After being exposed to treasury bills and bonds in her university days, Martha, an investment banker, has now increased her appetite for the risk-free instruments.

Oftentimes, she is either redeeming matured securities or asking her bankers to rollover maturing ones, depending on the prevailing interest rates and/or her projections for the coming months.

Despite her deep knowledge in the rules governing the sale and redemption of the risk-free instruments, Martha is deficient on the processes that her purchases or matured securities pass through before the required amount of money is credited at or paid to her by the Bank of Ghana (BoG) on behalf of the government. However, she is not alone.

Like Martha, many people with rising appetite for T-bills, public or corporate bonds barely know what goes on behind the scenes after their purchases go through.

All they know is that their commercial banks take the money to the government through BoG, which keeps or uses it and refunds the said amount together with the interest or principal amount upon maturity or termination of the purchase. What transpires in-between is virtually none of their business.

This is not surprising. In a country where financial literacy is still a luxury (less than 30 per cent of adults have access to bank accounts), not many will care to know about the nitty-gritties of investments.

The same applies to the equity market, where shares of listed companies are traded on and/or bought from the Ghana Stock Exchange.

So what happens after an investor successfully pays for a particular type of investment instrument such as T-bills and bonds?

Middleman’s job
For every purchase made of any of the short-term securities, an account comprising the details of the investor is often opened at the Central Securities Depository (Gh) Limited (CSD). Thus, in-between the purchaser and the issuer BoG, which acts on behalf of the government in matters of this nature, is the CSD, which holds the data of all patrons.

At the last day of trading in September 2016, the CSD had opened 828,048 of such accounts, which it managed on behalf of the investors, their partner banks and the BoG.

These accounts comprised individual and institutional, as well as local and foreign investors, who had invested in one or more of the debt securities — T-bills, GoG bonds, Ghana Cocoa Board or BoG or any of the corporate bonds on sale and equity instruments in the market. As a safe haven for investor information in the country, the CSD keeps track of such purchases, their respective dates of maturities and the amounts involved.

It then uses that data to advise the BoG, in the case of GoG securities, of maturing debts that require settlement.

The advice is done through a technique called Corporate Action Payment or Settlement.

Benefits

Although barely known, corporate action settlements ensure that investors in government securities are paid their respective due principal and the interest amounts on the designated maturity and interest payment dates for their investments.

Given that securities keep changing hands, an efficient corporate action settlement process, as currently exists, helps the BoG to determine the real owners of the securities after they have been moved in-between owners on the secondary market.

“This helps the issuer or the paying agent to ensure that the right investor is paid when the time comes,” the CEO of CSD, Mr Stephen K. Tetteh, stated.

“When the security matures, we generate the entitlement file. It is that file that will tell you the investor that qualifies to receive payment and the bank through which the investor will receive payment.”

“The file is then sent to BoG and they will pay the bank involved and the bank also pays the clients,” he added.

At the moment, the depository undertakes two forms of corporate actions — the interest payments and maturity payments.

Interest payment is limited to bonds and notes, which are interest or coupon bearing, because payments to bond/fixed note investors are done after every six months. The CSD normally ensures that the interest on any interest bearing security purchased is divided into two – semi-annual periods – in the case of a one-year bond, and paid to the investor in two tranches.

This it does by generating, in tranches, the payment schedule on the note and forwarding same to the BoG or the issuer for payment.

However, in the case of maturity payment, which applies to T-bills and other securities that are not interest-bearing, the CSD normally advises the issuer to pay the nominal value or the principal amount to qualifying investors.

Instilling investor confidence
Money is a coward and so are investors. As a result, market infrastructure such as the CSD and its array of services are needed to assuage the fears of investors from some difficulty that may arise from tracing records of their investments.

This is where corporate action payments come in handy.

At optimal level, the process ensures that the investor gets what he/she is entitled to.

As the CSD pointed out, “It will be catastrophic if you buy something and in the future it cannot be traced to you.”

“It will derail confidence and that is basically what we (CSD) guard against.”

Beyond ensuring smooth settlements and reconciliation of ownership, corporate action settlements also give the BoG and the government a clearer picture of the appetite the investor community has on short-dated instruments.

This plays a key role in policy direction, both at the fiscal and monetary level and that goes a long way to boost economic growth.

That not said, the CSD would have to keep on upgrading its security systems to ensure that the safety of investor details with it is properly guarded against.

It is, therefore, heart-warming that the depository is ISO (27001:2013) certified by International Organisation for Standardisation (ISO).

The certification will help to deepen the management of the company’s Information Security Risk.

This will not only cement CSD’s role as an enabler of a conducive investment climate but a depository of repute in the arena of securities depositories worldwide.
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Source: Graphic Online

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With a few services on the platform at the time of commencement, Vodafone Cash now boasts of services such as ATM-cardless withdrawals, TV license payments, bulk payment services and insurance for fisherfolks.

Ghana’s financial services sector is still a long way off in reaching majority of the non-bankable population; hence, the activities of mobile money are seen as a way of moving this population into mainstream financial services.

The Vodafone Cash proposition has undoubtedly commenced another phase of growth and maturity for Vodafone Ghana and Head of the service, Martison Obeng-Agyei sees a future of tremendous growth ahead:

“What we have seen in less than a year of operating the mobile money service is proof of its power to transform the entire country. We want to be integral in the promotion of a cashlite society in Ghana and bridge the gap between the included and excluded in our society. This is part of an overall strategic focus of digitally leaving noone behind in Ghana. We are confident that going forward, we will become very significant in this space in the country.”

Meanwhile, Vodafone has paid close to GHS1m as interest payments to customers over the past three quarters of this year.

This follows the introduction of new guidelines on Dedicated Electronic Money Issuers (DEMI) from the Central Bank, which directs banks to pay interest on floats from mobile money platforms to telecom companies, out of which 80% is mandated as interest payment to mobile money customers.

The telecommunications giant witnessed a 75 per cent increase in Q3 payments over Q2 – a development which reflects the significance of the trust reposed in the company by customers who have increased their deposits and transactions.

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Source: Vodafone Ghana

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But some 73 percent of the repos done this year happened among commercial banks, instead of with the central bank, at an average rate of 25.38percent, indicating deeper interbank collaboration.

The remaining 27percent of the transaction was done with the central bank at a rate of 26.79 percent.

Repurchase agreements are short-term instruments, usually overnight lending, used by banks and other financial institutions to meet cash or capital reserve obligations with the regulator, and improve liquidity.

Banks are required to declare a percentage in liquid funds of deposits they mobilise from the public, either in short-dated securities or in cash.

At the end of the day, if they do not have enough cash to declare to the regulator as cash reserve, they go to the market to borrow, which constitutes the repos.

Usually collateralised or backed by Government of Ghana (GoG) securities on the books of the borrower, the number of transactions has increased from 5,535 in 2010 to 7,062 as at November, 2016.

Stephen Tetteh, Chief Executive Officer of the Central Securities Depository, explained that collaborating in this manner, rather than relying on the Central Bank for short-term or overnight borrowing is good for business.

“This is very good for the market and industry. In the advanced countries, it is a very lucrative market where they use repos to manage their liquidity.

At the end of the day, if you have excess liquidity and it is sitting on your books, what do you use it for? But if you can get some small margin by loaning it to another institution that is short, then you get some small margin overnight,” he said in an interview with the B&FT.

“Maybe, you are expecting something tomorrow but today you are short, so you borrow today and when the funds come in tomorrow you pay off.”

From a low of GH¢26.4billion in 2010, the repos value went up to GH¢53.96billion in 2012, at a collateral value of GH¢56,99billion with 5,806 transactions; and GH¢82.16billion in 2013 at a collateral value of GH¢84.22billion, with 6,157 transactions.

In 2014, the figure shot up to its highest level so far of GH¢195.79billion, at a collateral value of GH¢211.43billion, with 9,985 transactionsat an average rate of 21.4percent.

It, however, dropped slightly to GH¢183.29billion in 2015 at a collateral value of GH¢186.92billion, with 8,190 transactions at an average rate of 24.23percent.

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Sourece: B&FT

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Spio-Garbrah has come under pressure from the Association of Cement Manufacturers of Ghana (CMAG) for approving the license of some foreign companies to import about 500,000 metric tonnes of cement into the country.

The association argued that the minister acted illegally when he deliberately issued the permits to SOL Cement from China and Fujian from Korea to import the products into the country and further complained that the decision will virtually push them out of business.

But speaking on the Citi Breakfast Show on Thursday, Spio-Garbrah said the row over his decision is unnecessary.

[contextly_sidebar id=”z8Dty0nk7NbUsJelIt2SPJT3wuNXWi3O”]“…by the time cement comes into Ghana, because of tariff, duties and levies and also the profit margin cement companies are putting on it, the prices tend to be in the GHc28 to GHc30 range. But between manufacturers and importers our own view is that cement prices should keep coming down and these last few days we’ve had some news report about cement prices coming down.”

The Minister attributed the report entirely to competition saying “the manufacturers realized that there is competition.”

“Dangote for example is providing a lot of competition to the Ghanaian manufacturers some of whom have had the monopoly situation for close to 30 or more years and are not used to competition and their natural reaction is to run to the media and throw a lot of dust in the air to seem as if somebody is doing something wrong.”

He also explained that government did a thorough job before passing the Legislative Instrument which empowers the Ministry of Trade to regulate the cement sector.

“…in order to manage and regulate the cement sector we had a cabinet document on this that was approved, we had legislative instrument passed on Parliament   which was also debated at length by various parliamentary sub-committee before it was passed. The objective was to have the Ministry of Trades and Industry through the Minister decide on the periodic issue of how much cement should be imported into Ghana at any particular time and it will approve licenses for particular importers,” Spio-Garbrah added.

Spio defends cement regulation

Dr. Spio-Garbrah had earlier clarified that the regulation on cement importation was to control importation of such products onto the Ghanaian market and not to totally ban them as being asserted by cement manufacturers in Ghana.

Cement prices drop

The price of cement early in October dropped slightly on the market.

The Daily Graphic reported that Dangote Cement Ghana Limited was the first to drop its price in September, following which GHACEM Limited reduced its price by about the same margin of GHc1 per 50KG bag of the product.

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By: Godwin A. Allotey/citifmonline.com/Ghana
Follow @AlloteyGodwin

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