GB&F January 2015 teaser

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JANUARY 2015 / ISSUE 044 GH¢10.00

Exports confab strategises for growth Great speakers; broad minds

USA..........................................$5.00 UNITED KINGDOM.....................£3.00 EUROPE....................................€3.50 AUSTRALIA.............................AS5.00 CFA ZONE...........................CFA 2,000 OTHER AFRICAN COUNTRIES.US$4.00

THE FIRST BUSINESS READ IN GHANA

Follow us online at www.ghanabizfinance.com

CONTENTS ISSUE 044 / JANUARY 2015

Export of products from African countries to the US under the scheme reached US$44 billion.

Did Africa really gain?

26 Finance

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Briefs

Summaries of business and financial news in Ghana during December for a quick read.

10 Agriculture

Ghana’s agricultural sector is a key driver of the economy. The sector employs over half of the workforce which is mainly smallholder farmers. But its rapid growth depends on modern commercial farming.

12 Housing

Housing finance helps income earners to acquire landed properties as availability of adequate shelter improves living conditions. Despite its considerable socio-economic potential, housing finance remains underdeveloped in Ghana.

16 Mining

Chinese involvement in illegal small-scale mining has left Ghana’s government with a dicey problem to solve. But the Chinese have come with new technologies that local small-scale miners find useful.

18 Trade

Since the enactment of the African Growth and Opportunities Act (AGOA) in 2000, the United States (US) Congress has amended AGOA five times, extending the trade preference eligibility to September 30, 2015.

The African Development Bank’s (AfDB) huge appetite for infrastructure projects proves that investing in Africa is now a very attractive proposition, writes Dr Donald Kaberuka, the President of the AfDB.

28 Science & Technology

The developed nations boast of several scientific inventions that have earned them the title of ‘World Power.’ Though a middle-income country, Ghana’s foray into the space industry has already begun. A space satellite will be launched in five years.

32 Cover

The Vice President of Ghana, His Excellency Paa Kwesi AmissahArthur, opens the 3rd annual Ghana Economic Outlook & Business Strategy Conference (EOBS2015) at the plush Best Western Premier Hotel in Accra.

The event will witness the crème de la crème in government, the private sector, civil society, diplomacy and foreign investments gather to strategise for the country’s economic growth.

38 Hospitality

A research commissioned by the Industrial and Commercial Workers Union (ICU) Ghana revealed that there are violations and abuses of workers’ rights in the food and hospitality industry.

What are the authorities doing to stop the abuses?

40 Word for word

An interview with the President of the Association of Ghanaian Industries (AGI) on a wide

Find us online at www.ghanabizfinance.com All information contained within this magazine is the property of Ghana Business & Finance and is not to be used without written authorisation from the publishers. Although every effort is made to ensure the correctness of information submitted for publication, the magazine may inadvertently contain technical inaccuracies or typographical errors. Ghana Business & Finance assumes no responsibility for errors or omissions in this publication or other documents that are referenced by or linked to this publication.

JANUARY 2015

range of issues bordering on the economy, industrialisation, the soon-to-come IMF bail-out and other topics is not only interesting but also thought-provoking.

43 Integration

An approach to higher education allows resources to be concentrated, and knowledge to be shared across West Africa.

The Association of African Universities (AAU) and the World Bank teamed up to bring to fruition the Africa Centres of Excellence (ACE) project.

46 Global Co-operation

Africa and Turkey have jointly developed the Joint Implementation Plan of AfricaTurkey Partnership for 20152019. The five-year plan is subject to mutual review and improvement.

51 Outlook

Tunisia, famous for being the launching pad of the Arab Spring, won the plaudits of The Economist magazine as its ‘Country of 2014,’ out of many nation-states.

52 Perspectives

A Ghanaian advocate of solar energy, Kobina Nyanteh, argues how the current power shortage can be fixed in less than a year.

56 Events

Know where, when and how to attend conferences of your choice.

57 Stats & Indices

Figures speak louder than words for the economy.

58 Commodities

Check prices of agricultural produce in some local markets, as researched and compiled by Esoko. linkedin.com/GhanaBusiness&Finance facebook.com/GBandF @ghana_business

GHANA BUSINESS & FINANCE

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The take over of HFC Bank by the Republic Bank (RBL) of Trinidad and Tobago is now a done deal, following the Supreme Court decision legitimising the take over process. The highest court of Ghana, by a unanimous decision, ruled in favour of RBL in an application to quash a judgement by an Accra High Court which had prevented RBL from proceeding with a mandatory offer to all shareholders of HFC Bank under the ‘Take over Code’ of the Securities and Exchange Commission (SEC).

The decision paved the way for RBL to continue with the process of acquiring HFC Bank without hindrance. The five-member panel of judges presided over by Mr Justice William Atuguba dismissed the suit initiated by HFC Bank against RBL and SEC in an attempt to prevent RBL from proceeding with a mandatory offer to all shareholders of HFC Bank after RBL had acquired over 30 per cent of the shareholding of HFC Bank.

The Supreme Court’s decision has

Kantanka new products showcased An array of products, including an armoured vehicle, was exhibited at the 34th Annual Technology Exhibition of the Kristo Asafo Group in Accra. The vehicle, which has an armoured shell and a cab with bullet-resistant glass, has been designed to deflect bullets from handguns and rifles.

It was among a number of Kantanka vehicles, electrical and electronic items manufactured by Kristo Asafo Group on display at the annual event which was instituted in 1983. This year’s exhibition was touted as one of a kind in that Apostle Kwadwo Safo, the originator of the Group, showcased a brand new vehicle known as the Kantanka Ring Car. With this particular car, a driver only needs a specially made ring worn on any of the fingers to start it.

An electronic vehicle which operates without an engine was also displayed. Other vehicles that were exhibited include Kantanka pick-ups, saloon cars and sport utility vehicles (SUVs). A 19-day Kantanka incubator, explosives and car engines were also on show. Some of the products that had been exhibited over the past 33 years include cross-country vehicles, brickmaking machines, cranes, rockets, fridges, television sets, six-cylinder car engine blocks, cylinder heads, crank shafts and a security robot.

The Minister for Trade and Industry, Dr Ekwow Spio-Garbrah, commended Kristo Asafo Group for the technological initiatives it had carried out over the years and pledged that the government would ensure that state institutions patronise the vehicles.

Dr Spio-Garbrah called on unemployed graduates to approach Apostle Safo for assistance in the areas of engineering and technology in order to put their

JANUARY 2015

skills to work. “The National Service Secretariat should consider posting service personnel to the KAC at Gomoa Mpota in the Central Region to render their services in science and technology,” he said.

The First Deputy Speaker of Parliament, Mr Ebo Barton Odro, called for long-term funding for the Kristo Asafo Group to help it in its operations.

quashed the earlier ruling by the High Court. The legal battle began in May 2014 when HFC Bank sued RBL and SEC for what it described as breaches of the SEC code on take overs and mergers.

Reacting to the decision of the court, the Director of African Operations of RBL, Mr Robert Le Hunte, said: “We are pleased with the ruling of the Supreme Court. Based on this ruling of the highest court of the land, Republic Bank will continue the process as outlined under the Take over Code which was halted by the institution of the proceedings by HFC Bank. We have always acted in accordance with laws of Ghana and the regulations of SEC and will continue to do so.”

Oil revenue not evenly distributed – PIAC report A report by the Public Interest and Accountability Committee (PIAC) has shown that revenue accrued from Ghana’s Jubilee oil fields was not evenly distributed among the country’s ten regions. This implies that the Petroleum Revenue Management Act, 2011 (Act 815), which mandates the equitable distribution of the oil revenue to the regions, has not been adhered to.

According to the most recent report released by PIAC, over US$700 million was channelled into the Annual Budget Funding Amount (ABFA) from 2011 to 2013 as mandated by Act 815. PIAC’s 2013 annual report showed that while some regions received 18 per cent of the ABFA, others received just one per cent. Section 21 of the Act stipulates that the ABFA is part of the national budget, and it shall be used to maximise the rate of economic development; to promote equality of economic opportunity with a view to ensure the well-being of citizens; and to undertake even and balanced development of the regions.

The Ashanti Region got the largest take of 18 per cent, followed by the Greater Accra and Eastern regions which received 17 per cent each. The Western Region, where the oil fields are located, and the Volta Region obtained 12 per cent each. The Brong Ahafo Region bagged seven per cent.

The Upper East, Northern and Central regions were allocated five per cent each; and while the Upper West received one per cent.

The report also indicated that about 67 per cent of the total revenue channelled into the country’s ABFA was spent on some 118 counterpart funding road projects which did not ensure value for money.

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BRIEFS

Republic Bank takes over HFC Bank

HOUSING

Mortgages not Solving Housing Deficit

BY KWEKU DARKO ANKRAH

Housing does not only provide shelter. It has significant impact on the lives of the dwellers in terms of the potential for income generation, increased security, health, selfconfidence and dignity. Housing finance boosts equitable economic growth and reduces poverty by helping households acquire assets. Availability of adequate shelter improves living conditions, empowers the middle- and lower-income population, and strengthens communities.

Despite its considerable socioeconomic potential, housing finance remains underdeveloped in Ghana.

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he typical household, including the Ghanaian one, is faced with three choices when considering the acquisition of shelter.

Depending on income levels and access to land, in the case of Africans, households can either rent single rooms or apartments, build or purchase an existing house outright through savings or through a mortgage. However, at

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the very early stages of an individual’s working life, many people rent accommodation. As incomes increase above the level of basic consumption needs, investing in housing becomes a prime objective for many. Nonetheless, since the acquisition of housing involves huge capital outlays and most Ghanaians are in the medium-to-low income bracket, very few can afford decent shelter.

GHANA BUSINESS & FINANCE

Despite these hurdles, home ownership remains the preference of the majority of the population. The attractions of security, stability, investment returns potential and a sense of pride outweigh the fear of insecurity or bankruptcy if it becomes difficult to pay the mortgage or the concerns about the responsibility for repairs and maintenance.

That being said, the Ghana Real Estate Developers Association (GREDA) says only five to eight per cent of Ghanaians can afford a house from their own resources, that is, without accessing bank or mortgage loans, and most of these are resident outside the country. About 60 per cent of people in Ghana need some form of financial assistance, while up to 35 per cent will not be capable of owning or building a house in their lifetime. This is because the majority of people do not have access to long-term loans or mortgage products. This situation has made most Ghanaians prefer incremental housing (self-help building), which accounts for nearly 80 to 90 per cent of home ownership. Incremental housing is

JANUARY 2015

MINING

Chinese change the face of small-scale mining

BY PHIL THORNTON

Many are optimistic that Chinese investment in Africa will spur job creation, infrastructural investment and technological transfers. An influx of Chinese workers combined with alleged problems with the licencing regime, however, has left the Ghanaian government with an expensive problem to solve. Mention Chinese investment in Africa and most people will think of major natural resource or infrastructure projects. But China is also the source of a dramatic influx of workers in the small-scale mining (SSM) sector (or ‘galamsey’ as it is locally called) in Ghana.

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he migration of around 50,000 Chinese miners has had a “significant” impact on the way the SSM sector operates, Professor Gordon Crawford of Leeds University told a country session at the International Growth Centre’s ‘Growth Week 2014.’

“They have arguably changed the nature of small-scale mining in an irreversible way,” Prof. Crawford said.

SSM is a major economic activity in Ghana with an estimated one million people working in small gold

and diamond mines although the majority is in the informal sector. The influx of Chinese workers took off in 2006 and accelerated after 2008 as the gold price hit historic highs. But by 2012, the Asian immigrants’ presence and activities were fuelling hostile reactions among both the public and the press. Prof. Crawford looked at one area where a Chinese company was permitted to work on two concessions as a “service provider” – although he said it effectively acted as the miner – and at informal Chinese miners operating in a nearby municipality.

New technologies

The research found that the Chinese influx has led to wholesale changes to the SSM sector – both positive and negative. The incomers have introduced new technology and new machinery into what was traditionally a manual activity.

Ms Barbara Serwaa Asamoah, the Deputy Minister for Land and Natural Resources, had told the session that low-level technology was a

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GHANA BUSINESS & FINANCE

traditional characteristic of SSM. But Prof. Crawford said: “The technology that the Chinese introduced has transformed the traditional method of using a pickaxe, shovel and pan. There is now widespread use of excavators.

Areas that would have taken years now take weeks.”

This brought a substantial windfall for the Ghanaian miners who had turned over their concession in exchange for a minority share in the value of the output. “One concession holder told us that it was worth GHc25,000 Ghanaian cedis a week (£5,000 per week),” he said. “For some people this has become big business.”

This shift has, however, had major environmental, social and economic impacts. On the negative side the industrialisation has had a major impact particularly on alluvial mining areas where observers talked about rivers being the colour of “coffee with milk.”

Prof. Crawford said there were significant direct and indirect economic benefits. It has led to increased gold

JANUARY 2015

TRADE

Impact of EU’s trade system on Ghana’s cocoa (I)

BY KENNEDY ADDAI KUFFOUR

The sensitive position of cocoa in the economic development of Ghana requires the ascertainment of the projected performance of the sector under the new Economic Partnership Agreement (EPA) with the European Union (EU) since there are other attractive alternative trading schemes for the cash crop.

Historically, cocoa has been at the epicentre of the Ghanaian economy and a major source of fiscal earnings and export. The crop is one of the largest contributors to Gross Domestic Product (GDP). It provides nearly 30 per cent of all export revenue. There are an estimated 265,000 cocoa farming households in the country and about 1.3 million people engaged in some aspect of cocoa growing.

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ccording to the World Bank, more than 156,000 square kilometres of land was under cultivation at the end of 2009. The Ghana Statistical Service (GSS) recorded that 80 per cent of the total agricultural export between 1995 and 2000 was cocoa beans, which held a 16 per cent share of the total agricultural sector.

Ghana Cocoa Board (COCOBOD), the institution mandated by law to oversee the production, quality control management and marketing of cocoa, borrows money on the international financial market to facilitate the procurement of cocoa beans to make supplies readily available to international buyers. Due to the viability and sustainable growth of the cocoa industry, the credit rating of COCOBOD has risen greatly over the years.

The country’s cocoa receives a premium price on the world market due to its low amount of debris, slightly higher-than-average fat content and low levels of defected beans. For this reason, cocoa beans from all over the world are discounted to Ghana’s cocoa.

Using the New York Stock Exchange life cocoa market information, it is

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observed that cocoa from Ghana draws a premium of 3-5 per cent compared with cocoa emanating from say chief rival and neighbour Cote d’lvoire.

In Ghana, cocoa producer prices rose about 26 per cent between 2000 and 2006. This was largely a result of an increase in the world cocoa price, and partly a result of the various strategies employed by COCOBOD. These include the promotion of technically packaged cocoa extension and other agronomic practices; increased access to credit and the liberalisation of cocoa marketing. Notwithstanding the increased production, the Food and Agricultural Organisation (FAO) and the Ministry of Food and Agriculture estimate that there exists a huge potential for further increased production.

The EU, given its share of world trade (it accounts for a fifth), has developed a trade policy which can trigger economic growth in developing countries. The EU helps in enhancing production and export earnings and encouraging trade creation and diversification. Its policies ostensibly offer great incentives to investors to import products from developing countries with a ‘preferred’ status in the quest to help those countries get

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integrated into the world’s economy.

Yet, evidence has shown that preferential trade agreements (PTAs) are some of the most propagated illusive instruments for achieving growth in developing economies. Despite this, there has been a concerted effort by the EU to expand and sustain the PTAs.

The EU has had a long history of non-reciprocal PTAs with developing countries. The first of such trade agreement was the Yaounde-1 Convention in 1963 with 43 developing countries. Subsequently, the EU embarked on a continual review of the agreements’ eligibility criteria for selection of preferred countries, product coverage, quota setting and tariff cuts for products. This led to the emergence of the Generalised System of Preferences (GSP) in 1971 which incorporated 140 low and medium income countries from around the world. The Lome Convention of 1975 brought together 78 African, Caribbean and Pacific

JANUARY 2015

COVER

Exports confab strategises for growth

Great speakers; broad minds

January 21 will be a great and exciting day for the export sector in Ghana, particularly for export industry experts and organisations, financial institutions, private sector players and key decision-makers as well as the managers of the economy. On that day, the 3rd annual Ghana Economic Outlook & Business Strategy Conference (EOBS2015) comes off at the de luxe Best Western Premier Hotel in Accra.

The series of conferences, which have been recognised in the past three years as the preeminent and the most anticipated business event at the beginning of every year in Ghana, will be attended by over 250 foreign and local delegates.

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EOBS2015 will be graced by Vice President Paa Kwesi Amissah-Arthur, who will deliver a speech on ‘Sustained Economic Growth – Role of the Export Sector,’ Chief of Staff Prosper Bani and other high-level local and international dignitaries. The other attendees include Ministers of State, heads of state institutions, captains of industry, heads of bilateral and multilateral agencies, foreign investors, leaders of civil

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society organisations, members of the Diplomatic Corps, bankers, exporters and the media, among others.

The confirmed high-profile speakers and panel members include Hon. Dr Ekwow Spio-Garbrah, Minister for Trade and Industry; Dr Ahmed Yakubu Alhassan, Deputy Minister for Food and Agriculture; Mr Edward Effah, Managing Director of Fidelity Bank and 2013 CIMG Marketing Personality; Mrs Marie Laurie Akin-Olugbade, Country Director of the African Development Bank; Major Albert Don-Chebe (Rtd.), Director-General of Ghana Broadcasting Corporation and immediate former President of the Institute of Public Relations Ghana; and Dr Michael Agyekum, Chairman of KAMA Group of Companies. The others are Dr Nii Moi Thompson, Director-General of the National Development Planning Commission; His Excellency William Hanna, Head

JANUARY 2015

WORD FOR WORD

AGI wants industrial parks’ enclaves to incubate micro-business Industries are directly and indirectly affected by the difficult goings-on in the economy, and by the implementation of certain policies.

What do owners and managers of industries think about the energy sector and the current power rationing, inflation, the stabilisation of the Cedi and the impending IMF bail-out? They certainly have some views and suggestions. The Association of Ghanaian Industries (AGI) speaks for captains of industry in Ghana.

GB&F’s Ag. Editor, AYUUREYISIYA KAPINI ATAFORI, visited the President of the AGI, Mr James Asare-Adjei, at his company, Asadtek Group, located off the COCOBOD Warehouse on the Harbour Roundabout Road in Tema Community 2, and engaged him in a conversation on a range of contemporary issues.

GB&F: What results have the AGI Industry Awards achieved?

James Asare-Adjei (JAA): This year was the third AGI awards. The awards are the engine of growth of the economy.

People need to be recognised and rewarded, hence the institution of the AGI Ghana industry awards. What it seeks to achieve is to identify businesses that have braced the odds and emerged profitable in spite of the various challenges, particularly 2014 being a challenging year. Businesses that were able to keep heads above water, keeping people in employment, grow their output, develop more market and rake in the needed foreign exchange had to be significantly rewarded. That is what the third AGI awards actually achieved; and definitely it is one award among many other awards in the country that needs to be encouraged and grown to become the awards of all awards and AGI thinks that that is the way to go.

Without industrialisation, there is no economy and where indigenous entrepreneurs are recognised and given the needed support, definitely, we would have an economy that will become buoyant, and then we will grow our economy as a country. That is the focus of the award.

GB&F: What suggestions does AGI have for the rapid industrialisation of Ghana?

JAA: Without industrialisation, we shouldn’t expect Ghana’s economy to grow. We [AGI] have on numerous platforms and occasions indicated that what we can do for our country is to 40

grow our local industries and the only way to do so is to look at support for them both technically and financially.

At the moment, what we are seeing is a very challenging business environment where cost of borrowing and availability of finance are big issues to deal with.

Talking about cost of borrowing, where you are attracting capital at over 35 per cent interest rate, it is very difficult for businesses to survive. Elsewhere, even in some countries in the [West African] sub-region, we have interest rates which are below 20 per cent. So how can we compete with companies or businesses that are attracting credit at such a reasonable level of interest rate? It is very difficult.

Secondly, there is a need for government /institutions that are mandated to actually support private sector growth to look at the issues that are militating against businesses in the country. Looking at issues relating to land acquisition, it is very challenging as we see multiple owners of land, leading to endless litigation.

For 10 to 15 years you are not able to get title deeds covering your land.

AGI, the mouthpiece of industry, has suggested the need for industrial parks development whereby government zones out industrial enclaves and we are able to resolve all issues related to land administration.

If we really don’t find out reasonable means of creating confidence in our land administration, it is going to be very difficult to get foreign direct investors. We need to look at what we consider as land banks which have

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been mooted long ago by AGI: that government should, by legislative instrument, acquire tracks of land in growth-oriented areas, for example, districts, regional capitals such that we can comfortably set up businesses in these zones.

One key thing we refer to for our industrialisation is the ‘industrial park.’

The parks are developed in industrial enclaves to help actually incubate micro and small-scale businesses. New businesses do not have that capacity to fend for themselves, especially when it comes to land acquisition, utilities, and so on. We should create these facilities and then all these businesses between one and five years will be able to grow.

So as they grow to some level, you wean them off these facilities so they can then contribute meaningfully to the economy. That is the key thing AGI has been asking for.

GB&F: How have the AGI barometer/ Surveys been useful to businesses and industries?

JAA: The business barometer survey reports, which AGI has been doing in the past four to five years, has contributed effectively to growth to business in general in terms of identifying the level of business confidence in the economy which is very key. Foreign investors should know what the local players think about the local economic climate. So what AGI does is that we use the evidence-based approach. We gather data from the people, that is, CEOs, captains of industries, and the rest about their perceptions about JANUARY 2015

PERSPECTIVES

How to resolve the energy crisis in a year or less

BY KOBINA NYANTEH

“Is it too late to prevent us from self-destructing? No, for we have the capacity to design our own future, to take a lesson from living things around us and bring our values and actions in line with ecological necessity. But, we must first realize that ecological and social and economic issues are all deeply intertwined. There can be no solution to one without a solution to the others.” -Jean-Michel Cousteau The most realistic and cost-effective solution to Ghana’s energy crisis has been with us all along. The question I ask myself every day is why Ghana’s abundant sunshine is so underutilised for the people to sleep in darkness.

Solar energy, in my opinion, is the best alternative to energy production in Ghana because sunlight is free and always available.

Ghana has been going through an energy crisis in varying forms since the late 1970s. In a bid to curb the crisis, thermal generators were introduced to back up the existing hydroelectric plants. Now, they have become a permanent part of our electricity production. As a result, the country spends millions of dollars every year purchasing expensive fuel to power these thermal generators.

Using hydro for electricity production has proven to be unreliable due to the inconsistent flow of water – a consequence of a myriad of factors including worsening climate change.

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Substitution through thermal plants has also proven extremely expensive due to the daily purchase of fuel and the high maintenance costs. Thus, Ghana has compounded her energy crisis over the years. Even if Ghana solved the energy crisis through the commissioning of additional thermal plants, our energy bill would continually rise as the price of crude oil goes up. Using gas from Atuabo might reduce the costs of fuel but not the high costs of maintenance of thermal generators.

Solar energy rather has the potential to help Ghana achieve international standards in sustainable energy within six to 12 months - the approach used

by Germany to drastically increase their energy source to solar instead of hydro.

Despite not having a generally sunny climate, Germany has been pushing solar energy to the forefront. Today, 28 per cent of the country’s electricity generation comes from solar energy. It is therefore unreasonable that Ghana, which receives more sunlight, should

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focus rather on expensive thermal alternatives.

Ghana can transform its economy and emerge as an energy hub in West Africa through the use of solar energy because it can create about 500,000 jobs ranging from technicians, solar sales solutions experts, to installers, managers, entrepreneurs and so on within one year of placing solar at the forefront of our energy production.

Solar can generate millions of dollars in revenue for the country when it exports solar solutions expertise to other African countries. There is no limit to what Ghana can achieve when it adopts solar as the fulcrum for addressing the power shortage.

First time

I derive my confidence in prescribing solar generation as the cure to the electricity woes of Ghana from many factors. One clear reason is that for the first time in history, ordinary citizens will determine the power generation

JANUARY 2015