plans with regard to the opening of more branches in the North.
Ecobank Ghana was incorporated in 1989 and commenced business in February 1990 as a merchant bank, operating as a subsidiary of Ecobank Transnational Incorporated (ETI), a bank-holding company which is currently present in 33 African countries and transacting in 22 currencies.
Ghana’s Economic Crisis: The Attitude of Ghanaians Must Change
The Greater Accra Regional Chairman of the National Democratic Congress (NDC), Joseph Ade Coker, says the country needs to find a pragmatic way of solving the economic situation of the country instead of playing politics with it.
According to him, the economic crisis facing the country now, did not start in the current administration, the National Democratic Congress (NDC), but from previous administrations and so there is the need for the country to come together and find a lasting solution to the problems.
He said that the inability to rectify and sustain base economic structures and to don’t produce enough energy to propel economic activities has resulted in the current crisis.
He added that there is the need for the country to have a common economic policy so that even if there is a change in government, that policy will still be used.
Below the trend of the week of the GSE – CI (Ghana Stock Exchange – Composite Index)