Business24 Newspaper 15th March, 2021 by Business24 Online

MONDAY MARCH 15, 2021

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NO. B24 / 171 | NEWS FOR BUSINESS LEADERS

MONDAY MARCH 15, 2021

Gov’t interest expense hits alarming record

GH¢5.5bn required to fully settle asset management investors By Joshua Worlasi Amlanu macjosh1922@gmail.com

o fully settle investors of the remaining failed 17 asset management companies (AMCs), the Securities and Exchange Commission will require an additional amount of GH¢5.5bn, equivalent to 1.3 Cont’d on page 3

By Nii Annerquaye Abbey abbeykwei@gmail.com

nterest payment on the country’s debt has become the biggest expenditure item on government’s books— surpassing the amount set aside to pay public sector workers’ salaries and pensions. According to the 2021 budget statement presented to lawmakers last Friday, government will spend GH¢35.9bn as interest payments, whereas workers’

compensation is expected to amount to GH¢30.3bn. Compensation paid to workers has historically been government’s biggest expenditure item, but rising public debt since the late 2000s has rapidly pushed up interest spending, which has now eclipsed the compensation bill. In the 2021 budget, presented by Osei Kyei-Mensah-Bonsu, Minister for Parliamentary Affairs, government is seeking parliamentary approval to spend GH¢110bn on its

ECONOMIC INDICATORS EXCHANGE RATE (INT. RATE)

POLICY RATE

14.5% 14.77%

OVERALL FISCAL DEFICIT

11.4% OF GDP

AVERAGE PETROL & DIESEL PRICE:

4.2% GHC 5.13

By Eugene Davis ugendavis@gmail.com

he Minority Leader, Haruna Iddrisu, has recommended the passage of a law to prevent governments from starting new projects they have not secured adequate funding for. Cont’d on page 3

Cont’d on page 2 INTERNATIONAL MARKET

US$1 = GHC 5.7606

GHANA REFERENCE RATE PROJECTED GDP GROWTH RATE

programmes and initiatives— meaning 31 percent of the amount will go into debt servicing. The country’s debt as at end-December 2020 stood at GH¢291.6bn, representing 76.1 percent of GDP. The rapid rise in the public debt, which stood at GH¢218bn at the beginning of last year, was attributed to the pandemic, which cut government’s revenues even as it incurred unplanned expenditure.

Minority Leader advocates law to prevent gov’ts abandoning projects

BRENT CRUDE $/BARREL NATURAL GAS $/MILLION BTUS GOLD $/TROY OUNCE

CORN $/BUSHEL

$543.75

COCOA $/METRIC TON

$123.55

COFFEE $/POUND:

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Editorial / News

MONDAY MARCH 15, 2021

Editorial

Debt position scary

he 2021 budget was last week presented by Osei Kyei Mensah Bonsu, the Minister of Parliamentary Affairs. Following the devastation caused by the covid-19 pandemic, this year’s budget was one of the most highly anticipated. It was no surprise that the budget was christened: “We are moving forward.” As the first major budget since the pandemic struck a year ago, it was expected that the statement would consolidate the several scattered policy directives announced last year as the virus hit the shores. The statement was also expected to offer the clearest picture yet of the full extent of the damage caused by the virus. As it turns out, the country’s debt

position has been aggravated by its inability to raise more revenue even as it incurred unplanned expenditure. The country’s ballooning debt had occasioned the biggest fiscal deficit in the country’s recent history. Quite apart from the deficit, it also emerged that the amount of money the country spends on servicing its debts has reached alarming levels. Typically, Ghana spends most of its revenues on paying workers’ salaries and wages. But a careful analysis of this year’s budget shows that interest payment has overtaken compensation to workers. The overtaking is not only troubling but the fact that the difference between the two expenditure items is over GH¢5billion must be a grave

source of concern. Already, the IMF and its allied institution have classified the country as being at risk of defaulting on its debt obligations. Though the government had downplayed this creeping debt situation, it doesn’t negate the fact the nearly half of domestic revenues mobilised would be used to sort out interest payments. Interest payment and compensation to government workers alone consume nearly all of domestic revenues collected – which would mean that more borrowing would be needed to execute the government’s budget. This paper would call on the government to, as a matter of urgency, consider drastic measures to arrest the situation.

Gov’t interest expense hits alarming record Continued from cover The emergence of interest payments as the biggest expenditure item reaffirms the International Monetary Fund’s classification of Ghana’s economy as being at high risk of debt distress—a situation where a country is unable to fulfill its financial obligations and debt restructuring is required. But in his budget speech, the Your subscription -- along with the support of businesses that advertise in Business24 -- makes an investment in journalism that is essential to keep the business community in Ghana well-informed. We value your support and loyalty. Contact Email: hello@thebusiness24online.net Newsroom: 030 296 5315 news@thebusiness24online. net Advertising / Sales: +233 24 212 2742

Osei Kyei Mensah Bonsu

Parliamentary Affairs Minister was confident that Ghana is not yet at a stage that should cause panic. “The results of the 2020 updated Debt Sustainability Analysis (DSA) show that both Ghana’s external and total public debt stocks were high but sustainable, and remained unchanged from the results of the previous 2019 DSA, which was included in the 2020 Budget,” he said.

That notwithstanding, a Senior Research Fellow at the Institute for Fiscal Studies (IFS), Dr. Said Boakye, stated that the situation is dire and the government needs to take drastic measures to halt the pernicious debt increase. “The government’s understanding that the Ghana Revenue Authority (GRA) has to collect taxes that are due to the government is not enough. The state of the fiscal position is such that something drastic needs to be done,” he said in an interview with Business24. In his view, some of the measures government needs to explore include cutting down on wasteful expenditure. He argued that policies like free senior high school, for instance, have to be reviewed to allow parents who can afford to pay their kids’ school fees to do so in order to offer government some relief. Also, Dr. Boakye said that the precarious nature of government’s finances cannot accommodate the regular increases in the wage bill. While calling for a rationalisation, he maintained that the labour unions could only be won over if the executive and legislative arms of government cut down on their entitlements, such as end-ofservice benefits. He further called on government to reassess mining concession agreements to ensure that the state increases its earnings from the industry.

MONDAY MARCH 15, 2021

GH¢5.5bn required to fully settle asset management investors Continued from cover percent of gross domestic product (GDP), the interim Finance Minister, Osei Kyei-MensahBonsu, has said. Presenting the 2021 budget statement to parliament last week, he said government is seeking approval of the amount from Parliament to complete the asset management industry bailout. Out of the estimated GH¢8.5bn in total required to pay investors of the failed AMCs, legislators approved GH¢3.1bn in the 2020 mid-year budget. The bailout covers 47 failed asset management companies, including Gold Coast Fund Management (now Blackshield Capital Management), First Banc Financial Services, Liberty Asset Management, Beige Capital Asset Management, Ideal Capital Partners, and Frontline Capital Advisors. By the end of December 2020, government had provided GH¢3.4bn for the payment of validated claims to investors of 30 AMCs for which liquidation

orders had been obtained. This amount was in a combination of a three-year marketable bond of GH¢2.5bn and a five-year zerocoupon bond of GH¢915m. In December 2020, SEC revealed that 2,802 clients of the defunct fund management companies had received full

or partial payment of their investments. The full bailout package involves a special arrangement whereby the government will pay clients of defunct fund management companies whose liquidation has been approved by the courts the full amount of their

investments within a three-year period. The partial bailout, on the other hand, is a flat cash payment of GH¢50,000 to clients of fund management companies whose liquidation has yet to be approved by the courts.

Minority Leader advocates law to prevent gov’ts abandoning projects Continued from cover According to him, this will prevent the phenomenon of uncompleted and abandoned projects scattered all over the country. Mr. Iddrisu made this recommendation at a post-budget workshop in the Volta Regional capital, Ho, for members of

Parliament. The workshop was to help legislators appreciate and analyse the 2021 budget. He said such a law is urgent and will be critical to ensure value for the investments the state makes in projects. “There are many ministers who initiate projects even when there is no budgetary allocation

or provision for it. It’s about time we (Parliament) said no to that. No project should commence unless it is supported by adequate availability of funds for its initiation and completion,” he said. On his assessment of the 2021 budget statement, the Tamale South legislator said the budget was without hope and urged

Ghanaians to brace themselves for more hardships. “There is no hope. Ghanaians must brace themselves for increased hardship and increased suffering because there will be petrol hikes with [the increase in] ESLA [energy sector levies] that they [the government] described a few years ago as a nuisance tax,” he said. The Majority Leader of Parliament, Osei Kyei-MensahBonsu, who presented the budget last Friday, indicated that President Akufo-Addo in his second term of office will commit to completing abandoned projects by his predecessors. He said government will prioritise channelling its resources to completing existing infrastructural projects instead of committing to new ones. The Member of Parliament for Suame stated that abandoned projects do not only have a dire effect on the country’s development but also cause financial instability to the economy.

MONDAY MARCH 15, 2021

News

MONDAY MARCH 15, 2021

Tullow to decarbonise its assets in Ghana By Joshua Worlasi Amlanu macjosh1922@gmail.com

ullow Oil has reassured investors of its commitment to becoming a “net zero company” by 2030 on its Scope 1 and 2 emissions through a combination of decarbonising its operated assets in Ghana and pursuing a nature-based carbon removal programme. The company in a statement said its investments in decarbonisation projects over the next three years will result in an increase in the gas-handling capacity on the Jubilee field and enable process modifications on the TEN field, which will also put the Group on track to eliminate routine flaring in Ghana by 2025. To offset the residual difficultto-abate carbon emissions, Tullow has begun the necessary works to identify nature-based carbon removal projects, such as reforestation, afforestation and conservation, which Tullow will invest in to achieve its “net zero” ambition by 2030. “We will also seek to align

Rahur Dhir, CEO, Tullow Oil Plc

our carbon offset strategy with government priorities, emerging regulation on Article 6 of the Paris Agreement as well as our Shared Prosperity strategy, focused on creating socioeconomic opportunities for our host communities,” said Rahur Dhir, Chief Executive Officer, in an address to investors on the company’s 2020 performance

and outlook. “The effects of the COVID-19 pandemic on our operations have been managed safely across the business with no impact on Ghana production. This has been achieved in close cooperation with the Government of Ghana, who have enabled effective testing and quarantine measures to be put in place. However,

this increased the net cost of operations by US$10m in 2020,” he noted. Mr. Dhir said that both fields in Ghana performed in line with expectations in 2020, with the Jubilee field averaging 83,600 bopd gross (net: 29,500 bopd) and the TEN field averaging 48,700 bopd gross (net: 23,000 bopd).

Analyst predicts positive outlook for cedi pinned to exports Patrick Paintsil p_paintsil@hotmail.com

kechi Akunyili, Managing Partner of Access View Africa, a portfolio investment and advisory firm, has predicted a positive outlook for the Ghana cedi on the back of expected bond issuances, positive forex inflows from crude and gold export and the attractiveness of the economy to foreign direct investments. She forecasts a 3.9 percent

Louis Yaw Afful

depreciation this year for the worst scenario but adds that sustaining the gains of the local currency will be largely hinged on government’s ability to shore up import substitution by leveraging the Africa Continental Free Trade Area (AfCFTA). “A country’s currency is as good as its economy; there is a positive outlook for the stability of the cedi but we can do better with increased exports. With the AfCTFA, we should be looking at the productive sectors

Ms. Nkechi Akunyili

to facilitate import substitution. We change dollars to import; we flip it to the other side and the cedi will stabilise,” she said as a panelist on Azafinance’s webinar on Ghana in recovery: outlook for growth, AfCFTA and the cedi. The webinar discussed the fortunes of a pandemic-laden Ghanaian economy highlighting how the single continental market will fast-track its recovery to growth and also how the use of the dollar for AfCFTA-borne transactions will impact the cedi.

To Ms. Akunyili, the AfCFTA will facilitate trade but making settlements in the dollar, for instance, cannot help the pressure on the respective currencies of member countries. She admitted that the continental market hoards huge prospects for Ghana and all other countries that are signed onto but advised that payments for trade must be in local currencies. “Trade between two African countries can be measured against the dollar but settlement should be in local currencies,” she noted. Another panelist and Executive Managing Director of AfCFTA Policy Network Ghana, Louis Yaw Afful, indicated the need for a solid pan-African payment system as a boost to integrating trade across the continent. He therefore tasked tech startups and fin-techs to study the African terrain and come up with digital platforms that will facilitate trade. He said: “AfCFTA has come to boost intra-trade and to integrate cross-border trade; it’s a gamechanger but steadily. E-commerce is one critical area that holds huge prospect for the market and its subscribers.”

MONDAY MARCH 15, 2021

News

MONDAY MARCH 15, 2021

Gov’t signals deficit compression, boosting investor confidence By Joshua Worlasi Amlanu macjosh1922@gmail.com

overnment’s target to achieve a fiscal deficit of 9.5 percent of gross domestic product (GDP) signals the start of deficit compression, which is good for debt sustainability over the medium term, Courage Kingsley Martey, a senior research analyst with Databank, has said. Reacting to the 2021 budget statement, the senior analyst was optimistic that the budget will sustain investor confidence in Ghana’s commitment to fiscal and debt sustainability. “The boldness on the part of the government to introduce taxes at a time when the policy would appear unpopular could also be viewed by some sophisticated investors as government’s commitment to restore fiscal and debt sustainability,” Mr. Martey said. The deficit target is key to the government’s next Eurobond issuance, as it increases investor appetite, with the signal of a strong intention to revive growth and domestic revenue collection, both of which were hit hard by

the COVID-19 shock. Government intends to raise Eurobonds valued at US$5bn through its international capital market programme this year. Of the targeted amount, US$1.5bn is intended to be used to support the implementation of the 2021 budget and the rest for liability management. According to the interim Finance Minister, Osei KyeiMensah-Bonsu, the 2021 fiscal operations will result in an overall deficit of GH¢41.30bn, equivalent to 9.5 percent of GDP, which will be financed from both domestic and foreign sources. Net domestic financing is expected to amount to GH¢25.42b, equivalent to 5.9 percent of GDP, while net foreign financing will amount to GH¢15.87bn, representing 3.7 percent of GDP. However, Mr. Martey said, “a critical dig into the [fiscal deficit] target could make you want to exercise caution in your optimism.” “On the revenue side, one may want to question the feasibility of a 31 percent growth in revenue in a year when the economy is still fragile from the impact of

Osei Kyei-Mensah-Bonsu, interim Finance Minister

COVID. And if one considers the historical revenue performance, which shows an average growth of 17 percent from 2017 to 2019 (excluding COVID year) or 13 percent when 2020 is included, the market could perceive a revenue growth of 31 percent in 2021 as quite ambitious.” He further stated that the projected deficit of 9.5 percent of 2021 GDP reflects more of a bigger nominal GDP base than a sharper contraction in the 2021 funding gap. “The projected funding gap

of GH¢41.3bn for 2021 is only lower than the 2020 gap by some GH¢3.6bn. This shows a compression in the funding gap by only 0.8 percent of GDP. The remaining compression that is expected to pull the deficit from 11.7 percent in 2020 to 9.5 percent in 2021 is mainly due to a higher nominal GDP,” he explained. “So it gives the impression that fiscal consolidation is starting on a slower note, largely because the government is unable to aggressively rein in expenditure,” he said.

GSE to pursue initiatives to drive listing, liquidity By Joshua Worlasi Amlanu macjosh1922@gmail.com

he Caretaker Finance Minister, Osei Kyei-MensahBonsu, has disclosed a number of initiatives to improve listing and drive liquidity on the equities market this year.

Key among the initiatives is a collaboration between the Ghana Stock Market (GSE) and the State Interests and Governance Authority (SIGA) to ensure the listing of state-owned enterprises (SOEs) on any of the GSE’s three markets. This, according to Mr. KyeiMensah-Bonsu at his presentation

Ekow Afedzie, Managing Director, Ghana Stock Exchange (GSE)

of the 2021 budget in parliament last week, will enhance access to long-term capital and improve corporate governance practices of the SOEs. Additionally, with less than 2.5 percent of pension fund assets, which by the end of 2019 stood at GH¢26.3bn, held in listed equities, the GSE plans to engage with the

National Pensions Regulatory Authority (NPRA) and pension fund managers to boost the pension industry’s investments in equities. This is expected to boost local participation in Ghana’s equities market and support government to attain its goals of economic and business development. Furthermore, in line with government’s agenda of achieving a more digitalised economy, the exchange plans to partner with fintechs to bring trading of securities to the doorstep of Ghanaians via mobile applications. The exchange is also pursuing partnerships with the Association of Ghana Industries (AGI) and various chambers of commerce and associations to increase listings and drive liquidity on its markets. The exchange expects to continue to operationalise the MoUs signed with its international partners, especially the one with the London Stock Exchange Group, to transform the Ghana Stock Exchange from a frontier to an emerging, internationallyrecognised securities market.

MONDAY MARCH 15, 2021

Feature

MONDAY MARCH 15, 2021

The importance of networking during a pandemic

Uncertain Times With connections being more important than ever during these uncertain times you need to utilize virtual tactics to advance your career and build business connections when you cannot meet with people face to face. The coronavirus has forced many people to work from home. The knock on effect from this has been the disruption to career life, networking, social activity including activities in conference halls or corporate social events. With social distancing still in effect for the foreseeable, networking online is now extremely important. It has become the primary way for people and businesses to connect. Many employees are starting to realize that online networking is essential for their careers. Moving to virtual networking does not come without some concerns from people. It can come with its challenges but it can be done. Here are some tips on how to navigate through this. Stay Connected People are realizing that just putting their information out there will not always get them business. You need to connect with people in the first instance. Experienced professionals, should make a conscious effort to stay connected with the people they used to see in person. It is important to take five minutes out of the day and send a contact an email, even if it is just a polite message to touch base with them.

It also reminds them that you are still there. Online Tools Join or increase your use of networking sites to keep in touch with existing contacts and meet new ones. Virtual meetings can allow people to have choice in identifying those that they think would be helpful in a way that inperson networking events can’t. Most Virtual meetings give you a brief of what they are about or areas they focus on when you start to subscribe. Always remember at the same time to take the precautions you normally would online. Do your research before you connect with someone you don’t know online, and check privacy policies on sites and apps. Be Proactive Be proactive not just about sending out emails but also about following up. Always make planning easier on the other person by setting up the time to talk or video-conference through calendar invites with easy instructions. Most people are busy working from home, so making any appointment easier to schedule for the other party is key. You should initially only ask for a few minutes so the meeting doesn’t feel like a burden to the person you are networking with. Fifteen to thirty minutes is enough to make an impact. If it works out that you need more time you can always schedule a second appointment.

Be Considerate It is more important during this time to think about tone when reaching out, as almost everyone working from home is dealing with some sort of issue or problem. People are trying to juggle work with childcare and family time plus the added concern about Covid 19 precautions if they have to go out of their home. It could also be worth checking online if the other party’s job situation has changed. An email should also include some acknowledgment of the pandemic, and also ask if it’s a good time to contact them. It may also be worth inquiring if the person prefers a call by telephone or video conference - some people may still prefer a phone call rather than using zoom, teams or a similar application. Be Specific As always in networking do your research on the people you are trying to connect with, to understand who you are talking with and their accomplishments. If you are asking them for pointed advice that draws from their experience, that shows deference on your part and also creates the basis for follow-up conversations in order to sustain that relationship that you just formed. Be specific in email subject lines and explain why you want to connect, referencing their accomplishments or a video or publication you saw them mentioned in, for instance. You

also want to demonstrate that you have something to offer that will make it worth their time to respond and connect.

Authored by: BforB Ghana | Networking Clubs Business for Breakfast (BforB) is internationally recognised for creating successful networking meetings, events and training for referral marketing. Our global offices are in Australia, Germany, Czech Republic, Spain, Slovakia, Ghana and headquartered in UK. We create an environment where you can build quality relationships within your group, backed up by an ongoing member support programme. BforB is committed to helping small to medium scale businesses expand. In our professional network, members meet regularly in business networks to develop relationships, support each other and to share and record referral business. We are here to help you get new business from quality business introductions and referrals made through our meetings. Kindly join our next meeting using this link: https://rb.gy/qrf4pl Contact us: 059 4 016 432 | info@ bforbgh.com | Facebook & LinkedIn: @bforbghana | www.bforb.co.uk

MONDAY MARCH 15, 2021

Energy

MONDAY MARCH 15, 2021

Leadership in Financial Institutions can be a key tool This announcement comes in fighting Global Climate Change as U.S. regulators begin drafting

ne challenge facing the fight against climate change is the availability of funds. Funds to push more innovation into technologies that will ensure energy efficiency and research into alternative source of energy. Financial institutions are beginning to re-strategize their business operations and hence are aligning their core values to climate change targets. Taking up the position of CEO of Citigroup, Jane Fraser has announced the bank’s commitment to achieve a net-zero greenhouse gas emissions from its financial activities by 2050. Banks like JP Morgan Chase, Morgan Stanley and Bank of America are already setting longterm goals to reduce its financed emissions in line with the Paris Climate Agreement. The strategy here is to offset enough greenhouse gas emissions to cover Citigroup’s individual footprint by 2030 and its lending portfolio by 2050. Jane said, “Net zero means rethinking our business and helping our clients rethink theirs. For banks, what some don’t realize is that net zero includes not just our own operations but also our core business impacts in other words, our financing,” This is looking at solving the problem, not only at the bank level but also at the customers’

level. The need to knowledge share, plays a key role here. She again said, “As the world’s most global bank, we are interconnected with many carbon-intensive sectors that continue to help drive global economic development. We are committed to bringing as many clients as we can along with us on this journey and working with them relentlessly to get it right,” This decision by the bank was triggered after an engagement with investors regarding a shareholder resolution filed by As You Sow, Mercy Investment Services, Boston Common Asset Management, Arjuna Capital, Presbyterian Church USA, and the School Sisters of Notre Dame Cooperative Fund. Concerned shareholders had to find out how the bank plans

to reduce emissions from its financing, in line with the global goal of limiting warming to 1.5 degrees Celsius. Other banks involved in this similar commitment are; • Bank of America Earlier this month announced a commitment to reduce its financed emissions in line with the Paris Agreement’s net-zero goal, resolving a shareholder proposal. • JPMorgan Resolved a shareholder proposal in agreeing to disclose its financed emissions for three high-carbon sectors; provide assumptions and methodologies; report on its success in portfolio decarbonization; and announce a timeline for adding additional sectors.

ways to sanitize the financial sector for climate-related risks. Citigroup also made it clear to release its initial net-zero emissions plan within the next year, detailing how the company plans to reach a carbon-intensive program including its individual footprint by 2030. Fraser assured that, she would ensure transparency and report on the progress of the plan set out by the bank to meet its own targets by 2030. Between 2014 to 2019, Citibank financed and facilitated $164 billion in low-carbon solutions. In 2020, it committed to completing an additional $250 billion in environmental transactions by 2025. These figures are clear indications on how the bank seeks to push projects and programs related to climate change. This gets interesting by the day and makes a clear revelation that, policy alone does not solve a country’s set developmental goals and Climate Change targets. However, implementation of the policy to fight climate change may lie in the hands of a committed financial institution. Writer: Donald Marshall Company: Mframadan Energy Management & Research Institute (M.E.M.R.I). Contact: 00233-24-4550854 Email: donaldamus@yahoo.com

Gov’t proposes new levy to deal with energy sector debt By Benson AFFUL

he government has proposed a new tax, the Energy Sector Recovery Levy, of 20 pesewas per litre of petrol and diesel to deal with financial challenges in the energy sector as a result of excess capacity payments. The administration has bemoaned the situation where it spends US$500m annually on excess electricity generation due to take-or-pay power purchase agreements with independent power producers. While negotiations are ongoing to revise the agreements, the government said it has spent GH¢12bn in the past four years on the excess capacity obligations. “Due to the difficulties faced by the economy arising from higher excess capacity payments in the energy sector, which have not reflected in electricity tariffs,

there is still the need to find additional resources to cover the excess capacity charges that have resulted from the power purchase agreements (PPAs) signed prior to 2017, which required payments for capacity charges even when the plants involved were idle or unutilised,” said Osei Kyei-Mensah-Bonsu, the caretaker Finance Minister, who announced the new tax measure at Friday’s budget presentation to Parliament.“It has therefore become imperative for government to consider a review of the energy sector levies,” he added. The budget also proposed a Sanitation and Pollution Levy of 10 pesewas per litre of petrol and diesel to help improve sanitation and combat pollution. Mr. Kyei-Mensah-Bonsu said on the basis of existing world crude oil prices, the implementation of the two new levies will result in a

5.7 percent increase in petroleum prices at the pump. According to him, the increase in petroleum prices under the current administration is the lowest in the Fourth Republic,

with an average annual petroleum price increase of 8.26 percent in the last four years, compared with 24 percent between 2013 and 2016 and 29.5 percent between 2009 and 2012.

MONDAY MARCH 15, 2021

News

MONDAY MARCH 15, 2021

Youth learners urged to tap into oil palm opportunities By Benson AFFUL

ead of Communications, Solidaridad West Africa, Bossman Owusu, has urged learners who have received training in oil palm at the University College of Agriculture and Environmental Sciences (UCAES) to seek opportunities within the supply chain and tap into them as agripreneurs in order to contribute to the transformation of the oil palm sector. He said Solidaridad has made some interesting proposals to the Embassy of the Kingdom of the Netherlands and the Swiss government through its State Secretariat for Economic Affairs (SECO), toward funding some of these learners who desire to be oil palm entrepreneurs on a competitive basis. “I am confident that we can revisit this discussion soon and a possible follow-up project, to also include GIZ, to consolidate the learning from this activity for the benefit of other learners,” he said this at the graduation of the1st batch of Agricultural Technical and Vocational Educational Training (ATVET) Learners in Oil Palm at UCAES at Bunso in the Eastern Region. Speaking on some of the

achievements so far, Mr. Bossman said through a dint of hard work under this activity, COTVET has accredited five schools, and from these institutions, 27 lecturers and tutors have received technical upskilling training on oil palm and CBT facilitation. This, he said, is besides the training received by 32 staff from 11 enterprises that have signed up as workplace learning centres. Additionally, he said SWAPP II has mobilised more than 700 interested youth and some SME workers from oil palm growing zones to enroll in CBT. The first batch of 511 learners (27% of which are females) is drawn from 146 communities in eight regions of Ghana. “Today, 101 learners are graduating from UCAES alone. The second batch of learners will be enrolled next month. Now, I dare say that this feat would not have been possible, at least not at this time, without the funding support of our dear development partners the Swiss, Dutch and German governments - for this joint work by Solidaridad and GIZ under the Sustainable West Africa Palm Oil Programme Phase II and the Ghana Skills Development Initiative respectively,” he added. The Dutch Ambassador,

Ron Strikker, reiterated the importance of technical and vocational education to the development of any economy. He said that the Dutch government was extremely delighted that a competency-based programme in oil palm — an idea that was conceived two years ago — had finally come to fruition. He disclosed that the Dutch government has jointly supported the development of the oil palm sector in Ghana with the Swiss government through the Sustainable West Africa Palm Oil Programme being implemented by Solidaridad because it recognises the value of vocational and technical education. “For us, we see opportunities to continue supporting the government of Ghana in its

development agenda,” Mr Strikker said. Congratulating the learners for a successful training, the Swiss Ambassador to Ghana, Philpp Stalder, commended the government of Ghana for investing in vocational and technical education. He said the Swiss embassy was looking forward to further areas of collaboration with Ghana to realise greater impact in competency-based training in the oil palm, cashew and other agriculture sub-sectors as it has done in the last three years. “Ghana remains a focal country for us and developing skills for employment and entrepreneurship will continue to be on our agenda for the next four years,” he added.

Activa International Insurance joins forces with Invest in of ensuring the survival The partnership represents to-peer sessions, a repository of Africa Ghana objective and continued development of an innovative strategic approach practical guides and interventions

ctiva International Insurance Company Ghana Limited (AIIG) and Invest in Africa (IIA) Ghana have signed a cooperation agreement to widen access to protection schemes for multiple SMEs. With direct access to IIA Ghana’s membership network with over 2,000 cross sector businesses, AIIG aims to provide an innovative and effective model to enhance knowledge of risk management and commercial protection solutions. This is in line with IIA’s

Africa’s SMEs, maintaining its status as a key driver of economic growth and job creation. At 2.8%, sub-Saharan Africa’s insurance penetration sits considerably below the world average of 6.8% highlighting the continent’s need to catch up. While motor insurance is the largest contributor to non-life insurance – driven by compulsory regulatory requirements – accident insurance, health insurance, and property insurance have all shown impressive growth in recent years.

to accelerating insurance penetration, as well as promoting insurance growth in Africa through targeting unique customer segments. AIIG’s Activ’Lady Program, launched in October 2019 in partnership with the International Finance Corporation (IFC), a member of the World Bank Group, specifically targets female entrepreneurs with customised business protection packages, as well as offering other value-add opportunities such as networking, access to client bases and skills acquisition through training. The advancement of female-led business is a priority in the scope of IIA’s work; further strengthened by its COVID-19 Recovery and Resilience programme being delivered with funding from the Mastercard Foundation. The programme will support Activ’Lady customers with access to online masterclasses, peer-

enhancing their access to finance. Benjamin Yamoah, Managing Director of AIIG said: “Available data shows most SMEs in Africa are owned or led by women, it is therefore important that women in business are supported to grow and expand their businesses for both economic and social development and this partnership will help create a platform that will make female entrepreneurs more resilient to personal and business shocks. Carol Annang, Country Director IIA Ghana added: “SMEs are key drivers of African economies, accounting for more than 90% of businesses and employing about 60% of workers. We are committed to building a commercial ecosystem which supports their sustained survival and success, leveraging the power of effective partnerships to build on synergies and expand on reach.”

MONDAY MARCH 15, 2021

Opinion

MONDAY MARCH 15, 2021

Government bonds are set to outperform

hana local currency bonds (GHGBs) have had a spectacular start to the year, compressing by 125bp, outperforming North and East African peers such as Egypt and Kenya whose bonds have ticked up by c. 20bp. “Offshore appetite for local currency debt in addition to consistent BOG interventions via the spot and forward curve, led to the GHS strengthening by 3.7% against the USD by the end of February 2021,” says Head of Markets at First National Bank Ghana, Kofi Pianim. “We have seen the secondary market traded bond volumes increase by 150% year on year to $5.7 billion by the close of February. Strong market patronage by domestic and foreign investors led to primary issuance oversubscription and ultimately yield compression in the two to six-year tenor buckets,” Pianim adds. Given the global search for yield, fuelled by sizeable global monetary and fiscal stimulus, Ghana’s outperformance is not entirely surprising. In addition, political risk fears have been tempered after the conclusion of local elections. “At RMB and FNB we and our clients have been asking the question: has the yield compression been overdone and do yields have further room to compress?” says Neville Mandimika, RMB Africa Economist and Fixed Income Strategist. “Our model suggests that even though the 6-year bond is fairly valued, the upcoming Eurobond issuance offers tailwinds to the local curve. We estimate the local

curve can rally by a further 150bp this year.” The RMB model suggests that bonds could compress further in 1H21 to about 18.6% (70bp rally) largely driven by currency strength and more importantly, low inflation. However, several factors are likely to affect performance: Inflation: In RMB’s base-case scenario, inflation is seen as trending lower in 2021 primarily due to base effects. This should result in price pressures bottoming out in 2Q21 and picking up slightly in 2H21 as the global economic recovery takes hold. Benign inflation at a time of nascent economic recovery should result in the central bank keeping policy rates unchanged in order to give the economy a chance to recover before hiking rates, which we think will only happen in 2022. Short-term rates: Linked to the RMB view of an accommodative monetary policy, it is estimated that short-term rates will tread water from here. This should allow for cheap funding for the long end of the curve, supporting some yield compression. FX (USD/GHS): It is estimated that the cedi could register another decent year, given the strong tailwinds in oil (in the wake of a successful vaccine rollout), gold (US inflationary pressure concerns) and cocoa (as tourism rebounds). Despite the nearly 2% strength in the currency this year, the cedi remains relatively undervalued. This is based on the cedi’s REER level relative to its 5-year average to approximate this effect. With the cedi trading close to its fair value (i.e. near 0% deviation

from its historical average), this should be a sweetener for investors as currency losses/ risks appear fairly limited. This contrasts to the Egyptian pound, which by this measure reaches 13%, suggesting greater exchange rate risk. The Nigerian naira is also set to experience weakening pressures, adding to the comparative appeal of cedi investments. Mandimika believes that: “The big risk of course is that as offshore interest in GHGBs rises, it adds to FX pressure, particularly if this is hot money, as was the case in early 2019. The latest reading from the Ghana Securities Depository shows that foreign holdings in domestic debt instruments picked up in January 2021 to 21.2% from 19.8% a month before. We think this trend will continue in the months ahead.” The expected (1Q21) Eurobond issuance (US$3bn – US$5bn) could have a material effect on the domestic curve. Ghana’s finance minister noted that part of the funds will be used for liability management for both hard and local currency bonds. “We are of the view that the government will use the funds to retire some expensive local debt, as reflected by the recent GHGB 2-year bond auction where the authorities retired the 19.75% bond in exchange for a new 17.6% issuance, resulting in savings in excess of GHS179m,” says Mandimika. To further illustrate the potential savings: if the entire GHGB curve was reissued at coupon rates 3ppts lower than current, the authorities would save GHS1.4bn. This is about 2% of revenue or 0.4% of GDP.

Concludes Mandimika: “Ghana’s government bonds are set to do well this year but also outperform their African counterparts. Of course, as the curve gets pushed lower, investors will likely use this as an opportunity to take some profits, which would naturally add to rollover risks. Funds from the Eurobond issuance could then be deployed to manage this risk. The combined effects of these factors suggest that the path of least resistance is lower bond yields, despite the current fair valuation. We estimate that the curve could get pushed down by another 100bp – 150bp, post the issuance.” Contact: Joandra Griesel, Rand Merchant Bank [South Africa] Joandra.griesel@rmb.co.za +27 82 462 6741

Delali Dzidzienyo, First National Bank Ghana DDzidzienyo@firstnationalbank. com.gh +233 266 380 380

MONDAY MARCH 15, 2021

Feature

MONDAY MARCH 15, 2021

Antitrust is back in America

By Eric Posner

resident Joe Biden is signaling that his administration will get tough on monopoly. With the appointments of Columbia University law professors Timothy Wu to the White House National Economic Council and Lina Khan to the Federal Trade Commission (FTC), he has selected two wellknown proponents of breaking up the Big Tech monopolies. Moreover, these appointments come on the heels of a major antitrust reform bill that Amy Klobuchar of Minnesota introduced in the US Senate last month. Klobuchar’s bill aims to bolster antitrust enforcement in a number of ways. It would increase funding for the FTC and the Department of Justice Antitrust Division, establish new bureaucratic offices to investigate and monitor antitrust compliance and market conditions, slap new civil penalties on violators, and expose firms to liability for anticompetitive business practices that currently fall through the cracks. Notwithstanding the fierce Republican opposition the bill is expected to receive, there is good reason to think that the antitrust momentum in the United States will continue. Already during Donald Trump’s presidency, the Justice Department and the FTC launched investigations into the tech industry, which have (so far) resulted in lawsuits against Google and Facebook, filed just before Trump left office. While it may simply have been Trump’s unhappiness with culturally liberal tech companies that lit a fire under previously sleepy bureaucrats, other Republicans also have begun to rethink their traditional opposition to antitrust liability. Antitrust law has long straddled ideological divides in the US. Although it involves significant “intervention” in the

market by regulatory agencies and private lawyers (which Republicans loathe), the goal of such interventions is to preserve economic competition (which Republicans ostensibly favor). Decades ago, conservativeleaning economists and lawyers managed to square this circle by contending that markets are self-correcting: because monopolies generate outsize profits, they are juicy targets for other market actors. Moreover, because regulators and courts are hopelessly unsophisticated about economics and industry, any attempt on their part to enforce antitrust law would do more harm than good. Such thinking provided a convenient excuse for Republicans to claim that they were both pro-market and probusiness, allowing them to take financial contributions from businesses that had no interest in a free market. Businesses fear competition, which drives down profits. But times have changed, and not only because of concerns about Big Tech. A huge range of markets in the US – from airlines to wireless communications – have become more concentrated in recent decades. While technological change may play a role in this trend, it also reflects a hollowing out of antitrust enforcement since the 1970s. In his 2019 book, The Great Reversal: How America Gave Up on Free Markets, the New York University economist Thomas Philippon charts the growing concentration of US markets, and draws a sharp contrast with markets in Europe, which became more competitive during the same period, owing in large part to more aggressive antitrust law (or “competition law,” as it is known everywhere outside of America). Philippon finds that weaker antitrust law in the US has led to greater market concentration and more anticompetitive behavior,

which in turn has led to lower growth, higher prices, and greater inequality. Moreover, recent economic research points to two additional problems that were previously ignored. First, big firms that dominate markets harm not only consumers (by raising prices), but also workers (by lowering wages). Labor markets across the US are highly concentrated, which means that employers can – and very likely do – suppress wages far below the competitive rate. Following decades in which economists assumed that labor markets were highly competitive, this surprising new research has revolutionary implications for antitrust law. For example, as the US government only recently acknowledged, mergers should be reviewed for their anticompetitive effects on wages, not just prices, as was the tradition. Second, market concentration has undermined the efficient functioning of capital markets. Recent research shows that just a handful of institutional investors, including BlackRock and Vanguard, have amassed a massive amount of economic power; and some economists have found evidence that this consolidation is leading to higher prices in other sectors, such as the airline industry. Others disagree, and the institutional investors claim to be using their power for good, by pressuring corporations to behave more responsibility. And that is the question – not whether these giants have power, but how they are using it. Are they really pursuing strategies of noblesse oblige, or are they simply trying to maximize profits, as one would normally expect? Whatever the answer to this question, there is no doubt that the US economy is oligopolistic and increasingly sclerotic. A few lawsuits against Big Tech will not revive competition. Nor can Klobuchar’s bill be regarded

as more than an admirable first step. Congress also must clear away various hurdles to antitrust enforcement that the Supreme Court has erected over the years. Employing a deathby-a-thousand-cuts strategy, the Court has introduced procedural barriers to antitrust litigation, limited the scope of class actions, eliminated presumptions that previously helped plaintiffs, and instilled a culture of suspicion toward antitrust claims among lower courts. It will take a concerted effort by Congress and the Biden administration to reverse decades of antitrust neglect. And their biggest challenge may lie in an unexpected place: public opinion. While many progressives like to evoke the Gilded Age – when a grassroots anti-monopoly movement helped get the first antitrust laws passed – there are big differences between then and now. Back then, monopolists like Standard Oil were widely loathed, depicted by cartoonists as malevolent octopuses. Now, the tech monopolists are among America’s most admired companies. Especially in the context of the pandemic, millions of Americans have depended on Amazon for household goods, and used Facebook to maintain contact with family and friends. Pretty much everyone is now addicted to Netflix, YouTube, and their smartphones. Some of these people will serve as jurors in antitrust cases, others as judges – and all of them are voters. Legal and regulatory changes are overdue, but the hard work of transforming public opinion remains. About the author Eric Posner, a professor at the University of Chicago Law School, is the author, most recently, of The Demagogue’s Playbook: The Battle for American Democracy from the Founders to Trump.

MONDAY MARCH 15, 2021

Markets

MONDAY MARCH 15, 2021