{"id":323246,"date":"2017-05-29T06:20:36","date_gmt":"2017-05-29T06:20:36","guid":{"rendered":"http:\/\/citifmonline.com\/?p=323246"},"modified":"2017-05-29T06:20:36","modified_gmt":"2017-05-29T06:20:36","slug":"the-unnecessary-political-twist-and-turn-of-the-ghs9-7bn-bond-article","status":"publish","type":"post","link":"https:\/\/citifmonline.com\/2017\/05\/the-unnecessary-political-twist-and-turn-of-the-ghs9-7bn-bond-article\/","title":{"rendered":"The unnecessary political twist and turn of the GHs9.7bn bond [Article]"},"content":{"rendered":"
The \u2018$2.25bn\u2019 Templeton bond saga is a classic example of \u2018PR motivated by political spin\u2019<\/strong> gone bad. I am a strong believer in institutional policy making and cringe when politicians seek to overwhelm the technical space of public relations. The art of PR makes one minded that your public is not restricted to your customers but include competition and other stakeholders. Needless to say, politicians ought to be reminded that their public involves more than the electoral public. Focus on sharing facts and cut the political spin.<\/p>\n I ask, of what value was the announcement that a \u2018$2.25bn bond, was successfully issued? Did politics seek to show that over 2bn was done when others struggle to do 1bn? Totally needless. For starters, there were no dollar bonds so why state them into dollars? Share official facts and outsource the spin. You announce a USD size bond and then create room for the opposition to battle the legality and legitimacy of the transaction. We all know external borrowing requires parliamentary approval but not local borrowing whose cap is limitless. The bond size was simply Ghs9.7bn<\/u><\/strong>.<\/p>\n If the objective was to provide comparative perspective to other USD bonds, then communication was obviously not optimal. State the Cedi size and indicate the dollar equivalent but don\u2019t state the dollar equivalent without stating the primary cedi size.<\/p>\n Lesson 1: Don\u2019t throw an unnecessary punch, you may just awaken your opposition.<\/em><\/strong><\/p>\n Lesson 2: Just share the facts. Cut the spin. Outsource the spin if necessary. This is governance not elections.<\/em><\/strong><\/p>\n Lesson 3: Allow technocrats to do their work!<\/em><\/strong><\/p>\n The Opposition\u2019s Fight<\/u><\/strong><\/p>\n Obviously, almost every opposition somewhat hopes to be a nuisance under a government\u2019s skin. When it fails to be constructive over time, the opposition will lose credibility, which is in itself a major threat to democracy and the critical watchdog role it plays.<\/p>\n Let\u2019s get a few facts clear.<\/em><\/strong><\/p>\n The Bond was not a USD bond so why question the legality of the bond issuance for lack of parliamentary approval? Our Cedi bonds and treasury securities have for a while now been open to foreign investors. The prospectus was clear in its distribution clause stating the condition below<\/p>\n \u201cDISTRIBUTION: Marketed to Resident Investors\/Open to Non-Resident Investors\u201d<\/strong><\/p>\n When foreign investors seek to partake in local bond subscriptions, they will naturally bring in foreign currency which is often exchanged for Cedis at the central bank to enable them to participate in the trade. This exchange does not make the bond a dollar bond. For example, changing your 10 dollars gifted you by your uncle at a forex bureau to pay your 40-cedi electricity bill does not make ECG bills dollar tariffs.<\/p>\n To a good extent, knowing the facts and insinuating otherwise nurtures the growing negative perception of the credibility of politicians.<\/p>\n There is no rule about the duration between the notice and the issuance date or book build close. It is totally dependent on the issuer and its confidence about the market as well as the funding urgency. If notices are inadequately short, it reflects in the market\u2019s response. In this case, the market responded positively. In the last 2years, duration between the day of notice and book build close has varied between 3 and 12 days. In this instance, it was just a day. Any issue with this? I see none.<\/p>\n Some have questioned the auction window which opened and closed in a day. For starters, it is not the first and will not be the last. The 2013 Ghs400mn 3yr bond was also opened and closed in a day. The duration of an auction is often moderated by the assessed market confidence. Serious investors do not need much more time after \u2018road shows\u2019 or investor engagements amidst a 24hr price guideline notice? If it were inadequate, it would have reflected in the bond pricing and subscription.<\/p>\n Local investors were allowed to participate but as things turnout often in our bonds market, foreign investors have proven more confident in Ghana than local investors. \u00a0Local investors comparatively shy away from longer term bonds as can be observed from the Central Securities Depository report for March 2017, below. They are more active in the short end of the curve.<\/p>\n <\/p>\n\n
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\n GoG Security
\nTenor<\/strong><\/td>\nLocal Investor
\nShare<\/strong><\/td>\nForeign Investor
\nShare<\/strong><\/td>\n<\/tr>\n\n 2YR<\/strong><\/td>\n 60.59%<\/td>\n 39.407%<\/td>\n<\/tr>\n \n 3YR<\/strong><\/td>\n 28.52%<\/td>\n 71.479%<\/td>\n<\/tr>\n \n 5YR<\/strong><\/td>\n 18.34%<\/td>\n 81.658%<\/td>\n<\/tr>\n \n 10YR<\/strong><\/td>\n 27.20%<\/td>\n 72.804%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n