GB&F June 2015 teaser

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JUNE 2015 / ISSUE 049 GH¢10.00

High t interes ain em rates r med unta

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

Tigo walks the talk

in digital lifestyle

THE FIRST BUSINESS READ IN GHANA

Follow us online at www.ghanabizfinance.com

CONTENTS ISSUE 049 / JUNE 2015

abnormal rates too continue to remain high.

26 MET Capital Group Limited has

launched its novel Wealth Unit Trust Scheme for low income earners. Watch what this ominidirectional wealth creation plan can do for you.

28 Science & Technology 6

Briefs

Snippets of business and financial stories trending in Ghana, Africa and the remainder of the world.

10 Economy

“Government will now rely on bonds and banks that can provide long-term financing of projects,” says Finance Minister Seth Terkper. What difference is this statement going to make?

12 Banking

Six of the world’s biggest banks were caught by the United States’ laws for currency rigging. The guilty banks agreed to pay US$5.8 billion for their corruption?

14 Trade

Shopping malls revitalise cities and towns, and regenerate economic fortunes. Read this second part of the article published in the May edition.

18 SMEs & Microfinance

When properly harnessed, microfinance offers a variety of benefits to small and medium enterprises, creates employment and boosts businesses.

22 Insurance

Insurance cannot boast of the market share of Ghana’s banks. The National Insurance Commission shows over three per cent penetration of the market by 26 non-life insurance and 19 assurance companies.

24 Finance

The high interest rates debate continues unabated as these

In the midst of the ‘dumsor’ tribulations, we all need affordable and uninterrupted light to make our lives easier and productive.

So it is important to celebrate the UN International Year of Light.

32 Cover

Multiple-award winning Tigo has been encouraging Ghanaians to use smartphones, as it offers innovative and unique voice and data products and digital education.

36 Agriculture

The National Food Buffer Stock Company was set up to give sustainable income to farmers.

But the viable but under-funded company is gasping for oxygen to survive.

40 Tourism

Heritage tourism is one of the fastest growing sub-sectors in tourism. But many Ghanaians do not understand heritage’s role in the configuration of their identity, and how it can help to develop new economic, social and territorial dynamics.

48 Perspectives

Germany, the largest economy in Europe, is short of Information Technology (IT) specialists. Thus, it has modified its immigration laws to entice many an IT expert and other professionals, examines Professor Rose Baaba Folson (Ph. D).

50 Time is running out to renew the

African Growth and Opportunity Act (AGOA). If by September 30, AGOA is not renewed, the apparel sector of the US and Africa will lose out.

52 Outlook

To enhance the African unity and development agenda successfully, the African Union must be reformed so that strong leadership and well-qualified technical staff will hold sway.

56 Events

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

57 Stats & Indices

Figures speak louder than words for Ghana’s economy.

58 Commodities

Find the prices of agricultural produce in selected local markets, as researched and compiled by Esoko.

44 Business & Management

It is the common belief that in meeting our new ‘wants,’ we will be happier and more fulfilled. But with each new ‘want,’ comes new risks. Question is: What becomes the marginal utility of our new wealth?

46 Automobile

Korean car-maker Hyundai is celebrating 30 years of its iconic Sonata mid-size sedan this year, with a search for future innovations. In Ghana, Auto

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.

JUNE 2015

Plaza Limited, the authorised distributor of the various Hyundai models, is also celebrating with expectation of a brighter future.

Automobile: Page 46

linkedin.com/GhanaBusiness&Finance facebook.com/GBandF @ghana_business

GHANA BUSINESS & FINANCE

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General Manager Josiah Spio-Garbrah jspiogarbrah@ghanabizfinance.com +233 264 510 396 Editor Ayuureyisiya Kapini Atafori editor@ghanabizfinance.com Senior Staff Writer Kweku Darko Ankrah kdankrah@ghanabizfinance.com Columnists Jerry Halm Dr Nana Ama Browne Klutse Contributors Martin Luther C. King Oppong Baah Anthony Sedzro Kennedy Addai Kuffour Design & Production Manager Benjamin Tetteh btetteh@ghanabizfinance.com Circulation & Subscription Jeffrey Dapaah subscription@ghanabizfinance.com Editorial Committee Prof. Paul N. Buatsi Prof. Kwame Addo Ms Johanna Awotwi Mr Gaddy Laryea Mr Ray de Bono Mr Nana Robert Mensah Mr Frederick Alipui Ms Dede-Esi Amanor-Wilks Ms Nana Spio-Garbrah Office Location Ghana Business & Finance African Business Media House No. 7 Lamb Street (off Farrar Avenue) Adabraka, Accra, Ghana Mailing Address P. O. Box O 772, Osu, Accra, Ghana Tel: +233 302 240 786 Fax: +233 302 240 783 info@ghanabizfinance.com Brand Advisor Dmax Studios in Malta, EU. (www.dmax.tv) Credits

GNA myjoyonline Daily Graphic Bloomberg radioxyzonline.com citifmonline Mergermarket Group Corporate Council on Africa ghanabusinessnews.com

Ghana Business & Finance magazine is published by

JUNE 2015

At between 25 per cent and 35 per cent, Ghana has the highest rates in West Africa.

Regional economic colossus Nigeria’s current interest rates average 9.86 per cent. According to Trading Economics, the benchmark interest rate in Cote d’Ivoire was last recorded at 3.50 per cent, reaching an all-time high of 4.25 per cent in January 2011, and a record low of 3.50 per cent in September of 2013. The benchmark interest rate in Togo was last recorded at 3.50 per cent, as the interest rate averaged 3.87 per cent from 2010 to 2015, reaching an all-time high of 4.25 per cent in January 2011, and a record low of 3.50 per cent in September 2013.

Complaints by the business community about high interest rates are almost unaccountable. The first- quarter 2015 Association of Ghanaian Industries (AGI) Business Barometer said it all. The last Bank of Ghana’s (BoG) Monetary Policy Committee (MPC) report unravelled the destructive effects of high interest rates on businesses. The recentlylaunched Institute of Economic Affairs (IEA) Business Confidence Survey also revealed that the exorbitant cost of credit weakened businesses’ operations.

‘Review of Development Finance’ Volume 4, Issue 2, December 2014, observed the causative elements of interest rates in Kenya to include “bank size, credit risk as measured by non-performing loans to total loans ratio, return on average assets and operating costs, all of which positively influence interest rate spreads.”

What is the single real determinant of Ghana’s high interest rates? In a post-graduate thesis by Nicholas Ekow Cobbinah titled, THE IMPACT OF BANK OF GHANA POLICY RATE ON COMMERCIAL BANK LENDING RATE.THE STUDY OF BARCLAYS BANK GHANA (2011), submitted to the Kwame Nkrumah University of Science and Technology, it was enunciated: “Notwithstanding the fact that there are other financing options to the public, the primary source of finance in Ghana recently is through bank loans. Such loans come at a cost higher than the price at which the commercial banks borrowed from the central bank.

“A change in the policy rate changes the lending rate of commercial banks and thus, reduces or increases the amount of money available on the market for business and individuals to trade with.”

The thesis concluded: “There was an evidence of a very strong positive relationship between the Bank of Ghana Policy Rate and the Lending Rate. This means that as the Bank of Ghana Policy Rate increases, the Commercial Bank Rate also increase [sic] and as the Bank of Ghana Policy Rate decreases the Commercial Bank Lending Rate also decreases.”

Besides this, there are a lot of factors which give rise to the high interest rates in Ghana.

Some of the variables have been delineated by the specialists and captains of business at the Ministry of Trade and Industry (MOTI)-IEA forum on interest rates (See Page 24).

In realistic and comparative terms, interest rates in Ghana are very high. Therefore, recent comments and suggestions on how to nip the top perennial dampener on doing business in Ghana, high interest rates, are heart-warming and healthy.

Though the much-talk-but-little- action discourse on how to reduce interest rates has been going on since the 1990s while the rates kept bumping up, the ploy lately to cut the expensive rates should be backed by all stakeholders, particularly the Ministry of Finance, BoG, MOTI, AGI, Ghana Chamber of Commerce and Industry and Ghana Union of Traders Association.

It is pleasing and patriotic that MOTI, spearheaded by Dr Ekwow Spio-Garbrah, the sector Minister, is leading the advance in the battle to tame the wild galloping horse called costly interest rates. But bet GB&F, and lose, when we dare say the declared war against the wild horse will be arduous and frustrating.

The entrenched vested interests of some critical actors involved in the process of cutting the current high interest rates will scupper efforts like those of Dr Spio-Garbrah and like-minded persons. As a banker, the Trade and Industry Minister is not unaware of the intricacies, intimacies and complexities involved in fixing interest rates in Ghana.

Let us hope that he and his co-crusaders do not end up being like Sisyphus, who, in Greek mythology, is said to roll a rock to the top of a mountain, whence the stone would fall back of its own weight, and the legendary figure resumes the rolling perpetually. GB&F wishes the anti-high interest rates champions well in their near-impossible endeavour. We can only hope and pray their tireless efforts will not become futile labour.

Ayuureyisiya Kapini Atafori

Letters to the Editor

Editor (+233 024 2385374)

editor@ghanabizfinance.com

send your letters to the editor at

GHANA BUSINESS & FINANCE

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EDITOR’S SUITE

Tackling high interest rates conundrum may be impossible

TRADE

Shopping malls revolution rocks Ghana (II)

BY KWEKU DARKO ANKRAH

Shopping malls act as catalysts for the long-term revitalisation of cities and towns.

Malls often become key landmarks that dramatically improve the physical and social fabric of the urban environment, apart from regenerating economic fortunes and improving the local quality of life in the process. Malls often improve the environment of respective cities when compared to their being non-existent. Shopping centres’ high quality architecture enhances the cityscape, exerting a lasting impact on the urban fabric and improving local pride.

The newly sprang up malls in Accra, with their unique architectural designs, have become an iconic representation of Ghana’s capital city’s identity. This has enhanced the quality of Accra’s physical public space which now offers a significant sense of enjoyment and leisure, enabling social activities such as meetings with friends for lunch, coffee

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or dinner. This was not the case before the malls emerged.

Regarding the economic benefits of malls to the wider community, a research by United Kingdom (UK)-based Hammerson’s shopping centres has found that malls are the key contributors to the revitalisation of towns and city centres.

GHANA BUSINESS & FINANCE

They are an integral part of the high street, not only in terms of their financial successes. There are also the benefits to local residents as the establishment of a new shopping centre generates employment opportunities for people within its immediate vicinity. A survey carried out by UK`s Bullring and WestQuay showed that on average 85

JUNE 2015

SMEs & MICROFINANCE

Regulating Ghana’s microfinance institutions:

Any impact?

BY YAW OHEMENG KYEI

Microfinance is the provision of financial services to low income groups and very poor self-employed people in rural and urban areas.

These financial services include savings, credit and in some cases, micro-insurance. Microcredit refers to small loans offered to clients. When loans are supplemented with other financial services like savings and insurance, it is referred to as microfinance.

Microfinance Exchange defines microfinance institution (MFI) as an organisation that offers financial services to the very poor (MIX, 2005).

The main priorities of MFIs are as to achieve large-scale outreach, to attain financial sufficiency, to reach a significant percentage of each country’s poor with microfinance services and to play a significant role in reducing poverty. According to the 2004 Microcredit Summit Campaign Report, as at December 2003, the 2,931 micro-credit institutions that it has data on had reported reaching 80,868,343 clients, 54,785, 433 of who were the poorest of the poor when they took their first loans.

When properly harnessed, microfinance offers a variety of benefits to small and medium enterprises (SMEs). It can create employment and boost businesses to address the

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poverty situation in Ghana. At the personal level, microfinance can effectively address issues linked to nonmaterial poverty which includes social and psychological effects that prevent people from realising their potentials.

One of the greatest challenges facing MFIs, however, is regulation.

Regulation is critical area that should be looked at if MFIs could be sustained to grow SMEs. Regulation refers to a set of enforceable binding rules that govern the conduct of legal entities or individuals, whether they are adopted by a legislative body or an executive body. The cardinal aim of prudent regulation is to ensure the financial soundness of financial intermediaries and try to prevent or minimise financial

GHANA BUSINESS & FINANCE

system instability and loss of depositor’s money.

The others reasons for regulations are to improve MFIs governance and ownership structure and to reduce asymmetry information and moral hazard problems. Prudential regulation strengthens the reputation of MFIs and prevents fraudulent activities through transparency in financial accounting and transaction reporting.

Research indicates MFIs clients are from the poorest households, and any loss of their savings due to MFI insolvency would be disastrous. Besides, the clients lack the financial expertise to assess the riskiness of MFIs, hence the need for prudential regulation.

JUNE 2015

COVER

L-R: Ron, Stephen, Gifty, Jesse & Tara

Tigo walks the talk in digital lifestyle

BY KWEKU DARKO ANKRAH

Tigo, Ghana’s premier Mobile Network Operator, has been more aggressive in its zeal to capture the Ghanaian telecommunications market share in recent times. Tigo has been encouraging Ghanaians to use smartphones instead of feature phones (‘Drop that Yam’) and has been offering them voice and data products with unrestricted access (‘Big Six’) and digital education to enable them make the most of their smartphones and other mobile technology (Digital Fair).

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GHANA BUSINESS & FINANCE

JUNE 2015

COVER Corporate Communications and CSR; and Ron Reddick, the Chief Technical and Information Officer.

Digital inclusion for rural children

There is also Tigo’s the Corporate Social Responsibility (CSR) programme which is focusing on digital inclusion for children in rural Ghana. These marketing campaigns, with the CSR focus, are supported by various investments in the network`s architecture and infrastructure to ensure that customers are able to do more with “Ghana’s Number 1 Digital Lifestyle Mobile Network Operator.”

In interactions with the various leaders of the teams which are ensuring that the Digital Agenda is the focus in all Tigo’s initiatives, it was revealed that many customers and noncustomers have embraced the digital lifestyle and are satisfied with it. The team leaders include Jesse Agyepong, the Head of Marketing; Tara Squire, who leads mobile innovations; Stephen Essien, who heads Customer Operations; Gifty Bingley, Head of

JUNE 2015

Ever thought of how CSR can be digital? Well, Tigo is at the forefront of Digital CSR, if there is such a phrase. The telecom company recently unveiled an initiative which will ensure that children in rural Ghana are not left out of the digital world.

Outdooring its unique new Mobile Digital Library, Tigo showed off a Boxer van which has been re-fitted with tables and chairs, laptops, tablets and kindles to encourage children in rural communities to read and get a hands-on experience on computers.

Tigo also had additional tables, chairs and laptops to set up outside the van to cater for more children.

`The project, a partnership with one of its Changemakers, Hayford Siaw of Street Library Ghana, will ensure that children get the same reading and learning experience in the selected communities. In an interview with, Bingley revealed that Changemaker Siaw was previously travelling around rural communities with hard copy books in a mini-van to encourage a reading culture among children. “With this innovation, we are hoping to get more children interested in digital technology. We are excited to be the first to introduce the children to the digital world,” she said.

Getting Ghanaians to prefer smartphones

Total mobile subscription in the Ghanaian market is over 30 million, far higher than the country’s population

of over 26 million. However, mobile data penetration is about 50 per cent, meaning about half of the population is not able to access the Internet on their phones. Tigo smartphones are at the heart of getting Ghanaians to be a part of the digital lifestyle. The phones range from the entry-level to the highend state-of- the-art smartphones.

In December 2014, Tigo launched a campaign to get customers to drop their feature phones and adopt smartphones. The discounted phones included entry- level phones like the Samsung Young 2 and the high-end IPhone 6. The campaign, themed ‘Drop that Yam,’ emphasised the numerous benefits of smartphones, including staying in touch with friends and family on multiple social media channels and capturing digitally important milestones in life and storing important documents.

An 2013 Ericsson Consumer Insight Summary Report, ‘BRIDGING THE DIGITAL DIVIDE: How mobile phones are playing a key role in connecting people in Sub-Saharan Africa,’ identified Sub-Saharan Africa (SSA) as one of the fastest growing mobile markets in the world in need of entry of low-cost smartphone handsets to allow people from different social classes to benefit from an integrated system.

The report also revealed that smartphone use in SSA is primarily driven by young consumers under 30 years of age who work full time, or are still at school and own lower range smartphones that cost less than US$150.

About 44 per cent of consumers in SSA were found to yearn for smartphones to enable them access the Internet, 39 per cent for upgrade of current mobile phones, 34 per cent to go on social media sites, 31 per cent to use current applications/features and services, and 29 per cent for entertainment.

GHANA BUSINESS & FINANCE

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AGRICULTURE

Food Buffer Stock Company struggles to live up to its mandate

BY OPPONG BAAH

Worldwide, 1.3 billion tonnes of food are lost or wasted every year, and one-third of food produced, worth about US$1 trillion, is lost or wasted during food production and consumption, according to research undertaken by the United Nations’ Food and Agriculture Organisation (FAO). Fifty-four per cent of the world’s food wastage occurs at the ‘upstream’ of production (post-harvest handling and storage), while forty-six per cent of it happens ‘downstream’ at the processing, distribution and consumption stages, the FAO study states. The study reveals that, as a general trend, developing countries suffer more food losses during production, while food waste at the retail and consumer levels tends to be higher in middle- and high-income countries.

E

xperts estimate that 30 per cent of Ghanaians do not have enough food to eat and over 45 per cent of food produced annually is wasted. Ghana is striving to achieve food security by producing 51 per cent of its cereal needs, 60 per cent of fish requirements, 50 per cent of meat and less than 30 per

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cent of raw materials needed for agrobased industries. Research conducted

by United Kingdom-based The Urban Association Limited (TUAL) in 2013 on post-harvest losses of selected food crops in eleven African countries showed that as much as 60 per cent of yam produced in Ghana did not make it to the consumer. The study, which

GHANA BUSINESS & FINANCE

was commissioned by the Alliance for a Green Revolution in Africa (AGRA), revealed that the level of losses which occurred in maize production, for instance, ranged between five per cent and 70 per cent, whereas between 11 and 27 per cent of rice cultivated never reached the consumer. The amount of millet or sorghum lost after harvesting

JUNE 2015

TOURISM

Heritage tourism is touted by industry players as one of the fastest growing subsectors in tourism today.

But many citizens do not understand the role that heritage plays in the configuration of their identity, and how it can help to develop new economic, social and territorial dynamics.

According to the World Heritage Fund (WHF), an international conservancy whose mission is to protect, preserve and sustain the most significant and endangered cultural heritage sites in the developing world, “By 2025, global heritage sites can be a $100 billion a year opportunity for developing countries if a worldwide effort is made for their preservation and responsible development.�

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BY KWEKU DARKO ANKRAH

GHANA BUSINESS & FINANCE

JUNE 2015

AUTOMOBILE

Celebrating 30 years of the

Hyundai Sonata brand

BY ADNAN ADAMS MOHAMMED

Korean car-maker Hyundai is celebrating the 30th anniversary of its iconic Sonata mid-size sedan this year, with peek into a future of innovation. Sonata made its debut in 1985 in Korea, playing a pivotal role in Hyundai’s growth and reputation. With more than 7.3 million Sonata models sold since its introduction, the car has become a family friend loved by customers all over the world. In Ghana, Auto Plaza Limited, the authorised distributor of the various Hyundai models such as Accent, Sonata, Elantra and Azera, is celebrating the anniversary with an expectation of a brighter future.

“The Sonata has been a huge factor in Hyundai’s growth not only in the US, but around the world,” said Dave Zuchowski, President and CEO, Hyundai Motor America. “During its 30year history, we have been able to craft and evolve Sonata to the ever-changing needs of our customers. And, with the Sonata family growing this summer to include the all-new Sonata Plug-In Hybrid, we’re expanding an already diverse line-up with something for everyone.”

The latest in the models is the 2015 Hyundai Sonata, which has been ranked three out of 18 affordable mid-size cars in the world. This ranking is based on analysis of published reviews and test drives of the 2015 model, as well as reliability and safety data. The 2015 Sonata is redesigned to give a pleasant, hushed ride and has a high-end cabin that ranks near the top of the class. With the best combination of positive media reviews and long-term ownership costs in its class, Hyundai Sonata is considered the best mid-size car in 2015. Sonata also has the best combination of space, reliability and safety ratings and available family-friendly features. Compared with many of its rivals, the 2015 Sonata's cabin materials are more high-end. It has a pleasantly quiet interior.

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The 2015 Sonata's trunk has 16.3 cubic feet of space. Its standard features include satellite radio, Bluetooth and a USB/ iPod input. Other features are a panoramic sun-roof, leather upholstery, heated and ventilated front seats, heated rear seats and Smart Trunk system, which opens the trunk when it detects the key fob behind the vehicle for more than three seconds.

More features include adaptive cruise control (which can bring the car to a stop), a rear view camera, blind spot monitoring, forward collision warning, lane departure warning, a 5-inch attractive and user-friendly touch screen infotainment system or an 8-inch touch screen infotainment system with navigation.

Test drivers like Sonata’s audio, climate and navigation controls which are easy to use and are separated from the touch screen system.

Powerful acceleration

The 2015 Sonata has powerful acceleration off the line but does not deliver adequate passing power on the highway. It has superb braking power. The turbo-charged 2.0-litre four cylinder engine in the Sport 2.0T trim is very swift on the highway.

GHANA BUSINESS & FINANCE

JUNE 2015

OUTLOOK

African Union

requires reforms to be more effective

BY MWANGI S. KIMENYI

Some of the key development issues that the African Union (AU) is expected to spearhead in 2015 includes presenting a coherent African position on the post-2015 Millennium Development Goals. Here, the AU needs to push for goals that reflect the actual needs of Africans. Although the AU has already released its Common Africa Position on the Post-2015 Development Agenda that includes its own vision for 29 Sustainable Development Goals, AU negotiators must participate fully and effectively in the talks at the United Nations (U.N.) so that the African platform is given a proper hearing.

To successfully enhance the African agenda, the AU needs strong leadership and well-qualified technical staff— two things that critics have argued the body lacks. In addition, to amplify the African voice, many people inside the continent have called on the AU to narrow down the scope of the AU’s goals to focus on those that affect the largest number of Africans, are Africaspecific (and hence, are unlikely to be lobbied for by other countries), and are least likely to be vetoed (Carin 2014).

Peace and Security

Africa still suffers from violence by various ethnic and religious groups.

However, the AU—despite the fact that, unlike the Organization of African Unity (OAU), it has the mandate to intervene in these crises— has been unable to deal directly with

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this violence, as seen in intractable civil conflicts in the Democratic Republic of Congo and South Sudan, as well as the increasing threat of terrorism by groups such as Boko Haram, al-Shabab, the Lord’s Resistance Army, and al-Qaida in the Islamic Maghreb (AQIM).

Although there have been some notable successes such as in the case of Somalia, the failures stand out.

In many respects, the AU has either been extremely slow to intervene in various conflicts in the continent or has done so ineffectively. In fact, the AU’s effort in Central African Republic (MISCA—Mission internationale de soutien à la Centrafrique sous conduite africaine) was considered a total failure.

These short-term missions have not been the only disappointments: The launch of the African Standby Force has already been delayed several times

GHANA BUSINESS & FINANCE

- even though it was expected to have been established and made operational by 2010—largely due to limited resources from the member countries.

An additional obstacle to the AU’s efforts to bolster peace lies at the Heads of States level as they are expected to provide guidance on such matters.

Good Governance and Corruption

The AU has played and continues to play an important role in bringing about improvements in domestic good governance, accountability and transparency. It is empowered to impose sanctions in cases of non-democratic transitions of power or where parties to conflicts refuse to enter into negotiations to resolve disputes—as it threatened to do in the recent events in Burkina Faso. The AU has also been involved in matters of management of natural resource wealth, especially in pushing for member countries to sign

JUNE 2015

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