The historical chains

Having inherited a government with the trappings of the free market, Ghana became increasingly pro-East with its attendant central planning under President Nkrumah.

As a result, our commodities, education, industries, construction, aviation, employment, transportation, media to name a few, were largely if not wholly under the aegis of the central government.

With the collapse of the Berlin Wall, the disintegration of the Union of Soviet Socialist Republics (U.S.S.R.) and the fallouts of Perestroika, China’s reforms and the increasing global acceptance of Adam Smith’s “invisible hand”, Fabian socialism has lost its quiddity except in the minds of those who keep mouthing it without much action.

Even the Labour Party of the United Kingdom (U.K.) under Tony Blair and later Gordon Brown would speak of a “New Labour” which embraced market forces with unpredicted fervour. In the US, the Democratic Party’s Bill Clinton would call it “The Third Way”.

The Vestiges of the Socialism of the 1960s

Today, many of the State-Owned Enterprises (S.O.E.s) of the 1960s remain under the iron grip of central government despite the oft-repeated evidence of the shambolic performance of an overwhelming majority of them. A few were divested, with hardly any evidence of benefits to us, not so much because of a belief in the free markets but as a result of our obeisance to the prescriptions of foreign and international institutions.

The ghost of central planning has ensured that these SOEs, whose shares are held entirely by the government, are used as instruments of political patronage. Friends, cronies, relatives and party members are assured of seats on the boards of these establishments when electoral power swings in their favour.

They are not held to any standards of efficiency and are at liberty to operate with freewheeling nonchalance. They were never intended to be run on the measured rods of the hands of corporate governance with a diverse collection of the best business and governance brainpower. Their guide was Marxist economic theory and the capital market was never in sight for them.

The Ghana Stock Exchange

It was not until the 1990s that Ghana set up a stock market. Thus the driving principles behind the raising of capital, corporate governance, diffusion/dispersion of shareholding, shareholder activism, the constant improvement of corporate law among others are yet to take a firm hold.

Where government has dared to participate in the affairs of the stock market it has ensured that it retains massive controlling shareholder status. That way, it still calls the shots with respect to the appointment of directors and management whose qualifications are based more on ‘right standing’ than competitively determined competence.

In the end, citizen participation on the bourse is minimal, their participation in decision-making is non-existent, the alignment of the desires of shareholders (non-government) with directors/management remains a pipe-dream and the stock market has not become the linchpin it must be to the economy.

The result is a palpable unattractiveness of the Ghana Stock Exchange (G.S.E.) to the biggest corporations in Ghana and the disincentive to investors who in the absence of free-market choice of corporate leadership cannot bet on any great returns on their investment.

The Economy

An economy that imprisons the efficient market and denies the citizenry frontline participation in it does not grow in leaps and bounds. It does not create wealthy citizens. Its private sector is small and not influential and government continues to be the employer of the overwhelming droves of its workforce.

That economy is unable to provide infrastructural expansion to enable businesses to push the possibilities of their productive frontiers. Tax evasion becomes the order of the day as the informal sector balloons as a way to avoid the taxman.

Only a minutiae of the workforce pay tax and so it is not surprising that since 2011 Ghana’s tax to GDP has consistently hovered between 17%-19% and is edging below the lower end in 2017.

Investors will not touch such an economy with a long pole unless they are promised markedly high returns that pressurize government to embark on “smart borrowing” and not-so-smart borrowing sometimes for and on behalf of companies which should be allowed to deal on the strength of their own sets of financial statements.

To make matters worse, even the right of centre party relies on economic populism and the precepts of Fabian socialism (one district one this, free this free that etc.) in order to please a people whose mind-set is fixated on state largesse.

When a social democratic party hands over the baton to a “free market” party, the citizenry struggle to “spot the difference” in strategies such as the unbridled proclivity to issue bonds to raise revenue.

At over $4 billion dollars Ghana is the African country with the highest Eurobond debt, with a poor tax to GDP ratio (currently between 15%-16%) and around 70% debt to GDP ratio excluding its recent Energy Sector Bond.

Since the economy is not innately attractive to investors, beyond the high interest rates on bonds, the government finds itself scrapping critical taxes and granting exemptions to wealthy companies to keep their interest alive. This contributes to the low revenue ‘capture’.

The way forward

Change will only come if we want it. Our political parties must give us the best all-round persons as flag bearers. Our central bank governors and each and every member of the board of the Bank of Ghana must have formal education to the highest levels (at least post-graduate) in finance/economics/business with proven track records. Our finance ministers must be highly educated in economics/finance of the proper kind and be supported by the finest brains.

Our Presidents must choose competence, knowledge, training and expertise over petty considerations. They must set in motion the process to shed central planning and allow citizens to part-own, choose corporate leadership, run and manage those companies that government currently controls with perilous consequences.

In the process we may not always need to raise revenue through debt but equity by way of releasing shareholding in say the Ghana National Petroleum Corporation (G.N.P.C.), GOIL and/or COCOBOD with the attendant infusion of the competencies of the private sector.

If domestic investors had confidence in the way these entities are managed, government may raise millions from them by way of equity instead of the now fashionable option of a bond (debt), which attracts interest. The example of Colombia with respect to Ecopetrol’s 20% shares may serve as a useful guide with modifications to suit our circumstances.

Is President Akufo-Addo the man to ignite the untapped embers of the free market or must we wait for another government, which professes an unwavering belief in the free market economy?

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By: Robert Nii Ardey Clegg 

The writer holds a Master of Laws (LL.M.) degree in Corporate Law, Finance & Governance Concentration (Harvard Law School) with cross-registration in Boards of Directors & Corporate Governance (Harvard Business School)

The post Is Nkrumah dictating Ghana’s economic policy from the grave? [Article] appeared first on Citi 97.3 FM - Relevant Radio. Always.

Third world countries are taking sustainable steps to alleviating poverty.

Ghana, like many other African countries, has had its fair share of sustained and inclusive growth which has led to the reduction of the poverty rate by half.

The new World Bank poverty assessment has recorded a reduction from 52.6% to 21.45 between 1991 and 2013. Although several efforts have been made to end the vicious cycle of poverty, Ghana is still fraught with several challenges.

According to “Poverty Reduction in Ghana: Progress and challenges” sustained poverty reduction requires a commitment to reducing inequality and improving access to opportunities for all citizens.

Governance and poverty reduction is a sine qua non situation. A holistic participatory approach must be adopted by government and stakeholders that involves the poor. This must take place within a framework of good governance.

Policymakers must make it a point to promote a public consultation that cuts across the country. A country can experience a significant level of economic growth and the governance model will still not be considered good to reduce the rate of poverty because economic growth is not a model for measuring poverty rate.

Countries with good models of governance and economic growth have shown increasing trends of poverty alleviation.

Ghana, with her vast resources, has not been able to improve the lives of her people for reasons that can be attributed to lack of transparency, disregard for the end users during policy implementation and lack of accountability. Implementing social interventions such as the LEAP program which seeks to alleviate poverty in the short term does not translate to poverty reduction in the long term.

This is because Ghana’s currency coupled with high rate of inflation loses its purchasing value; hence sums of money given to families today may depreciate in value tomorrow.

Government should identify key areas of growth for rural communities where the rate of poverty is way higher than in the urban communities, and implement systems that only seek to provide people with monthly stipends, but economic activities where community members by exhibiting community ownership are empowered to be productive in order to sustain development overtime.

Government should laboriously ensure that all anti-corruption strategies are fully functioning to ensure transparency and effective management of Ghana resources.

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By: Adelaide Yiriyelleh

The post Poverty reduction: A critically necessary action for Ghana’s dev’t [Article] appeared first on Citi 97.3 FM - Relevant Radio. Always.

Such assertions, the MP argued on Eyewitness News, were indicative of a lack of understanding of public finance.

[contextly_sidebar id=”58umpGyiLcgFRECrQYj3sMMISkJlPDEq”]His comments on the matter followed President Nana Akufo-Addo recent lamentation over the “huge debts” and “empty coffers” his government came to meet.

President Akufo-Addo, as far back as his first State of the Nation address, has stressed that his administration did not inherit a stable economy from the erstwhile Mahama-led government, which missed all the targets set for the country under the International Monetary Fund (IMF) programme due to fiscal indiscipline in the management of public funds.

Mr. Adongo, in response to the President’s comments, said the Akufo-Addo administration should be looking for innovative ways to generate the revenue instead of complaining.

“If it was that when you inherit a government, then you are coming to meet a pile of money, then there is no business being in government because you simply are coming to do nothing. No government comes to inherit the coffers with money. Even in the United States of America, you come to meet deficits that are being run by the government.”

“For a President to say he met an empty coffer; since when did a President ever come to meet money and spend that money in the development of a country.”

We’ve spent more than we generate

The MP argued further that because of the challenges of the third world country like Ghana, there is always a dichotomy between the resources the country has and the enormous challenges of nation building that require “you will have to spend more than you generate.”

“What the President is asking for is that he should have come to meet a government that is running a surplus budget and building buffers of money for him to then use and spend and I am saying that would be almost irrational to consider a country such as Ghana… to have surplus money sitting there for Nana Addo Danquah Akufo-Addo to now come and be sleeping at the Flagstaff House and be spending money because the money is available.”

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By: Delali Adogla-Bessa/citifmonline.com/Ghana

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According to him, fixing the economy is his government’s major challenge but there are indications that the economy was taking shape after various interventions by the government.

[contextly_sidebar id=”IJvi4Kciyh4dx7nuFNp5foqlONWJDvVQ”]Nana Addo made the remarks during the swearing in of some five ambassadors and a high commissioner at the Flagstaff House in Accra on Wednesday.

“They [Ghanaians] voted for us to fix the economy and put our country on the path of progress and prosperity. Indeed, we have begun to fix the economy, and the mid-year review presented on Monday by the brilliant Minister for Finance, Ken Ofori-Atta, shows that we are on track. We will fix the economy. We will bring jobs and prosperity to Ghana,” he said.

He said the government was determined to strike key partnerships to get domestic and foreign investment into various sectors of the economy and urged the new ambassadors to help the government in that regard.

“We are determined to create the appropriate macroeconomic environment which will attract domestic and foreign investment into these, the real sectors of our economy. You have to help in that exercise,” he said.

Nana Akufo-Addo swore into office five Ambassadors and a High Commissioner to represent Ghana are countries including Korea and Kenya.

The appointees were, Dufie Agyarko Kusi who is heading for Republic of Korea, Virginia Hesse who is going to Czech Republic, Francisca Ashitey-Odunton who heading for Kenya, Alowe Leo Kabah going to Benin and Professor Abena Busia who is representing Ghana in Brazil.

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By: Jonas Nyabor/citifmonline.com/Ghana

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Mr. Ricketts-Hagan contends the economy is suffering from the New Patriotic Party’s scathing assessment when it was in opposition ahead of the 2016 elections.

[contextly_sidebar id=”NlfFVMBSD1lycOG8o1TtPmhL3OBOUrhn”]This has created the impression of an increased risk of doing business in Ghana, which inevitably affected the value of the cedi, he argued.

President Nana Akufo-Addo’s maiden State of the Nation address also painted a bleak picture of the country’s economic standing, as he highlighted unstable economic indicators, increasing debt and missed targets under the IMF programme.

But in a Citi News interview, Mr. Ricketts-Hagan urged government to stop speaking ill of the economy and scaring investors.

“The foreign exchange market does a lot of speculation therefore if you are talking down your economy then what you are doing is that, you are making the investors in our economy panic because if people don’t have confidence in your economy as it is being portrayed by you yourselves as a government then people who have invested here will begin to take their investment out.”

“By them taking their money in dollars and liquidating whatever assets they have here, they will use the cedis they receive here to buy dollars and repatriate them so it is indeed a factor,” he explained.

He also cautioned that this rhetoric fed negatively into the currency market and the credit rating markets.

“If you are talking down your economy, you have to be careful, and when we do it just to score partisan points by saying that previous government has done badly with the economy, you are not doing the country any favour… Recently you have heard the likes of Fitch thinking of possibly downgrading Ghana’s economy. These are all as a result of talking down the economy.”

Performance of cedi so far in 2017

The cedi commenced 2017 at GHc 4.2 on the interbank foreign exchange market.

Figures available to Citi Business News from the Bank of Ghana show that the cedi has depreciated by about 5.4 percent between January and February of this year alone on the interbank forex exchange market, and as much as 6.72 percent in the same period across forex bureaus in the country.

In the same period in 2016, the cedi performed better in forex bureaus across the country depreciating by only 2.5 percent.

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By: Delali Adogla-Bessa/citifmonline.com/Ghana

The post NPP’s negativity to blame for cedi depreciation – Ricketts-Hagan appeared first on Citi 97.3 FM - Relevant Radio. Always.

In his maiden State of the Nation address before Parliament on Tuesday [February 21, 2017], Nana Akufo-Addo accused the previous government to “ballooning” the country’s debt stock to GHs122 billion, from the GHs9.5 billion it inherited from the John Agyekum-Kufour government.

He also revealed that, the National Democratic Congress (NDC) government, had left office with the country’s GDP rate of 3.6%, which he says is the lowest the country has recorded in the past 23 years.

Below are 5 take-aways on the economy from Akufo-Addo’s address.

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By: Jonas Nyabor/citifmonline.com/Ghana
Follow @jnyabor

The post #SOTNGhana: 5 take-aways on economy [Infographic] appeared first on Citi 97.3 FM - Relevant Radio. Always.

In a congratulatory message to President Nana Akufo-Addo following his assumption of the office, the chamber expressed confidence in the New Patriotic Party government’s pro-business agenda.

[contextly_sidebar id=”wXk99UUZ8A9Q6R5CVNCQQeg5HPjBb9Dd”]“… we are happy about your commitment to ensure a conducive business environment that will make the private sector vibrant in driving growth and creating jobs,” the chamber said in a statement signed by its President, Dr. Appiagyei Dankawoso.

“Your pro-business national development agenda with key focus on building the “most business-friendly economy” which will create jobs, wealth and prosperity for all Ghanaians through private sector empowerment is commendable and accords with the main objective of the Ghana National Chamber of Commerce. In this regard, the Chamber assures you of its utmost support to achieve our shared vision for Ghana,” the statement added.

The chamber further expressed hope that “the incoming ministers will work assiduously” to deliver President Akufo-Addo’s vision for Ghana.

“The Chamber is of the strong conviction that businesses thrive in a peaceful and stable macroeconomic environment. It is our expectation that the confidence reposed in you by the good people of Ghana will inspire you and your administration to ensure peace and improve the macroeconomic environment for business growth.”

Find below the full statement

GNCC’S CONGRATULATORY MESSAGE TO THE PRESIDENT AND VICE PRESIDENT OF THE REPUBLIC OF GHANA

The Ghana National Chamber of Commerce congratulates H.E. Nana Addo Dankwa Akufo-Addo and H.E. Alhaji Dr. Mahamudu Bawumia on their assumption of office as the President and Vice President respectively of the Republic of Ghana following their victory in the 2016 general elections.

As a nation, our collective commitment to credible, free and fair elections have resulted in another successful elections that have received exceptional applause and commendation at the local and international level. This we believe goes to consolidate our democratic, economic and social gains.

We commend the transition team for their statecraft and the organizing committee of the swearing-in ceremony for their exceptional delivery. The smooth transition of power and the grand swearing-in ceremony with mammoth attendance has indeed added colour to our political history.

As a Chamber, we are happy about your commitment to ensure a conducive business environment that will make the private sector vibrant in driving growth and creating jobs. Your pro-business national development agenda with key focus on building the “most business-friendly economy” which will create jobs, wealth and prosperity for all Ghanaians through private sector empowerment is commendable and accords with the main objective of the Ghana National Chamber of Commerce. In this regard, the Chamber assures you of its utmost support to achieve our shared vision for Ghana.

In addition, your commitment to ensure private sector growth and efficient government machinery will consolidate the significant contributions made by past governments in improving the investment environment in Ghana. It is our fervent hope that the incoming ministers will work assiduously to deliver your vision for Ghana.

The Chamber is of the strong conviction that businesses thrive in a peaceful and stable macroeconomic environment. It is our expectation that the confidence reposed in you by the good people of Ghana will inspire you and your administration to ensure peace and improve the macroeconomic environment for business growth.

The Chamber wishes you and your administration a fruitful stewardship. We look forward to engaging your administration on a periodic basis to ensure a business-friendly environment for the growth and prosperity of the private sector and the nation in general.

God bless our homeland Ghana and make our nation great and strong. Long live the Ghana National Chamber of Commerce, long live Ghana.

Thank you

Signed Nana Dr. Appiagyei Dankawoso I (President, Ghana National Chamber of Commerce)

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By: Delali Adogla-Bessa/citifmonline.com/Ghana

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In response to a question during his vetting by Parliament, Mr. Ofori-Atta said the New Patriotic Party’s (NPP) promise of 1 million dollars to every constituency, will serve as the basis for the implementation of the one district, one factory policy.

[contextly_sidebar id=”UTkYCXaZOdvnVttmvU18Lw1RJFDseeoY”]The Finance Minister nominee remained optimistic of the sources of funding for the major campaign promise, saying that government intends to reallocate capital expenditure towards the policy, despite concerns that the NPP’s plan to cut taxes could hinder these efforts.

He noted that, assessing Ghana’s current expenditure profile, 15 percent of the country’s revenue, representing about GHc 1.6 billion, is spent on capital expenditure.

Mr. Ofori Atta thus explained that, “for me, the issue of getting $275 million reallocated to the constituencies set the ground floor to be able to do the one district on factory, and the beauty of that is that, you are now looking at empowering the constituencies and the districts for local problems with real local solutions in a way in which you then would have decentralized development.”

$50 million set aside for Zongos

Mr. Ofori Atta also spoke about the funding of the Zongo Development fund, which is essentially a matter of poverty alleviation for the government.

“For the Zongo Development fund, we have targeted putting $50 million into that. There are about some 365 Zongos in the country and it is really an issue of social justice,” he stated, adding that one of government’s main concern is ensuring all citizens have “a minimum threshold of liveability.”

As a campaign promise, the NPP government had said it would assist Zongo communities, predominantly Muslim settlements, by aiding their development with the fund.

Government has already indicated that, the Zongo Development Fund will be captured in the incoming Nana Akufo-Addo administration’s first budget statement.

Already, the government has been applauded but equally criticized for creating the Ministry for Inner Cities and Zongos Development.

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By: Delali Adogla-Bessa/citifmonline.com/Ghana

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Whilst Dr. Amoako-Tuffour considers some tax cuts may be obvious given their burden, he noted in an open letter to the nominated Finance Minister, Ken Ofori-Atta, that “hurried tax cuts and exemptions will do little to boost productivity or spur growth.”

[contextly_sidebar id=”3Q9YJBdj34WEN3E43ue9Ql28ksycla5l”]The NPP indicated that, its management of the economy would see a shift in policy from taxation to production, to relieve the burden on the private sector and boost production.

To realize this shift from taxation to production, the NPP has targeted the removal or slashing of some taxes.

Dr. Amoako-Tuffour in the letter suggested that, the sound management of the economy could be achieved by accelerating economic growth, increasing revenue mobilization and prudent spending.

Acknowledging that the point of increasing revenue mobilization was somewhat at odds with the NPP’s manifesto promise, he instead noted that “policy consistency, sequencing and a fine balance between equity and efficiency matter when it comes to sharing the tax burden to finance public enterprise.”

Improving machinery for tax collection

Dr. Amoako-Tuffour also stressed the need to improve the machinery of tax collections along with the need “to close the revenue escape hatches.”

“Next to customs duties, the management of direct taxes (profit and income taxes) is one of the weakest arms of the domestic tax system and it remains a major source of revenue leaks,” the economist noted.

He lamented the “slow motion” progress in domestic revenue mobilization over the past decade, noting that the focus of collection has not shifted from reforming legislation to implementing laws efficiently.

He also noted that personnel in charge of taxation are partly to blame for the low taxes due corruption.

“Those who must collect the taxes and enforce compliance are not without blame. The corrupt and embezzlers of revenue collected have been winning. Strung out behind them is ineffective accountability and partisan political interventions in the implementation of the tax system,” he said.

“Your commitment to action to tackle institutional habits, leakages and escape hatches offers the best opportunity in the short run to realize more non-inflationary revenues,” Dr. Amoako-Tuffour said to the nominated Finance Minister.

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By: Delali Adogla-Bessa/citifmonline.com/Ghana

The post Hurried tax cuts won’t boost growth, productivity – Amoako-Tuffour appeared first on Citi 97.3 FM - Relevant Radio. Always.

In a scathing assessment of the economy left by former National Democratic Congress (NDC) government, he said Ghana currently lay in conditions ripe for a debt crisis to emerge.

[contextly_sidebar id=”STvSGwh3ZvuyhP2PJkAODANGlQnRQbu7″]Dr. Amoako-Tuffour in a letter penned to the nominated Finance Minister, Ken Ofori-Atta, under the newly elected New Patriotic Party (NPP) government, described the economy left to the new government as “slow moving, indebted and jobless”.

This is despite Mr. Terkper consistently reiterating that, his government left behind a stabilized economy for the current administration.

Ghana’s debt stock lies at GHc 110 billion, as at August 2016, having risen to as high as GHc 112.4 billion under the previous government. The country’s debt to GDP ratio also stands at about 71 percent, according to Mr. Terkper.

About GHc61 billion of the debt comes from external borrowing, whiles GHc49.2 billion is from domestic borrowing.

In defence of the debt accrued by his government, the immediate past Finance Minster has argued that all nations borrow for major capital or infrastructural development, hence the previous government’s focus on “smart-borrowing” to sustain growth and development so as to avoid unduly increasing public debt.

Ability to borrow not good management

Dr. Amoako-Tuffour, however believes this “smart borrowing” may have left the Ghanaian economy on the brink instead of providing the needed stability for the economy.

“I must admit that while Ghana has not yet faced a debt crisis of the likes of the PIGS of recent vintage (Portugal, Italy, Greece and Spain), Ghana has built up all the conditions and vulnerabilities for a crisis to emerge.”

He noted further that, the the remedy for the economy “lies not in high spirits accounting, “smart borrowing” nor in Ponzi games, but in sound management and policy prudence for a higher public purpose. The ability to borrow should never be mistaken as a sign of good management.”

Dr. Amoako-Tuffour thus suggested that, the sound management of the economy could be achieved by accelerating economic growth, increasing revenue mobilization and prudent spending.

He elaborates on these points in the letter which can be viewed here.

Dr. Amoako-Tuffour explained in his letter that, substantial growth in national output “no doubt, will reduce the debt burden and provide additional resources through tax revenues; better if that growth creates jobs.”

He also noted that, the predicted economic growth for Ghana would likely not exceed 5-7 percent, thus attention must be paid to prudent spending and revenue management.

“The bulk of the needed adjustments rests on revenue and spending management; not just for the sake of better public sector management, but to provide the enabling environment for private enterprise growth,” the economist stated.

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By: Delali Adogla-Bessa/citifmonline.com/Ghana

The post Amoako-Tuffour slams Terkper’s ‘smart borrowing’ approach appeared first on Citi 97.3 FM - Relevant Radio. Always.