Kofi Ahovi

A nationwide road show organized by the Venture Capital Trust Fund has revealed challenges and opportunities for the venture capital industry around the country. To build on its already veritable successes, these challenges will have to be met and the opportunities exploited, reports TOMA IMIRHE. Last week, the Venture Capital Trust Fund, VCTF completed a three month nationwide road show campaign which has taken it around the country to educate potential business promoters and the general public about the alternative source of financing in the form of equity and quasi equity which the trust fund seeks to promote in the Ghanaian financial market. The road show started on August 16 in Ho, the capital of the Volta Region and was concluded last week in Accra. To be sure, the road show was a pertinent one. The VTCF provides support to small and medium sized enterprises (SMEs) by providing low cost, long term equity and quasi equity capital through special entities called Venture Capital Fin

By Kofi AHOVI The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) has started its quarterly meeting to review the health of the national economy. The committee usually considers developments within the economy and reviews them against the backdrop of the international economy to which Ghana’s economy has both direct and indirect connections. It would look at the financial sector and trace the pattern of loans by the banks and also look at trends in inward remittances by embassies, Non Governmental Organizations (NGOs) and individuals into the country, among others. The committee will also examine core inflation behaviour, domestic receipts and payments, as well as foreign receipts and payments. The behaviour of world market prices of primary commodities, such as gold, cocoa and crude oil, is of immense importance to the economy, which exports mainly primary commodities but imports everything from capital goods to consumables. The last time the committee met was in September,

By Kofi AHOVI The Association of Ghana Industries (AGI) has proposed to government an increase in the withholding tax for foreign suppliers of service from 15% to 25%. According to the president of the association, Nana Owusu-Afari, this would put them at par with local companies which are paying 25% corporate profit tax. The current withholding tax of 5% applied across board for foreign suppliers of services makes local entrepreneurs who are subject to 25% corporate tax, plus all other payroll taxes, uncompetitive, especially in the supply of services in the extractive sectors of the economy. For this reason, the withholding tax on foreign suppliers of services was increased from 5% to 15% in the 2011 budget statement and economic policy of government. The AGI is however of the view that the 15% is still low. It made the proposal last week to state its position on the 2011 budget statement of government presented to parliament a fortnight ago. AGI also recommended to government to rev

By Kofi AHOVI Based on projected revenues and expenditures up to the end of the 2010 fiscal year, government has projected a fiscal deficit for the full year to be GH¢2.51billion, equivalent to 9.7% of Gross Domestic Product (GDP). The projected higher than originally expected fiscal deficit is mainly as a result of the projected higher disbursement of project loans from the country’s development partners than was earlier estimated. Provisional data on the implementation of the budget for the first three quarters of 2010 indicate that revenues were below the budget target by 1.8%. On the other hand, expenditures were higher than estimated by 8.0%. Given the performance of revenues and expenditures for the same period, the overall budget balance showed a deficit of GH¢2.3 million. This is equivalent to 8.8% of GDP, compared with a budget target of a deficit equivalent to 7.6% of GDP. The bigger than expected deficit is mainly as a result of increased disbursement of project loans than w

By Kofi AHOVI The government has reconsidered its decision to transform the Export Development and Investment Fund (EDIF) into a non-bank financial institution. According to the government, the current operations of EDIF bar any unnecessary government or political interference and thereby giving it the free hand to operate. The Minister of Trade and Industry, Hannah Tetteh, explained to BusinessWeek during the meet-the-press session last week, that considering the fallouts from the Micro-finance and Small Loan Centre (MASLOC) where issues of political meddling were raised and the huge record of non- payment of loans, the government decided to maintain the status quo of EDIF The previous government, under President John Agyekum Kufuor, was considering the restructuring of EDIF as a non-bank financial institution to enable it to operate efficiently. This was because exporters were complaining about their inability to access the fund through the designated commercial banks. EDIF funds we

By Kofi AHOVI The Ghana Free Zones Board (GFZB) has approved a total of 13 out of 23 applications received from investors for the first half of 2010. Interestingly, the Board received a total of 13 applications for the first half of this year, but there was a backlog of 10 applications from 2009 for consideration. The 13 approved companies were made up of two each in the service sector and commercial sector and nine in the manufacturing sector. The total capital invested by the enterprises for the first half of this year is estimated at US$122 million. The value of production by the enterprises for the same period is US$431 million, while the value of export is US$691 million. Employment figure recorded for the same period is 30,969 comprising 50,006 Ghanaians and 963 expatriates. Total duties paid on sales into the local market as at the end of the first half year of 2010 is estimated at US$1.10 million, while an estimated amount of US$641.939 was spent on training Ghanaian employe

By Fred SARPONG The Collateral Registry (CR), a subsidiary of the Bank of Ghana (BoG), which is mandated to principally register charges and collaterals created by borrowers to secure credit facilities provided by lenders is expected to be fully automated next year. It is also aimed at ensuring that its services are accessible to all participants and stakeholders of the credit market, particularly borrowers and lenders. BusinessWeek learnt that the automation is in collaboration with the International Finance Corporation (IFC). Under the Borrowers and Lenders Act, CR is the first collateral registry in Africa to be established in Ghana by the Bank of Ghana. Sources at the CR indicated that measures were far in advance to start the full operation of the automation next year. The CR also provides an avenue to lenders to search for information on the existence of relationships between lenders and borrowers as they relate particularly to movable and immovable collateral(s). As a provision

By Kofi AHOVI Data released by the Bank of Ghana (BoG) last week indicate that the banking sector continues to be well capitalized, profitable and liquid. Total assets of the industry as at end of September 2010 stood at GH¢15.6 billion, representing a growth of 29.1%, compared with GH¢14 billion as at December 2009. The increase in assets was due mainly to an increase in deposits. The banking industry’s Capital Adequacy Ratio (CAR), which is a measure of the industry’s ability to withstand unexpected losses using a bank’s own shareholders capital, increased from 14.9% in December 2009 to 19.1% in September 2010. The Non Performing Loans (NPL) ratio, having ended 2009 at 16.2%, peaked at 20% in February 2010, but has since been trending downwards and was 18.1% at the end of September 2010. NPL measures the loan portfolio quality of banks and is defined as the ratio of loan losses to gross advances. The Bank of Ghana credit conditions survey conducted in November 2010 shows some improve

By Kofi AHOVI The trade balance for the first nine months of 2010 deteriorated by US$332 million, due mainly to increased imports. Exports registered a growth of US$1.7 billion to US$5.9 billion during the period, representing 40.4%, while imports increased by US$2 billion, representing 34% growth in year-on-year terms to nearly US$8 billion. Export earnings during the first three quarters improved on the back of strong increases in volume and prices of gold and cocoa. The financial and capital account surplus for the first three quarters was estimated at US$1.9 billion due to larger than anticipated Foreign Direct Investments, as well as large portfolio investments from non-residents. FDI flows were estimated at over US$1.3 billion of which the oil sector accounted for a significant portion. Portfolio investments were in excess of US$550 million. These developments in the financial and capital account were offset by adverse developments in the current account which recorded a defi

By Kofi AHOVI Commercial banks’ interest spread, which is the difference between the average of the lending rates and the average deposit rates, insisted on by the banks, has narrowed significantly by 87 basis points. The average base and lending rates of the Deposit Money Banks (DMBs) declined between August and October, this year, as the average base rates, quoted by the banks, declined by 93 basis points to 26.2%, while the average lending rates declined by 87 basis points to 27.6% over the same period. The average deposit rates of the commercial banks were unchanged at 9.5% between August and October, this year. The share of short-dated government securities went down to 36.6% in October 2010 from 38.8% in August 2010. A strong non-resident investor demand has continued to contribute to the lengthening of the average maturity. Interest rates declined over the entire spectrum of the yield curve. Between August and November, the 91-day Treasury bill rate declined from 12.7% to 12.3%.

By Kofi AHOVI Construction work has commenced for the establishment of a Perishable Cargo Centre (PCC), estimated at US$2.5 million at the Aviance Cargo Village in Accra The PCC, which will store fruits and vegetables for export, is expected to be part of an integrated cold chain for the horticultural sub-sector, which is required to achieve better produce quality and higher export market prices. It would also enable exporters to maintain produce quality to meet international standards of the high-end export market. The project, funded by the Millennium Challenge Corporation (MCC) of the United States, is being implemented by MiDA, Ghana. Hannah Tetteh, Minister of Trade and Industries, performing the sod-cutting ceremony, called on exporters of horticultural products to take advantage of the facility to protect their produce to meet international certified standards. She expressed dissatisfaction that some stakeholders in the international export community complain

By Kofi AHOVI Most universal banks in the country continued to ease their credit stance on loans or credit lines to enterprises as at end October 2010. The Bank of Ghana Credit Conditions survey recorded 48.12% in November, compared to 50.04% as of August 2010. Margin on average loans and the maximum size of the loans offered were the main contributing factors for the easing of credit stance for enterprises. Small and medium sized companies (SMEs) access to credit improved for the first time in 2010 due partly to reduction in margin on average loans. This development helped to improve overall credit conditions in the last quarter of this year. The access of large enterprises and households to consumer credit also continued to improve. Expectations regarding general economic activity, competition among commercial banks and reductions in margins on average loans contributed to the net easing of credit. However the credit stance on mortgage finance continued to tighten during the period.

By Kofi AHOVI The Board of Directors of United States of America’s Millennium Challenge Corporation (MCC) has declared Ghana eligible to submit a proposal for a second compact. Ghana is currently implementing a five-year $547 million compact due for completion by February, 2012. A statement issued by the US Embassy in Accra last week said the MCC Board, which approved of Ghana’s eligibility, noted that second compacts are contingent on successful completion of first compacts, continued good policy performance, development of proposals that have significant potential to promote economic growth and reduce poverty, and availability of funding. Qualifying for a subsequent compact is harder than qualifying for a country's first compact, it added. “This was the first MCC Board Meeting since President Obama announced the U.S. Global Development Policy in September,” the Embassy statement quoted MCC Chief Executive Officer Daniel Yohannes. “MCC’s approach to development, which focuses on e

The World Bank is providing training in agricultural risk management to various institutions in Ghana and the rest of Anglophone West Africa to equip them to identify opportunities and develop complementary products that help mitigate farmers' risks. The training programme aims to build the capacity of institutions in West Africa by providing the knowledge and skills required to design, price and implement agricultural index-based weather insurance programmes. It is a key step to helping institutions to identify opportunities that they could tap into by developing financial products that would help limit the impact of bad weather on farmers' productivity and profit. Malawi, Kenya, Ethiopia and Burkina Faso are some of the African countries piloting index-based weather risk management programmes. Ghana will also soon run a pilot agricultural insurance scheme with the support of the German Technical Cooperation (GTZ). "By sharing knowledge on index-based weather insurance wi

An Analysis by Michael N.A. COBBLAH (Country Representative, Ecobank Development Corporation) It has been two-years of continued macro-economic improvement, notwithstanding the usual dissatisfaction that the average Ghanaian cannot relate to these improvements. Even though the country still faces many basic infrastructure and business bottlenecks, exchange rate stability, sticky interest rate drops and a commendable downtrend in inflation are encouraging signs of an improved economy, especially when compared with the levels in 2008 and in the first half of 2009. The austere fiscal framework of government has translated into modest inflationary rates and against this backdrop interest rates maintained a commendable downward trajectory. A stable cedi, courtesy of IMF/World Bank foreign exchange injection, has made business planning practical. Moderate export gains and the effect of foreign direct investments, which assumedly were geared towards the upstream oil sector, also supported th

By Jeorge Wilson KINGSON Government is expecting to derive estimated revenue of GH¢330 million from the (Tema Oil Refinery) Debt Recovery Fund for the 2011 financial year. Deputy Minister for Finance and Economic Planning, Seth Terkper, announced this recently when he met the Finance Committee of Parliament during the consideration of the Debt Recovery (Tema Oil Refinery Company) Fund (Amendment) Bill, 2010. The bill repeals Act 713 and amends the Tema Oil Refinery Act 2003 (Act 642) to replace the schedule and increase the levy on specified petroleum products. It seeks to replace the schedule to the Act with a new one that specifies new levels of debt recovery levy on petroleum products. The new bill, as passed by parliament recently, increases the debt recovery levy on the various petroleum products to include eight pesewas on each liter of Premium And Gas Oil, three pesewas on a liter of Marine Gas Oil (MGO), four pesewas on a liter of Residue Fuel Oil (RFO) and five pesewas on a li

By Kofi AHOVI Trust Bank Limited - Gambia (TBL) has announced a takeover offer to acquire 100% of the ordinary share capital of Bayba Financial Service Limited. The rationale for the proposed offer is that TBL offers provisional foreign exchange services and, according to research, the development impact of remittances on recipient householders in developing countries is greatly enhanced by channeling funds through formal financial institutions. Bayba has been highly profitable since its inception and its acquisition will create a valuable source of foreign currency which will further help to stabilize the flow of foreign currency into the country. The proposed offer would be for an aggregated consideration of US$300,000 to be settled in cash and it would be for the entire shareholding of Bayba. Bayba is a money transfer company which commenced operation in 2007 and specializes in remittances. It has exclusive rights with Bayba UK for the transfer of money inter alia between the UK and

After two consecutive years of austerity driven deflationary economic policies, Ghanaians can at last afford to look towards some degree of respite in 2011, reports TOMA IMIRHE. The average man or woman on the street can take heart from the optimism expressed by both public and private sector chieftains that liquidity will return to the economy from this year as government opens its spending taps again. Basically they attribute this to the expected new revenues from oil and gas production. Of course the actual situation is more complex but still gives no less cause for optimism. To be sure, the Mills administration has good reason to be confident enough to begin loosing the tight rein with which it has held back fiscal spending so far. Simply put, the travails through which Ghanaians have gone over the past two years have yielded considerable dividends as macro-economic stability has more or less been restored. Having inherited a fiscal deficit of a record high of 14.8% of Gross Domes

The Ghana Medical Association (GMA) has signed a two-year agreement with PZ Cussons Ghana Limited to promote hand washing with Camel antiseptic across the country. The two institutions will join forces and embark on education campaigns to promote preventive health in the country. The president of GMA, Emmanuel Adom Wilful, signing the agreement on behalf of the medical association, commended PZ for the initiative and assured of maximum cooperation from the association. He added that the agreement is two years and they would look forward to extending it to at least 15 years. He emphasized on the need to always wash hands with disinfectants to reduce avoidable infections. “When one washes the hand with ordinary water about 90% of the germs are washed away and when washed with water and soap about 98% of germs and bacteria are taken care of, but when one washes with a recognized and proven disinfectant about 99% of all bacteria are killed,” he cautioned. Jim Judson, MD of PZ, explaining G

By Fred SARPONG After a continued downward trend for 18 consecutive months, inflation for January 2011 is expected to go up due to the fuel price increases introduced a few weeks ago. “Because the fuel price increase affects the distribution chain, it is very difficult for prices of goods and services to come down,” Magnus Ebo Duncan, the head of Economic Division at the Ghana Statistical Service (GSS), has warned. Duncan stated this when he released the December 2010 rate of inflation statistics in Accra last week. According to him, it is very difficult to say the downward trend of inflation has come to an end as a result of the fuel price increases in early this month, but was sure that the index will definitely go up, although he did add that “But we cannot rule out it coming down.”. Meanwhile, figures released by the the Ghana Statistical Service (GSS) indicate that the general price level in the country went up by 8.58% in December 2010, relative to December 2009. The rate is 0.50

By Fred SARPONG The National Communications Authority (NCA), the regulator of the telecommunications industry, is expected to issue new licenses for television, including digital television, and existing licenses are to be renewed. BusinessWeek learnt that this is subject to the payment of appropriate fees and meeting other technical requirements that the NCA may determine. The Ministry of Communications has announced that issuance of digital broadcasting licenses will begin in March, this year. This follows Cabinet’s approval of recommendations of a technical committee that was set up to facilitate Ghana’s migration from analogue to digital broadcasting. According to the ministry, a national digital migration implementation body will be set up by the end of this month to facilitate a cost-effective and timely migration from analogue to digital broadcasting within a space of three years. The Minster of Communications, Haruna Iddrisu, said the government is hoping to complete the migrat

By Kofi AHOVI The World Bank has projected that Ghana’s economy would grow by 13.4% in 2011 before dropping to 10% in 2012 making it the fastest growing economy in Sub-Saharan Africa. This figure is significantly higher than the 12.3% projected by government of Ghana itself in its 2011 budget statement. Launching the bank's global economic prospects report via a video-conference, Andrew Burns, Manager of Global Macroeconomics in the World Bank's Prospects Group, said Ghana was still in position to register strong economic growth without the oil sector, particularly from construction services as large infrastructure projects were being undertaken. He said Ghana's economy benefited from a strong rebound of both volumes and prices of gold and cocoa, increase in tourism, and higher household and government spending last year, with economic growth rate estimated at 6.6% in 2010. However, Burns cautioned that if the inflows from the oil sector in Ghana were not managed

By Kofi Ahovi Toyota Ghana Limited has launched a new maintenance service dubbed Express Maintenance Service (EMS) in the Ghanaian market. The objective of the EMS programme is to improve customer satisfaction and convenience by drastically reducing the service lead-time of periodic maintenance and guarantee quick delivery time by utilizing Toyota Production System concepts. The target service lead-time from reception to vehicle delivery is about one hour, far less than the previous time. The service is very reliable as it ensures safe and high quality job execution. A pilot was successfully run on this project from September last year and the exercise was well appreciated by clients. Toyota plans to extend this service to Kumasi later in the year while the other branches would be added in subsequent years. Currently, Ghana is the first country in sub-Saharan Africa and fourth in Africa as a whole to launch this programme after Egypt, Algeria and Morocco. Toyota Production System is

Ghana has commenced oil production and export right on schedule raising the country’s economic growth potentials, reports TOMA IMIRHE Finally, Ghana has become an African oil producer. In December last year, Tullow Oil and its partner companies kept to their promise of commencing oil production before the end of 2010, with a lavish official first oil pour ceremony on December 15. The significant of the ceremony was illustrated by the fact that it brought together the incumbent President of Ghana, John Atta Mills, and his two predecessors, Jerry John Rawlings and John Agyekum Kufuor, for the first time since American President Barrack Obama visited the country in mid-2009. Considering that there is little love lost among the three men, this emphasizes just how much the Jubilee oilfield means to Ghana. Initial production from the Jubilee Oilfield off the shores of Cape Three Point in the Western Region of Ghana is just 55,000 barrels per day (bpd) but by the second quarter of this year,

British Airways (BA) believes that 2011 holds even greater prospects for Ghana than the previous year. Paul Dhami, BA Country Manager, looked back at an interesting year for the industry and expects this “reinvigoration” to impact the airline’s operations in the country. In a press statement, Dhami noted that British Airway’s response to the global financial crisis saw improvements in business within the previous financial year. “Across the world, premium travel, as well as our cargo business improved,” Dhami explained. He also pointed out that after receiving approval for the merger with Iberia, a “strong and extremely competitive global airline proposition” now exists for customers. On the local front, Dhami is “especially encouraged” about prospects for the new financial year. “We saw a seven per cent increase in local passenger volumes in the previous year. This is in spite of increased local competition, and reduced corporate travel budgets,” he explained. Dhami said that customer

The World Bank board has approved a US$215 million Poverty Reduction Support Credit (PRSC) to the Government of Ghana. The goal of the credit is to support the government’s efforts to consolidate ongoing fiscal stabilization and promote the development objectives set in the Ghana Shared Growth and Development Agenda (GSGDA) Ghana’s National Medium Term Development Policy Framework for 2010-2013. Over the last decade Ghana has received a total of six Poverty Reduction Support Credits from the World Bank, averaging US$100 million per year in budget support between 2003 and 2008, to support implementation of the Ghana Poverty Reduction Strategy (GPRS I and II). After the fiscal crisis of 2008, an agreement was reached to increase budget support in a countercyclical manner to help Ghana reduce its macro-imbalances in a way that does not hurt growth, the process of job creation, and the poor. Accordingly, a record total support of US$300 million was delivered in 2009, and US$215 million no