Business24 Newspaper - June24, 2020 by Business24 Online

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WEDNESDAY JUNE 24, 2020

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PIAC raises concerns over GH¢1.5bn oil cash Bankers association urges aggressive investment in systems BY DOMINICK ANDOH

MORE ON PG 3

Chairman of PIAC Noble Wadzah is not happy about what he describes as the impunity exhibited by the Finance Ministry regarding the utilisation of oil revenues.

BY NII ANNERQUAYE ABBEY

The Public Interest and Accountability Committee (PIAC), which monitors and evaluates the management and use of petroleum revenues, is asking Parliament to compel the central government to account for about GH¢1.5bn of oil revenue which was left unutilised in 2019. The watchdog said for the past three years, petroleum revenues voted to support the execution of government’s budget—known as the Annual Budget Funding Amount (ABFA)—have been underutilised and the remainder unaccounted for. Speaking at the press launch of PIAC’s 2019 Annual Report, the committee’s chairman, Noble Wadzah,

explained that the total ABFA available for spending in 2019 was in the region of GH¢2.7bn, out of which GH¢1.2bn was utilised, leaving a balance of GH¢1.5bn unutilised. He said for the third year running, not only has a sizable proportion of the ABFA not been fully utilised, but it has also not been accounted for, impeding PIAC’s appreciation of the full utilisation of Ghana’s petroleum revenues. The situation, he added, stifles PIAC’s ability to track how the revenues have been used, especially as the Ministry of Finance claims the unspent funds have been returned to the treasury main account, which is beyond the mandate of PIAC to scrutinise.

PAC threatens to invoke powers over BoG governor snub MORE ON PG 3

ECONOMIC INDICATORS *EXCHANGE RATE (INT. RATE)

How corruption affects emerging economies

Keta Port Project: GPHA seals contract with consultants

Penplusbytes launches COVID-19 information for all hub

PG 13

PG19

PG5

USD$1 =GHC 5.6230*

*POLICY RATE

14.5%*

GHANA REFERENCE RATE

15.12%

OVERALL FISCAL DEFICIT

6.6 % OF GDP

PROJECTED GDP GROWTH RATE PRIMARY BALANCE.

1.5% -1.1% OF GDP

AVERAGE PETROL & DIESEL PRICE:

GHc 5.13*

INTERNATIONAL MARKET BRENT CRUDE $/BARREL

42.48

NATURAL GAS $/MILLION BTUS

1.78

GOLD $/TROY OUNCE

1,772.61

CORN $/BUSHEL

329.50

COCOA $/METRIC TON

2,290.00

COFFEE $/POUND:

+5.70 ($108.30)

COPPER USD/T OZ.

220.15

SILVER $/TROY OUNCE:

17.07

NEWS/EDITORIAL

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WEDNESDAY JUNE 24, 2020

EDITORIAL

Wash your hands 2

Cover your cough 3

Wear a mask Brought to you by

LIMITED Copyright @ 2019 Business24 Limited. All Rights Reserved. Editorial Team Dominic Andoh: Editor Eugene Kwabena Davis (Head of Parliamentary Business & Commodities) Benson Afful (Head of Energy & Education) Patrick Paintsil (Head of Maritime & Banking) Nii Annerquaye Abbey (Online Editor) Marketing Alexander Lartey Agyemang (Business Development Manager) Ruth Fosua Tetteh (Dept. Business Development Manager) Gifty Mensah (Marketing Manager) Irene Mottey (Sales Manager) Edna Eyram Swatson (Special Projects Manager ) Events Evelyn Kanyoke (Snr. Events Consultant) Finance/Administration Joseph Ackon Bissue (Accountant)

War against “saiko” requires tougher sanctions A new study on saiko fishing has for the first time put a value on the cost of the destructive fishing practice, which is being driven largely by Chinese trawlers and is devastating Ghana’s overexploited fisheries. An investigation by the Londonbased Environmental Justice Foundation (EJF) has confirmed earlier estimates that in 2017 saiko fishing – the practice of transshipping fish at sea from industrial trawlers to specially adapted canoes – took around 100,000 metric tonnes of fishes.

The country’s fisheries sector and related activities along its value chain are under threat of imminent collapse as a result of this destructive practice, where foreign trawlers target the staple catch of canoe fishers and sell it back to local communities at a profit. The Minister for Fisheries and Aquaculture Development Elizabeth Naa Afoley Quaye has called for complete eradication of the practice but it an illegality than requires strict and tougher punitive measures.

There are laws to deter this practice on our territorial waters but the illegality persists because of the lack of enforcement these laws. The Business24 is calling on the regulators of the fisheries industry to crack the whip on operators who are blatantly engaging in saiko on our waters to secure the livelihoods of thousands of the country’s coastal dwellers.

PIAC raises concerns over GH¢1.5bn oil cash (…CONTINUED FROM COVER )

“PIAC urges Parliament to bring its oversight mandate to bear on the Ministry of Finance’s impunity and failure in not accounting for unutilised ABFA,” the committee said in its report. Key findings The report revealed that in 2019, 45.1 percent of the actual ABFA was spent on recurrent expenditure, with 54.9 percent going into capital expenditure. It said this contravenes the Petroleum Revenue Management Act, which requires that a minimum of 70 percent of the ABFA be spent on public investment expenditure. The committee also noted that for the second straight year, no allocation from the ABFA was made to the Ghana Infrastructure Investment Fund (GIIF), contrary to the provisions of the PRMA and GIIF Act. The committee further said that despite its persistent advice to Parliament to curtail Ghana National Petroleum Corporation’s (GNPC) non-core activities, the entity continues to dedicate more funds and resources to its foundation while issuing guarantees to other stateowned enterprises—even as it is unable to meet cash calls for its ongoing upstream projects. Last year, GNPC provided guarantees to the tune of US$645.5m, about twice the amount of the previous year. The Institute for Fiscal Studies (IFS), a public policy think tank specialising in fiscal policy evaluation, has described such activities by GNPC as quasi-fiscal and an inefficient use of the corporation’s petroleum revenue.

The PIAC report also revealed that while GNPC supplied US$334.6m worth of raw gas to the Ghana National Gas Company (GNGC) in 2019, no payment was

received, leading the committee to recommend to government to, as a matter of urgency, address the unsustainable debt of GNGC.

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Bankers association urges aggressive investment in systems capital,” the consulting firm said. BY DOMINICK ANDOH

Banks must consider a more aggressive investment in systems that can easily and securely interface with those of their clients, regulators and other stakeholders, if they are to stay relevant in the future post-COVID-19, the Ghana Bankers Association (GAB) has said. The association’s Deputy Chief Executive Officer, John Awuah, noted that banking will be completely transformed post-COVID-19 due to the fast uptake of digital channels, which has accelerated over the last four months. “Banks should therefore be open in the post-COVID-19 era to consider a more aggressive investment in systems that can easily and securely interface with those of their clients, regulators and other stakeholders for seamless transaction processing and real-time supervisory controls,” he said. “We will begin to see a gradual move away from the transactional applications that banks used to have—like checking balance, requests for cheque books and the rest—to those systems that enable deeper customer engagement,

“[There will be] pressure on banks to invest in expansion of infrastructure and improve service quality, such as investment in more e-banking options. [There will also be] increased probability of loan default as other businesses experience financial distress as a result of COVID-19,” it added.

such as systems that will respond to targeted customer profiling and journey mapping.” Accounting and consulting firm Deloitte’s analysis of COVID-19’s potential implications on banking and capital markets, published last month, said going forward, digital systems that enable deeper

customer engagement will be key to meet customer demands and avoid non-performing loans. “Lending and access to capital is likely to be more stringent as businesses are adversely impacted. Companies with in-built resilience will have the advantage in accessing

Due to the stringent restrictions imposed in the country since March to help contain the coronavirus outbreak, the public has turned massively to digital channels to transact banking business. This has led to a sharp increase in the number of customers now using these channels and taken customers away from physical bank branches. Mr. Awuah believes that this trend will continue and will put pressure on existing systems, hence the need for banks to continue investing in technology. “Big data analytics will also become important to the business of banking. Technology as we know it now, in our estimation, will no longer be just an enabler of banking business, but it will become the business of banks in the future.”

PAC threatens to invoke powers over BoG governor snub BY EUGENE DAVIS

The Public Accounts Committee (PAC) of Parliament says it will not hesitate to invoke the powers bestowed upon it to suspend, reprimand or cause the dismissal of any public official who fails to honour its invitation. It follows the failure of the central bank governor, Dr. Ernest Addison, to attend to the committee on Tuesday. PAC has complained that several invitations to the governor to answer some questions concerning the accounts of the central bank have been ignored. The committee deferred its sitting on Tuesday over the absence of Dr. Addison. The sitting of the committee was to consider the report of the AuditorGeneral on the statement of foreign exchange receipts and payments of the Bank of Ghana for 2017 and 2018. But the governor and his two deputies were not present at the meeting.

James Avedzi and his committee members were unhappy with the central bank governor’s absence at Tuesday’s sitting.

Chairman of the committee James Klutse Avedzi, after conferring with other members, decided that the committee would not give a hearing to the central bank’s Director of Financial Services, Stephen Opata, who had appeared before the committee, and declared that the committee would only scrutinise the

report of the bank if the governor is present. “We want the governor of the Bank of Ghana to appear before the Public Accounts Committee tomorrow [Wednesday, June 24] so we can handle both the 2017 and 2018 reports. So kindly indicate to the governor of the Bank of Ghana

that the committee is waiting upon him to appear before us tomorrow at the same time,” he said. Dr. Addison had been scheduled to appear before the committee on Monday, but PAC said in a statement that “when sitting commenced, it came to light that Dr. Addison had directed the bank’s internal auditors and directors of the bank’s Financial Management Division to speak to the issues raised in the AuditorGeneral’s report.” The committee said it felt disrespected by the governor for his persistent refusals to honour its invitations since his assumption of office, and invoked the powers vested in it under Article 103 of the Constitution to summon the governor to appear before it with his full team on Wednesday to respond to the issues raised. Mr. Avedzi reminded the public that the committee is constitutionally empowered to carry out investigation and enquiry into the activities and administration of Ministries, Departments and Agencies (MDAs) as Parliament may determine.

WEDNESDAY JUNE 24, 2020

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UCCBusiness School to conduct survey on psychological impact of COVID-19 on employees The University of Cape Coast School of Business has been organising series of e-seminars on various topics to engage the public, students, lecturers and alumni on the challenges and opportunities brought by the COVID-19 pandemic. Last week, the 4th session of the e- seminar was organised on the topic Coronavirus Pandemic: Implications for workplace reforms and employee wellbeing. In his introductory comment, the Dean of the Business School, Prof. John Gatsi called for huge investment in ICT to enhance the correction of disruptions to work. He supported his call with data from ILO in which only 10.7% of households in Africa have computers in 2019 and internet use was just about 28% when Europe was 83%. He asked Human Resource experts to unearth other critical challenges that the pandemic has brought apart from job losses such as health and safety, illnesses related to Covid-19 but not through infections to establish a basis for comprehensive solutions. One of the discussants Mr. Francis Eduku, the Vice President and Human Resource Director of Goldfields Ghana Limited explained that one of the issues labor unions and leaders are silent about is the effect of the pandemic on psychological contract which is about the unwritten contracts which cannot be found in the collective bargaining agreements but have become part of the work culture, motivation and recognition. He said all these things have been eroded such that all the unwritten promises made by management and employers to employees for which performance was good could

not be fulfilled. He explained that with COVID-19 where people work from home and virtually in many cases nobody is providing work place socialization, acknowledging and recognizing as before. In some cases no employer is interested in whether the home setting provides a conducive environment to work. Mr. Eduku said some workers are isolated and filled with anxiety. He therefore charged the Department of Human Resource Management of the School of Business to conduct a survey into the impact of the pandemic on psychological contracts to provide a balanced perspective of the effect on employees. He also called for collaborative, caring and engaging relationship between employees and employers. On the part of Dr. Hannah Vivian Osei, a senior Lecturer at the Department of Human Resource and Organizational Development, KNUST, said the work place for some employees have moved to the home with inappropriate set up for work coupled with destructive urroundings. She called on organizations and individuals to invest in virtual infrastructure and assets that will make employees deliver in the new work environment because Coronavirus Pandemic is a strong trigger for reforms to embrace technology intensive work place. Dr. Osei explained that with technology and proper capacity building, everywhere could become the work place. Dr. Osei asked Governments in Africa to invest in ICT to enhance inclusion of Employees and potential employees in the new work

place because access to internet and ownership of computers in households is abysmal and that this should attract attention.She also appealed to organizations not to terminate at the least misconduct but to promote negotiations and empathy during the period. She advised employees to protect data and information of their organizations with upscale sensitivity saying flexible work place and working hours should not increase the risk of organizational secrets and information.Dr. Osei advised organizations to place premium on human dignity, pain and empathy to inform any employee who out of extreme consideration and with regards to the law has to be laid off. Dr. Hannah Vivian Osei explained that one positive observation about the pandemic is the serious attention being paid to health and safety at the work place but called for more investments into office layouts to sustain the benefits to employees. On his part Dr. Agbettor encouraged employers not to live in fear that the multiple work locations and flexibility being experienced

will expose their vital information to wrong people. He rather asked employers to build such capabilities for their employees to improve trust. Dr. Agbettor who is also the Executive Director of the Institute of Human Resource Practitioners Ghana, explained that Covid-19 has increased socialization risk for both employers and employees because to many their source of joy, sharing of experiences for a longtime is the interaction at fixed work place. The challenge now, he said, is how to build into the new work models the work place socialization. He appealed to employees to provide interest free loans to employees if they have the means and alternatively negotiate with financial institutions for flexible loans to their employees to minimize the financial anxiety. Dr. Agbettor asked employers and organizations not to hide behind the pandemic to deny their employees legitimate expectations and they should be transparent with employees. Dr. Nana Yaw Oppong, a Senior Lecturer at the Department of Human Resource Management , University of Cape Coast school of Business, discussed the challenges that the pandemic pose to collective bargaining agreements especially post-Covid and call on labor unions to start discussing the issues. He advised employers to follow redundancy procedures and negotiations. He advised further that redundancy reason as provided by the law is critical. Dr. Oppong explained that employers should not treat employees as victims of the pandemic that should be laid off at the will of the employers without following the redundancy process.

Penplusbytes launches COVID-19 information for all hub To address gaps in information dissemination and the sheer volume of information disorder the Covid-19 pandemic has brought about in Ghana, Penplusbytes in collaboration with other civil society partners has launched a citizens-focused feedback and information hub that is designed to give continuous updates on various government interventions intended to reduce the socioeconomic impact of the pandemic on Ghanaians. The platform www.covid19infogh. org is the first of its kind to be built by a Civil Society Organization to complement government’s effort in responding to the information needs of citizens towards flattening the curve in the spread of COVID-19. The platform also has the functionalities of providing updates on coronavirus cases and case management in Ghana, debunking popular myths and misinformation about the coronavirus and its

adverse impact on the vulnerable in all regions of the country. The Covid-19 information for all hub provides audiences with trusted journalism from regional reporters all over Ghana in audio and visually engaging formats that is mobile-friendly. The platform hosts an automated feedback gathering mechanism which collates tweets, comments and posts on social media using the hashtag #CSOcovid19 and other key words on Covid-19 and government’s responses to the pandemic. Executive Director of Penplusbytes, Juliet Amoah explained the uniqueness of this site saying: “this platform is not static; it’s very dynamic so just as the virus, it adjusts to changing contexts at a fast pace. The vulnerable and rural populations are our focus as they are the most unreached with information on government’s efforts against the pandemic.” The platform also interacts with

its audiences who want to verify information and check for facts on the virus using both WhatsApp and SMS, complementing similar government interventions. Bearing in mind that not all citizens are literate and privileged to have access to the internet, the platform will be complemented with community radio engagements, using audio and messages translated into some local languages. Impactful and uniquely told news reports from all over Ghana will be transcribed and translated as podcasts in 5 local languages on the platform. Persons with visual disabilities will also be

accessing this platform using the text to speech feature built into the platform. Penplusbytes’ STAR Ghana Foundation funded “Info-forall” project is premised on the fact that information empowers and disinformation disempowers which endangers lives and leads to confusion and discord. Therefore, an access to accurate, timely and reliable information by all persons will be a key panacea to adhering to government directives and guidelines by health officials to help curtail the negative impact of the COVID-19 pandemic.

WEDNESDAY JUNE 24, 2020

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WEDNESDAY JUNE 24, 2020

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Business Outlook Series Part II Key drivers to be considered when taking advantage of the opportunities BY CDC CONSULT

art 1 of the Business Outlook series outlined the challenges faced by businesses in the Ghanaian economy amidst COVID-19. Given that all is not lost even in the current period of the pandemic, we outlined some measures businesses can take immediately to manage some of the negative effects as well as opportunities that can be considered during this period and beyond. Part 2 of our Business Outlook Series focuses on providing further insight into key drivers to be considered when taking advantage of the opportunities outlined in PART 1. First of all, it is important to clarify that, a business opportunity must be an attractive economic idea which can be implemented or operationalized to create a business, earn some returns and/or ensure further expansion and growth of an enterprise. In other words, whether the opportunity is related to product or service innovations, market diversification, leveraging on technology for improvement, partnership and collaboration or pricing mechanisms, it has to be capable of being implemented at a reasonable return to compensate for the investment outlay. Business owners, managers and all who have the mandate to steer the affairs of any enterprise in these difficult times must understand that unless a business is capable of identifying a need, creating a utility that adapts to the customer’s economic and social reality and delivering what represents true value to the customer, it may not be worth the attempt because a business opportunity does not yet exist. Flowing from this, key questions that businesses must respond to in establishing the existence of a well-thought through business opportunity include the following: 1. Have we defined the need or the idea precisely enough or without any ambiguity? 2. Have we established the requirements to fulfill this need or idea? 3. Do we know the competences required to take advantage of this need or idea? 4. How long will it take for us to convert the idea into a product or service or satisfy the need we have identified? 5. Do we know the exact benefits that will accrue to us if we satisfy this need or implement the idea, and are these benefits attractive and acceptable to us? 6. Within what timeframe are the benefits expected to flow to us?

Knowing a business opportunity exists and actually taking advantage of it are not quite the same. The latter requires further analysis of the conditions under which a business can take advantage of an identified opportunity. While some business owners and managers might have identified many business opportunities and probably started committing resources to them, others are still evaluating the available opportunities. Presented below are key drivers which are basic but crucial considerations when making investment decisions with respect to business opportunities in the current business environment: • Sustainable Market: One of the first things to consider when taking advantage of a business opportunity is the availability of market and how sustainable the market is. A market must be sustainable over a reasonable period of time to make it valuable. This is because, businesses may incur some investment expenditures when taking advantage of business opportunities and a certain minimum sales level may be required to break even on such expenses. It is imperative therefore, that businesses evaluate the probability of the opportunities remaining relevant especially after COVID-19 to guide the level of investment and resources to be committed to such opportunities. Where market opportunity is relatively short, an assessment should be made to ensure investments can be

•

recouped over that period of time. Technical capacity Technical capacity in this instance refers to the systems and the operational capabilities required to operationalize a business idea, produce goods or provide services to meet a market need. This may include specific technical know-how; ability to meet specific standards; particular equipment required among others. It is important to ensure the business has the required technical capacity, operational set-up and systems are adaptable, or the required technical capacity can be easily acquired to produce the required product or service. Technology - The role of technology in this period is so critical that it is worth considering as a separate factor from technical capacity. The pandemic has presented the opportunity for dormant and less-utilized technologies to be utilized by most businesses. Technology is leading product refinement and delivery and is mostly embedded in new opportunities. Business owners and managers alike must define the role of technology in the business opportunities that have been identified and the extent to which this is pronounced. Operational areas for delivering the business opportunity such as processing, procurement, sales and marketing, distribution or delivery etc. must be evaluated for the extent of

•

technological requirements. The accessibility, affordability and flexibility required to easily integrate such technologies into current systems should be thoroughly assessed by the business to properly inform the decision of either taking advantage or not, of the supposed business opportunity. Human resource requirement – A related consideration to technical capacity is the human resource capacity of the business. The question of whether the business currently has the staff with the requisite training, knowledge and skills to take advantage of the opportunity must be answered by the business? Where absent, can the required competences be easily acquired within a short period of time or can these skills be acquired by recruiting contract staff for a period at an affordable cost to the business? Businesses must be careful not to impose the requirements that come along with implementing identified opportunities on staff who are not easily adaptable or who cannot easily learn new skills otherwise they could walk away due to frustrations. Access to key inputs/ supplies - The pandemic has caused major disruptions to supply chains. There must be reasonable assurance that, the business will have access to sufficient quantities

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WEDNESDAY JUNE 24, 2020

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of key inputs from suppliers and that such suppliers will be reliable. Many businesses have gone ahead to sign offtaker agreements without securing any major supply sources. Businesses may want to avoid the embarrassment caused by no-show or suboptimal performance when a business is unable to meet promised demand. This could be detrimental to future business opportunities as trust and reliability is increasingly becoming a major currency of trade. Standardization – Regulatory requirements for adherence to standards keep getting stringent especially in this era. Applicable standards could be both local and international depending on the type of business opportunity. The business may have the capacity to produce a product that will get approval from domestic regulatory bodies such as Ghana Standard Authority (GSA), Food and Drugs Authority (FDA), Environmental Protection Agency (EPA) among others. However, if the opportunity is for instance in the area of production for international markets, then standardization requirements would usually be more stringent. Without belittling our domestic regulations and standards, different regions may have specific standards that may differ from the domestic requirements and must be considered by businesses when taking advantage of business opportunities.

•

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Estimated cost of investment – It is important that the cost of the new investment is reliably estimated before committing any resources. All possible cost elements (cost of equipment, technological infrastructures, inventory, licensing/fees, additional labour cost and other additional overheads) must be identified and the best estimates possible arrived at using both internal data and external search as well as consultations with experts. Additionally, further investment and the timing of the investment outlays should be known if the opportunity is not one off-spending so that better cash outflow estimates will be determined. This is not the time for any business to commence spending on a project only to run out of funds in the middle of it due to poor estimated cost of the project. Financial capacity of the business - Ultimately, it has always come down to financial capacity of the business to finance opportunities that have been identified. Funding sources keep narrowing as internal resources dry up; financial institutions apply breaks on facilities; and external investors adopt a waitand-see approach. Owners and managers must identify and assess the adequacy and reliability of various sources of funding for identified opportunities. If the business must borrow, then the costs of the fund must be reasonable, and indeed, evaluating the business ability to provide the necessary documentation that may be needed is imperative.

Matching timing of the opportunity with tenure of funds is be critical. Businesses cannot afford to borrow shortterm funds to finance longterm projects. Negotiating for favorable terms, asking for moratorium from funding institutions among others would be a prudent approach. • Ability to endure initial cashflows challenges Willingness and ability to endure initial cashflow difficulties may be a necessary requirement as it is common for new business undertakings to experience initial cashflow difficulties. So the question is whether business owners and managers are willing to endure those turbulent days that may come and whether the business has the capacity to endure same. There is the tendency for some business owners and managers to halt very profitable projects in the face of challenges. This can be addressed if proper investment appraisals are conducted to determine the cashflow cycle inherent in the opportunity and most importantly, how the shortfalls can be managed. It has to be clear from inception that, management will see the project through anticipated and unanticipated cashflow challenges. Can all these be met before taking advantage of a business opportunity? Of course you cannot be 100% ready but there has to be some reasonable estimates of level of readiness. The objectives and benefits of ticking all the relevant boxes as outlined above are to: • avoid further dissipating limited resources;

•

avoid try and errors in crucial moments like this which could diminish business confidence; • take risks but only measured and mitigated risks; • minimize cashflow challenges due to absence or weak thought-through processes in business opportunity decision making; • make the business competitive in the market place; and above all, • have reasonable assurance that the business will survive the current circumstances. In conclusion, remember that in this period, business continuity is a primary objective, therefore consolidating current position in the market, identifying business opportunities and going into new projects must be a priority. Business owners and managers must however, have clarity as to what constitutes an opportunity to invest in. Furthermore, analysis of key factors such as technical feasibility, financial feasibility, human capacity requirement and quality of the product or services must not be overlooked. Watch out for the next edition but until then remember to wash your hands with soap under running water, wear your nose mask when going out and never forget to comply with the social distancing

Ghana Cocoa Board launches US$600 million syndicated loan facility BY KWASI ANKU

The Ghana Cocoa Board (Cocobod) has launched a US$600 million receivable-backed syndicated loan facility which aims to boost productivity in the cocoa sector. The loan agreement, which was signed back in November 2019, was facilitated by a consortium of development finance institutions led by the African Development Bank. Speaking at the launch Mr Joseph Boahen Aidoo, the Chief Executive of Cocobod, said the loan was to support COCOBOD to increase cocoa production through the implementation of productivity enhancement programmes. It will also help expand irrigation facilities, the warehousing capacity, processing and promotion of cocoa consumption, as well as, the creation of a reliable database for the smooth distribution of inputs to farmers.

“I am happy to announce that the first tranche of $200m out of the $600m facility has been received,” he said at a ceremony attended by Heads of Missions of Italy, South Africa and Japan and joined virtually by DFI partners. He said the loan also offered cocobod the opportunity within the financial circle to assess a cocktail of commercial and noncommercial facility providing it a long-term and greater fiscal space. “As agreed upon prior to the signing of the facility, we believe this loan will support us to strengthen the cocoa value chain, help alleviate poverty by increasing productivity and promoting a progressive cocoa consumption environment,” Mr Aidoo said. He said significant progress had been made to implement various Productivity Enhancement Programmes (PEPs) to increase yield perhectaretoatleast1,000kilograms. Also, Cocobod has been able to achieve 100 percent coverage of

farm area for the 2020 Mass Pruning Exercise, giving more prospects for higher yields and rehabilitation of large proportions of the affected farms are presently at various stages of rehabilitation. On his part, Mr Owusu Afriyie Akoto, the Minister of Food and Agriculture, said the government would continue to work closely with the Ghana Cocoa Board (COCOBOD) to mitigate all challenges on the cocoa value chain. He said in efforts to ensure the provision of quality extension services and give farmers equal access to all interventions, government had rolled out a Cocoa Management System (CMS) which will enable us have adequate and accurate data of our farmers/ farms, Licensed Buying Companies (LBCs), Input suppliers and other players on the cocoa value chain. “A full implementation of the CMS will not only give farmers easy access to farm inputs but also make it easier for them to access funding

from the local financial market for their operations,” he said. He said government was also highly focused on increasing domestic processing and warehousing facilities to stimulate local consumption due to the price volatility on the world market. “The price volatility of cocoa on the world market requires us to, among other interventions, increase our domestic processing and consumption,” he said.

WEDNESDAY JUNE 24, 2020

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The COVID shock to the dollar BY STEPHEN S. ROACH

andemic time runs at warp speed. That’s true of the COVID-19 infection rate, as well as the unprecedented scientific efforts under way to find a vaccine. It is also true of transformational developments currently playing out in pandemicaffected economies. Just as a lockdown-induced recession brought global economic activity to a virtual standstill in a mere two months, hopes for a V-shaped recovery are premised on an equally quick reopening of shuttered economies. It may not be so simple. A sudden stop – long associated with capital flight out of emerging markets – often exposes deep-rooted structural problems that can impair economic recovery. It can also spark abrupt asset-price movements in response to the unmasking of long-simmering imbalances. Such is the case for the pandemicstricken US economy. The aggressive fiscal response to the COVID-19 shock is not without major consequences. Contrary to the widespread belief that budget deficits don’t matter because nearzero interest rates temper any increases in debt-servicing costs, in the end there is no “magic money” or free lunch. Domestic saving, already depressed, is headed deep into negative territory. This is likely to lead to a record current-account deficit and an outsize plunge in the value of the dollar. No country can afford to squander its saving potential – ultimately, the seed-corn of long-term economic growth. That’s true even of the United States, where the laws of economics have often been ignored under the guise of “American exceptionalism.” Alas, nothing is forever. The COVID-19 crisis is an especially tough blow for a country that has long been operating on a razor-thin margin of subpar saving. Heading into the pandemic, America’s net domestic saving rate – the combined depreciation-adjusted saving of households, businesses, and the government sector – stood at just 1.4% of national income, falling back to the post-crisis low of late 2011. No need to worry, goes the conventional excuse – America never saves. Think again. The net national saving rate averaged 7% over the 45year period from 1960 to 2005. And during the 1960s, long recognized as the strongest period of productivityled US economic growth in the postWorld War II era, the net saving rate actually averaged 11.5%. Expressing these calculations in net terms is no trivial adjustment. Although gross domestic saving in the first quarter of 2020, at 17.8% of national income, was also well

below its 45-year norm of 21% from 1960 to 2005, the shortfall was not as severe as that captured by the net measure. That reflects another worrisome development: America’s rapidly aging and increasingly obsolete stock of productive capital. That’s where the current account and the dollar come into play. Lacking in saving and wanting to invest and grow, the US typically borrows surplus saving from abroad, and runs chronic currentaccount deficits in order to attract the foreign capital. Thanks to the US dollar’s “exorbitant privilege” as the world’s dominant reserve currency, this borrowing is normally funded on extremely attractive terms, largely absent any interest-rate or exchange-rate concessions that might otherwise be needed to compensate foreign investors for risk. That was then. In COVID time, there is no conventional wisdom. The US Congress has moved with uncharacteristic speed to provide relief amid a recordsetting economic free-fall. The Congressional Budget Office expects unprecedented federal budget deficits averaging 14% of GDP over 2020-21. And, notwithstanding contentious political debate, additional fiscal measures are quite likely. As a result, the net domestic saving rate should be pushed deep into negative territory. This has happened only once before: during and immediately after the 200809 global financial crisis, when net national saving averaged -1.8% of national income from the second quarter of 2008 to the second quarter of 2010, while federal budget deficits averaged 10% of GDP.

In the COVID-19 era, the net national saving rate could well plunge as low as -5% to -10% over the next 2-3 years. That means today’s saving-short US economy could well be headed for a significant partial liquidation of net saving. With unprecedented pressure on domestic saving likely to magnify America’s need for surplus foreign capital, the current-account deficit should widen sharply. Since 1982, this broad measure of the external balance has recorded deficits averaging 2.7% of GDP; looking ahead, the previous record deficit of 6.3% of GDP in the fourth quarter of 2005 could be eclipsed. This raises one of the biggest questions of all: Will foreign investors demand concessions to provide the massive increment of foreign capital that America’s saving-short economy is about to require? The answer depends critically on whether the US deserves to retain its exorbitant privilege. That is not a new debate. What is new is the COVID time warp: the verdict may be rendered sooner rather than later. America is leading the charge into protectionism, deglobalization, and decoupling. Its share of world foreign-exchange reserves has fallen from a little over 70% in 2000 to a little less than 60% today. Its COVID-19 containment has been an abysmal failure. And its history of systemic racism and police violence has sparked a transformative wave of civil unrest. Against this background, especially when compared with other major economies, it seems reasonable to conclude that hyperextended saving and current-account imbalances

will finally have actionable consequences for the dollar and/or US interest rates. To the extent that the inflation response lags, and the Federal Reserve maintains its extraordinarily accommodative monetary-policy stance, the bulk of the concession should occur through the currency rather than interest rates. Hence, I foresee a 35% drop in the broad dollar index over the next 2-3 years. Shocking as that sounds, such a seemingly outsize drop in the dollar is not without historical precedent. The dollar’s real effective exchange rate fell by 33% between 1970 and 1978, by 33% from 1985 to 1988, and by 28% over the 2002-11 interval. COVID-19 may have spread from China, but the COVID currency shock looks like it will be made in America.

Stephen S. Roach is a faculty member at Yale University and the author of Unbalanced: The Codependency of America and China. Copyright: Project Syndicate, 2020. www.project-syndicate.org.

WEDNESDAY JUNE 24, 2020

Feature

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How corruption affects emerging economies BY SAM BEDIAKO-ASANTE

conomies that are afflicted by a high level of corruption which involves the misuse of power, whether in the form of money or authority, in order to achieve certain goals in illegal, dishonest or unfair ways are not capable of prospering as fully as those with a low level of corruption. Corrupted economies are just not able to function properly because corruption prevents the natural laws of the economy from functioning freely. As a result, corruption in a nation’s political and economic operations causes its entire society to suffer. According to the World Bank, the average income in countries with a high level of corruption is about a third of that of countries with a low level of corruption. Also, the infant mortality rate in such countries is about three (3) times higher and the literacy rate is 25% lower. No country has been able to completely eliminate corruption, but studies show that the level of corruption in countries with emerging market economies is much higher than it is in developed countries. (For related reading, see: Should You Invest In Emerging Markets?). Studies conducted showed that regions with developed economies - North America, Western Europe and Australia - are characterized by low levels of corruption. In contrast, a high perception of corruption is reported in almost all countries with emerging economies. Corruption in its many forms (bribery, nepotism, fraud, embezzlement) adversely impacts the economies and societies of affected nations. Artificially high prices and low quality (of products and services) Corruption in the way deals are made, contracts are awarded, or economic operations are carried out, leads to monopolies or oligopolies in the economy. Those business owners who can use their connections or money to bribe government officials can manipulate policies and market mechanisms to ensure they are the sole provider of goods or services in the market. Monopolists, because they do not have to compete against alternative providers, tend to keep their prices high and are not impelled to improve the quality of goods or services they provide by market forces that would have been in operation if they had significant competition. Embedded in those high prices are also the illegal costs of the corrupt transactions that were necessary to create such a monopoly. If, for example, a home construction company had to pay bribes to officials to be granted licenses for operations, these costs incurred will, of course, be reflected in artificially high housing prices.

Inefficient allocation of resources In best practice, companies choose their suppliers via tender processes (request for tender or request for proposal) which serve as mechanisms to enable the selection of suppliers that offer the best combination of price and quality. This ensures the efficient allocation of resources. In corrupted economies the companies that otherwise would not be qualified to win the tenders, are oftentimes awarded projects as a result of unfair or illegal tenders (e.g. tenders that involve kickbacks). This results in excessive expenditure in the execution of projects, and substandard or failed projects etc., that lead to overall inefficiency in the use of resources. Public procurement perhaps is most vulnerable to fraud and corruption due to the large size of financial flows involved. It is estimated that in most countries public procurement constitutes between 15% and 30% of GDP. Uneven distribution of wealth Corrupted economies are characterized by a disproportionately small middle class and significant divergence between the living standards of the upper class and lower class. Because most of the country’s capital is aggregated in the hands of oligarchs or persons who back corrupted public officials, most of the created wealth also flows to these individuals. Small entrepreneurs are not widely spread and are usually discouraged because they face unfair competition and illegal pressures by large companies who are connected with government officials. Low stimulus for technology advancement Because little confidence can be placed in the legal system of corrupted economies in which legal judgments can be rigged, potential innovators cannot be certain that their invention will be protected by patents and will not be copied by those who are not afraid of being subject to punitive measures by the authorities, because they can bribe these authorities. (For related reading, see: Patents Are Assets, So Learn How To Value Them.) There is thus a disincentive for innovation, and as a result emerging countries are usually the importers of technology, because such technology is not created within their own societies. Shadow Economies (or shadow markets) Small entrepreneurs tend to avoid having their businesses officially registered with tax authorities to avoid taxation. As a result the income generated by many businesses exists outside the official economy, and thus are not subject to state taxation and are not included in the calculation of the

country’s GDP. (See: The GDP And Its Importance.) Another negative effect of shadow businesses is that they usually pay their employees lower wages than the minimum amount designated by the government and they do not provide acceptable working conditions (including appropriate health insurance benefits and social security contributions) for employees. Low attractiveness for foreign investors and international trade Corruption is one of the disincentives for foreign investment. Investors who seek a transparent and fair, competitive business environment will avoid investing in countries where there is a high level of corruption. Studies show that there is a direct link between the level of corruption in a country and measurements of the competitiveness of its business environment. Low-quality education and healthcare provision A working paper of the International Monetary Fund (IMF) published in 2010 shows that corruption has an adverse impact on the quality of education and healthcare that are provided in countries with emerging economies. Corruption increases the cost of healthcare and education services through illegal and unofficial payments that are made in countries where bribery and connections play an important role in the recruitment and promotion of especially, government workers and more so, teachers. As a result, the quality of education decreases. Also, corruption in the designation of healthcare providers and recruitment of personnel, as well as the procurement of medical supplies and equipment, in emerging economies results in inadequate healthcare treatment and a substandard, or restricted, medical supply, and thus lowers the

overall quality of healthcare in these countries. In conclusion it must be stated that most countries with emerging economies suffer from a high level of corruption that slows their overall development. The entire society is affected as a result of the inefficient allocation of resources, the presence of a shadow economy, and low-quality education and healthcare. Corruption, thus, makes these societies worse off and lowers the living standards of most of their populations. It is with this knowledge that our country, Ghana, being an emerging economy, must take serious note of these and try as much as possible to lessen corrupt practices which appear to be eating deep into our fabric of society. For once, let Ghana lead in the fight against corruption in West Africa; YES WE CAN !!!, as great lessons can be seen in Botswana, Cape Verde and Namibia, our African sisters.

Sam Bediako-Asante, CGIA is the CEO of Sambed Consult, an Investment/ Management Consulting firm. He is also a former Banker, a Professional Administrator, a Chartered Global Investment Analyst, and also presently, a certified and an accredited SA Specialist of the South African Tourism in Ghana. Can be reached on 0277518634 or email: sambed33@gmail.com.

WEDNESDAY JUNE 24, 2020

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OctaneDC: Our birth story BY DR. SUZY AKU PUPLAMPU

here we sat in the lounge. The environment cosy for a Sunday evening at about 8 pm on a date in the second quarter of the year 2017. What was at stake? A conversation over a glass of wine. Call it the dialogue that gave birth to ‘our baby’. There was a cause to wonder: why could an older business owner see in a ‘wannabe’ business owner? Then he remarked, “I’d want us to stay closer to collaborate on several investment products for our respective firms and clients”. This statement lit my business mind. I saw an opportunity offered by a serial entrepreneur who was willing to help a younger businessperson grow better and faster. A powerful lesson in business collaboration states: Alone, we can do so little, but together, we can do much. That was what was at play right before my eyes. A glass of wine it took and a ‘love-me-love-my-dog’ business relationship commenced between - OctaneSD and Dalex Capital – two firms that would soon join forces as one to continue in the business of helping individuals and institutions achieve wealth creation and financial independence. Rolling with Alex Dalex Capital having been operating for over seven years, had experienced some turbulence in business that OctaneSD was yet to face. The year 2017 was fabulous for both businesses but the story was different for both in the following year. 2018 began to test our strategies for sustainability. Alex (then CEO of Dalex Capital) did not develop more grey hairs but Suzy was beginning to (at my relatively younger age). He had travelled this journey in many endeavours and had experienced all the bumps, so he remained hopeful, knowing how things could turn out positively. On hindsight, Alex’s attitude reminds me of Robin Sharma’s observation on change – we should be ready for the discomforts at the beginning of every journey, stay through the messy stages in the journey and rather keep our eyes on the gorgeousness that will spring out at the end of the journey. Armed by this promise, we remained close and continued to collaborate in areas we both saw opportunities over the years. What does he see in me? From time to time, I will ask myself: “what does Alex see in Suzy?” I get amazed at some of his requests and his belief that I could deliver. A reason he shared a lot of business success stories with me. Oh! Alex has ‘stories that stick’ (greetings to Kindra Hall). Stories of pure determination, focus and a deeprooted desire to make a difference in his field as an investment banker,

angel investor, serial entrepreneur, and a dancer – oh yes, you should see Alex on the dance floor. Of all the inns in the world, Alex and I bumped into each other on the Aviance Bus at the airport on a return trip from Kumasi. He said, with his hands in his pocket, in his baggy jeans and white shirt, “Suzy, why don’t we consider a merger? You have stuffs I don’t have. Likewise, I have stuffs you don’t have. There could be some synergies you know”. I had to quickly hold onto the metal grills on the bus, not to topple over the other passengers close by. Mind you, this was in the last quarter of 2017. The Founders’ Dilemmas In his book The Founders Dilemmas, Noam Wasserman explored the dilemmas founders face by progressively introducing new players into their space to bring about transformations. Could this be one of them? A merger between Dalex Capital and OctaneSD? Noam describes this succinctly as “flock together to succeed or play with fire and get extinct”. Noam further observed that collaborations between individuals or businesses with diverse networks and net-worth generate creativity and innovation. The result, I believe, is seen in the growth of a new company (NewCo). The easiest part of this corporate marriage for me was founded on the fact that we operated within the same industry and had one ‘Godfather’ - the Securities and Exchange Commission (SEC) as our Regulator (a benefit of homogeneity in business). However, the nightmares were going to be the nuisances of mergers (alas – the elephant in the room). Wealth or Control? Alex and I set ourselves a lofty sixmonths of initial conversations that would graduate to deep discussions and climax to gorgeous conclusions. Between the two of us “the deal should be easy”, or so we thought. No. No. No. At best, that will remain only in our dreams. Both businesses had other shareholders including well-structured boards. We needed the buy-in of all stakeholders. This was beyond Alex proposing ‘business love’ to Suzy, to say it lightly. To our dismay, our stakeholders threw questions at us that made us wonder: Wait! why did we both not think about this love relationship earlier? Then the poignant questions: “do you want control or wealth? Why do you want to hold onto 100% of GHS100,000 when you can hold onto 10% of GHS10m? Do you know that your combined efforts will add value and open bigger market opportunities for you?” the suggestions came. “Even more importantly, you will save money – capital and operational cost. Your asset base will grow and you can attract more funds” they added. The Landing Page

Then we set out on a journey to consolidate thoughts and ideas by bringing together experts to help achieve our dream. Due diligence and consolidation were estimated to be completed within six months. But it extended beyond that. As literature has it, a merger is one of the most challenging steps an organization can take as it creates tensions as well as excitement (www.ivar.org.uk). Pause! There were possible deal-breakers on our plates. What! Yes, there were. Name them for the NewCo – shareholding ratios, office location, board members, staff rationalization, assets and liabilities, etcetera. Somehow, we crossed that bridge with all the relativities except one: the business name for the NewCo. Anytime we thought through the name for the NewCo, there were tensions around the table. One day, one of the consultants said to me, “young lady, do you know the reason why some mergers are never signed off?” No, I retorted. “The name, just the name for the NewCo. It is usually a sensitive conversation, especially for brand management, brand equity, and personal sentiments”. In response, I asked “why it is not the first agenda item then?” Why do we come this far only for the name for the Newco to become a deal-breaker? He smiled at me and said, “did you ever bother about the last name of the guy you went out with on a date until he took you to the alter and insist you write his last name as yours?” Haha, I laughed so loudly and said, “sometimes all we know is the nickname till it’s all said and done”. Then he finally said, talk to your partner. Wisdom Prevailed At the next stakeholder meeting, involving the board and the transition team, wisdom prevailed. One member just quizzed from one end of the table, “have you both considered just merging your names as they stand?”. We said, do you mean OctaneSDDalexCapital? That is a mouthful, isn’t it? In the quiet of the moment, Alex said, OctaneDC

(as in OctaneDalexCapital) That was it! Deal closed. We were all like, “oh God, the answer had been with all of us all this while”. So simple to the eye but tough to the mind. Thank you Mr. Alex Kwasi Bruks. Together, we will grow stronger. And that was it on that faithful Friday evening at No. 2, Peduase Hills. We shook hands, and oh yes, we hugged (absolutely no COVID-19 wahala back then), we drank more wine, chewed plenty meat and that was how two Old Companies (OldCos) died as the NewCo – OctaneDC – was born. The rest of the story, they say…

Dr. Suzy Aku Puplampu is the CEO of OctaneDC Limited (https://octanedc. com). OctaneDC is a fund management and advisory firm regulated by the Securities and Exchange Commission (SEC). As a finance and investment professional, Suzy has in-depth knowledge and experience working in the finance industry in Ghana spanning two decades. Dr. Puplampu holds an international certificate in wealth and investment management (CISI, UK, 2020) and earned her Doctorate of Business Administration in Finance (with specialisation in Wealth Management) from Walden University, USA. She is a Fellow with ACCA (UK) and holds MBA in Finance from the University of Ghana, Legon.

WEDNESDAY JUNE 24, 2020

Mining

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Mining sector employment up by 18percent - report BY DR. SUZY AKU PUPLAMPU

The mining sector employed directly close to 11,899 in 2019 as against 10,109 in 2018, a report has revealed. According to the 2019 Chamber of Mines annual general report, the employment opportunities created by mining are both direct and indirect. In 2019, the total workforce engaged directly by producing member companies of the Chamber was 11,899 compared to 10,109 in 2018. The 18percent growth in employment was primarily due to additional recruitments at Newmont’s Ahafo Mine, Asanko Gold Ghana Ltd, Golden Star Wassa Ltd and the redeveloped AngloGold Ashanti Obuasi Mine. Out of the total number of direct mine employees, only 1.2 per cent are expatriates while the overwhelming majority remain Ghanaian nationals. According to the President of the Chamber, Eric Asubonteng, gone are the days when expatriates occupied all the key management roles on mine sites, but it has changed. “Today, highly skilled Ghanaian mining professionals are occupying key positions at all levels of our

industry, much to the satisfaction of our now actively discerning investors and stakeholders. Interestingly, Ghanaian mining professionals are in high demand on the global market, as many of our colleagues have taken up management roles as expatriates, in both developed and emerging mining destinations across the globe. We should be proud of what we have achieved as a relatively small nation with a big heart for the whole range of mining competences”. Furthermore, he indicated that while the country pat itself on the back for the increase in direct jobs, it is important to recognise that direct jobs created by large-scale mining are but a fraction of the multiplier effect of mining operations on employment. The value chain of mining creates a huge pool of opportunities that ensure that support service providers such as input suppliers, food producers and vendors as well as social entrepreneurs are able to take advantage of the inherent opportunities to generate sustainable employment. It is also useful to focus on the importance of a well-structured small-scale mining sector to job creation.

Eric Asubonteng touts employment opportunities in the mining sector

“We are all aware that thousands of our brothers and sisters are engaged in illegal mining financed by persons who are able to afford heavy machinery that are posing a major risk to our environment. If properly structured, small-scale mining could create many more decent jobs for the teeming youth of our dear nation, who would have the added benefits of pension contribution and plan for their future”. It also has the potential to open up a pool of revenue generation streams for the state, if modelled in a worker-friendly manner. Data from the Ghana Revenue Authority (GRA) showed that the mining sector’s total fiscal contribution, at 7.7 percent of

domestic revenue in 2019, was the second highest after the financial and insurance sectors. This notwithstanding, the share of the mining and quarrying sector in total direct domestic receipts mobilized by the GRA improved by 70 percent from GH¢ 2.36bn in 2018 to GH¢ 4.02 bn in 2019. This growth was occasioned by the simultaneous increase in production and price of some minerals, particularly, gold. Likewise, the expiration of the Stability Agreements between the Government of Ghana and some mining companies further resulted in changes that boosted revenue for the State, the President of the Chamber noted.

Congo officials vow to tackle child labour at mines as virus threatens spike Authorities in Democratic Republic of Congo’s southeastern mining heartland are boosting efforts to tackle child labour amid concerns that the coronavirus pandemic could drive more families to put their children to work in mines, officials said. Congo is Africa’s main producer of copper and the top global source of cobalt, accounting for two-thirds of global supplies of the metal used in smartphones and electric car batteries. Mining accounts for 32% of Congo’s national output and the economy has been hard hit by the pandemic, which has slowed demand for metals and other raw materials. The slump means mining workers are earning a fraction of what they did before the outbreak, and are more likely to take their children to work, according to activists and academics. “Economic activity has been paralysed during this health crisis and this will have a negative impact on parents’ income,” said Mathieu Kazembe Sawana Ilunga, the official who oversees the economy and industry in the southeastern Lualaba province. “But this must not be used as justification for the presence of children in mines,” he told the Thomson Reuters Foundation.

Tens of thousands of children as young as six work without protective gear in artisanal mines in the country’s southeast, according to rights groups including Amnesty International. About 15% of children aged 5 to 17 across Congo are engaged in child labour - with most doing dangerous work - a 2019 report by the National Institute of Statistics found. Children in Congo are permitted by law to work from the age of 16 if they are deemed fit to do so by labour inspectors. Nathalie Lunda Ngandu, the official in charge of social affairs, gender and family issues in Lualaba, said she shared the concerns of activists about a rise in child labour at mines. Authorities will address the soaring cost of basic necessities, raise awareness in communities and at mining sites, and improve monitoring systems for child labour, Ngandu said. Congo launched new monitoring and tracing mechanisms in 2018 to tackle child labour in mineral production. They apply both to artisanal mines and operations run by large mining companies. “We will also spearhead two major activities with elected representatives and traditional and local authorities so they get involved ... in the fight against the worst

forms of child labour, particularly in the context of COVID-19,” Ngandu added. Together, Lualaba and neighbouring Haut-Katanga account for nearly all of Congo’s output of cobalt. Exports fell by 15.2% in the first quarter of 2020 compared to the same period last year. Roger-Claude Liwanga a researcher at Harvard University who has studied child labour in Congolese mines - said authorities were “often in denial” about

child miners, and urged them to distribute free food to prevent the practice worsening. Civil society groups this month said many mines were forcing workers to stay on site - to avoid coronavirus outbreaks - and providing insufficient food and water and inadequate housing, while protective equipment and hygiene measures were lacking. Congo has so far confirmed about 5,925 cases and 135 deaths. Reuters

WEDNESDAY JUNE 24, 2020

Maritime

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Keta Port Project: GPHA seals contract with consultants The Ghana Ports and Harbours Authority (GPHA) has commissioned a team of consultants led by the German firm M/s Sellhorn Ingenieurgesellschaft mbH from Hamburg, Germany towards the construction of a new port at Keta in the Volta Region. The other consultants are ProTeln Service GmbH, PSP Architekten, Ingenieure and a Ghanaian team from Yogarib Engineering Services Limited. The appointed consultant is expected to expedite work to deliver a full feasibility study and master plan, including development and investment strategy for the Port of Keta. The first feasibility indicators are expected within seven months. The execution of the consulting services contract—which was carried out via video conferencing-marks a major milestone towards the realisation of the development of the new Port of Keta. Director General of GPHA, Mr. Michael Luguje, acknowledged the limitations imposed on all parties

in the face of the virus pandemic and admonished the team to take all necessary steps to employ their best professional abilities to deliver the terms of the contract. According to Mr. Luguje, the Port of Keta remains an important development agenda for the government and especially people around the project areas. Director of the Port of Keta, Dr. Alexander Yaw Adusei Jnr., thanked the leadership of GPHA for their committed investment in the project and the successful appointment of consultants through a professionally well-conducted and transparent process. He was hopeful that Volta Region will soon have a modern port and maritime logistics hub for the country as well as serving as the strategic cargo route through the eastern corridor to the landlocked countries. GPHA has also issued the letter of Notice to Commence to the Consultant to begin the services officially in accordance with the

conditions of the contract. The realisation of Keta Port begins with the Master Plan and Feasibility Studies’ consulting services, scheduled to commence in June 2020. Extensive multi-stakeholder engagement sessions are expected to be conducted during the

feasibility study period, including market search, investment shows, etc. It is anticipated that in the absence of any major delays attributable to the pandemic, the studies will be completed by Feb. 2021 with investment strategy plan for the port’s development.

“Cocoa powder”export MOL shrinks fleet by 40 ships in defensive response raked in US$7.2m in 2018 to Covid-19

Japanese shipping major Mitsui O.S.K. Lines (MOL) has devised a plan comprising defensive measures the company should take in order to reduce market exposure and reexamine investment activities in response to the coronavirus pandemic’s impact. In order to be able to chart its path forward, MOL had to review the impact of the pandemic on the markets it operates in and look into the forecasts for megatrends of the world economy in the COVID-19 and post COVID-19 era. MOL said that the analysis shows that a significant decline in ocean transport volume and a restrained stance on customers investments will be unavoidable in the foreseeable future. Recovery in the tanker and bulk shipping market is expected in 2021 and 2022 respectively, while some trades like the seaborne transport of

cars are not expected to recover to 2019 levels until 2023 or even later. In view of such developments, MOL has decided to reduce its fleet of oil tankers, bulkers, car carriers by a maximum of about 40 ships, including 13 vessels that have already been confirmed. Furthermore, the company said it would hedge from risks through time charter outs of its ships and forward freight arrangements. “Concerning three core strategies to realize the 10-year vision, with regard to portfolio strategies, we recognise that the shift of global energy demand to LNG and renewable energy will further accelerate. In the overall offshore businesses under our strategic field, we will invest management resources selectively, while shifting our focus to these growth fields,” MOL said. worldmaritimenews.com

With 13 market destinations, exports of Cocoa Powder (sweetened) from Ghana increased from US$3.1m in 2017 to US$ 7.2m in 2018, according to the 2019 potential market report on the commodity published by the Ghana Exports Promotion Authority (GEPA) In terms of global ranking of countries that exported the product under the sector in spotlight, Ghana garnered the 11th position. Nigeria was the largest market destination for Cocoa Powder (sweetened) from Ghana with estimated import value of approximately US$ 7.1million followed by Cote D’Ivoire, with imports of US$ 65,000. The two countries accounted for 98.8% of Ghana’s total Cocoa Powder export in 2018. Other importers of Cocoa Powder (sweetened) from Ghana include United Kingdom (US$20,000), Malaysia (US$

16,000), New Zealand (US$14,000) and Canada (US$ 8,000). Between 2017-2018, United Kingdom, Cote D’Ivoire and Nigeria recorded the highest growth rates of 480%, 225% and 140% respectively with respect to sweetened cocoa powder importation from Ghana. Ghana’s export to Italy recorded an average negative growth rate of -42% between 2014-2018. From 2017-2018, Ghana witnessed a drastic decline in its export growth to Canada, Italy and Burkina Faso by -90%, -33% and -34%. In 2018, Nigeria’s global importation of the product under consideration amounted to US$ 7.4m with Ghana emerging as the first supplier to the Nigerian market (94.8%). Guinea was the second largest supplier to the Nigerian Market (4.4%). Global demand for cocoa powder (sweetened) has hovered between US$418.9m and US$439m since 2015 and 2017, and in 2018, demand increased to US$493.1m. gepaghana. org

WEDNESDAY JUNE 24, 2020

African Business

South Africa: Private equity investors submit unsolicited proposals for new national airline The South African government said on Tuesday it had received unsolicited proposals from private sector funders, private equity investors and potential partners for a new national airline based on struggling South African Airways (SAA). State-owned SAA has been under a form of bankruptcy protection since December, and its administrators last week proposed a restructuring plan for which the government had to find at least 10 billion rand ($580 million) of new funds. Creditors are due to vote on the restructuring plan on Thursday, but one of SAA’s creditors - private airline Airlink - has launched an urgent court application to try to prevent the vote from happening. The Department of Public Enterprises, which is responsible for SAA, said in a statement: “Government is intent on pursuing credible proposals for investment and strategic partnerships with the private sector, as well as equity participation for employees”. It did not name any of the funders, investors or partners who had

Dispute over Africa’s biggest hydro dam set for discussion at UN The United Nations Security Council will discuss for the first time Monday a growing dispute between Egypt and Ethiopia over a giant hydropower dam being built on the Nile River’s main tributary, diplomats said. The behind-closed-doors meeting was requested by France, according to the diplomats, who spoke on condition of anonymity. It came after the latest talks between Egypt, Ethiopia and mutual neighbor Sudan ended last week with Ethiopia refusing to accept a permanent, minimum volume of water that the Grand Ethiopian Renaissance Dam should release downstream in the event of severe drought. Egypt’s Foreign Ministry subsequently asked the UNSC to intervene, calling for a fair and balanced solution. Ethiopia has threatened to start filling the dam’s reservoir when the rainy season begins in July, with or without a deal. That’s a step that Egypt, which relies on the Nile for almost all its fresh water, considers both unacceptable and illegal. Ethiopia remains resolute that a so-called declaration of principles agreement signed by Egypt, Ethiopia and Sudan in 2015 allows it to proceed with damming the GERD. (bloomberg.com)

expressed an interest in the new airline to emerge from the wreckage of SAA. The state carrier has not made a profit since 2011 and has been a drain on the public purse at a time of weak economic growth. If the restructuring plan is approved by creditors, the administrators say they need government to provide a commitment on funding by July 15. Finance Minister Tito Mboweni is due to deliver an emergency coronavirus budget on Wednesday, when any new government funding for SAA could be revealed. (af. reuters.com)

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Namibia further relaxes coronavirus restrictions despite rising case Namibia’s President Hage Geingob on Monday announced a further easing of the country’s coronavirus lockdown to boost economic activity, despite a rise in confirmed COVID-19 cases. Geingob said the country would move from ‘stage 3’ to ‘stage 4’ of a five-level exit from lockdown plan, except for the Erongo region - where the harbour town of Walvis Bay is located and which is Namibia’s coronavirus hotspot. “The government’s approach, to further relax national restrictions under Stage 4, aims to boost social and economic activities, while continuing to advocate for intensified public adherence to health and hygiene protocols to safeguard our successes,” Geingob said. Namibia has confirmed 63 cases of the novel coronavirus, with 17 new cases identified in the past 48 hours. Geingob said under the relaxed regulations, which are effective June 30, a limited number of tourists from “a carefully selected low-risk market” would be admitted to help revive a sector that employs 100,000 people.

Casinos and gambling houses will open for pre-booked clients with no walk-ins, while informal gambling houses will be allowed to open as long as they maintain a logbook. The relaxed regulations will also see the number of people allowed at public gatherings such as weddings, funerals and religious services increased to 250 from 50. Sporting activities will now be permitted, subject to adherence to the public gathering limit. Geingob said the country could move to ‘stage 5’ in September, which will see borders reopen as well as the resumption of air travel. (Reuters)

Nigerians move to sue Shell in UK over oil spillage The tussle over where the legal battle between Nigerians and Royal Dutch Shell Plc continues to rear its head as thousands of Nigerians have requested the British courts to give them the permission to sue Shell in London for compensation over environmental damage caused by oil spillages in the Niger Delta region. Lawyers who are representing residents of the oil-rich Niger Delta believe that last year’s landmark UK Supreme Court Judgement against a London-based miner should set a precedent. On the other hand, Shell, had blocked the suit on two different occasions, asking that the case should go on in Nigeria. The Nigerians suffered a setback in the case in 2017, when a high court in London ruled that Royal Dutch Shell cannot be sued in London over the oil spills as against the attempts to hold the British multinational oil firm liable in UK for the actions of their subsidiaries abroad. The 40,000 villagers from the Bille and Ogale communities in the oil-producing Niger Delta state, who were affected by pollution and sought to take action against Shell in London rather than its Nigerian subsidiary. The decades of oil spills have destroyed the livelihoods of these fishing and farming communities. The villagers argued that the Nigerian courts were unfit to hear their case as they may not get justice. The UK judge in his ruling said that there is no connection between this jurisdiction and the claims

brought by Nigerians for breaches or acts that were done in Nigeria by a Nigerian company. While the two Niger Delta communities have been badly affected by the oil spills, a spokesperson of Shell Petroleum Development Company in Nigeria, said that most of the oil spill are caused by oil theft, pipeline sabotage, and illegal refining. However, Amnesty International in 2018 questioned the claims by Shell with respect to the cause of the oil spills as they believed that they likely understated the number of spills attributable to operational faults. In an earlier hearing, the UK judge had said that he had not seen any evidence the Nigerian Judiciary was not taking concrete and effective steps to improve the speed at which the cases are being handled. But the legal representative to the Nigerian communities, Leigh Day, said that there is no prospect of justice in Nigeria as impoverished Nigerians have minimal chance of

success against these oil companies with deep pockets in the overburdened local courts. Although two English courts had ruled that the two Niger Delta communities failed to show that Royal Dutch Shell had sufficient control over SPDC, the supreme court’s subsequent dismissal of Vedanta, a London-based miner’s bid to stop a trial in the UK, has given new hope to those Niger Delta communities. However, the cases might be different as the lower courts had found Vedanta to be much more involved in its subsidiary’s operations than Shell’s parent company. In a related development, an earlier report had disclosed that the clean-up of oil spills in the Ogoniland area in the Niger Delta region has witnessed lack of progress. An advocacy group including Amnesty International, had said that the progress has been poor and the little work that had been done is sub-standard. (Source: nairametrics.com)

WEDNESDAY JUNE 24, 2020

Feature

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How the pandemic should shake up economics

BY: KAUSHIK BASU

Economists typically ignore the social norms and customs on which markets depend and treat them as part of the woodwork, because they are so unchanging in normal times. But a disruption such as the one caused by COVID-19 makes these tacit assumptions explicit, reminding us how much we take for granted. The COVID-19 pandemic has caused massive disruptions to markets, supply chains, and world trade. This has forced a reckoning with many traditional policies and should be treated as an opportunity to rethink some of the ideas that economists have long taken for granted – including the basic notion of what makes an economy function efficiently. That notion goes back to 1776, a landmark year during which Adam Smith published The Wealth of Nations, America’s 13 states declared independence, and the same day, July 4, the philosopher David Hume held a dinner party for his friends, including Smith, to mark the twilight of his life. Smith’s path-breaking work, along with later highly influential contributions by Léon Walras, Stanley Jevons, and Alfred Marshall, transformed economics. We learned that markets can function smoothly without a central authority, because the actions of ordinary people trying to earn more and purchase the goods they want create tugs and pulls of demand and supply, causing prices to rise and fall. As this idea became formalized, the social norms and customs on which markets also depend became part of the woodwork – tacit assumptions

that we ignored, because they are so unchanging in normal times, and then forgot were there. But a disruption such as the one caused by COVID-19 reminds us how much we take for granted. I realized this during the nearly three months I spent in Mumbai during the lockdown, when family and friends told me of conflicts, showdowns, and frayed nerves in the city. Whereas some residents were castigated for not wearing face masks or for violating socialdistancing norms, others were criticized for overdoing the lockdown. Some residents’ associations photographed anyone who stepped out of their home, even if they were alone and far away from anyone else, arguing that such behavior was irresponsible. Because the behavioral requirements brought about by the pandemic are novel and have yet to stabilize, we are more aware of them than we are of longer-established social norms. Markets also rely on such norms, most of which, having evolved over time and become routine, lie beyond economists’ explicit assumptions. As Karl Polanyi, Mark Granovetter, and others have argued, the economy cannot be understood as though it stands apart from society. Certain social and institutional preconditions must be present for an economy to function effectively. But the economics profession widely overlooked these important reminders, or, at best, put them aside with a nod. In my book Beyond the Invisible Hand, I argued that trade and exchange depend not only on technical assumptions of which all economists are aware, such as the law of diminishing marginal utility, but also on other conditions that

we take for granted. These include being able to trust one another and our ability to communicate, which allows us to negotiate and conclude deals. But no economist writes down “can talk” as an assumption. It is regarded as a given. Unfortunately, this approach has led to big gaps in our understanding of how the invisible hand works. Many conservative economists stress that as long as governments do not intervene and curb individual freedoms, economies will function efficiently. The invisible hand will do it all. But they forget that efficiency also requires many curbs on how we behave, such as not punching other traders in the face and running away with their goods. This oversight has in turn led to major policymaking mistakes, such as the “Washington Consensus,” which advocated curbing government intervention in the economy and tightly controlling fiscal deficits. As Joseph Stiglitz has pointed out, this so-called Washington consensus was in fact confined to the area between Washington’s 15th and 19th Streets, where the US Department of the Treasury, the International Monetary Fund, and the World Bank are housed. Nonetheless, this new orthodoxy was then thrust upon all developing economies, regardless of whether they met the social and institutional conditions these policies require. Not surprisingly, the measures often backfired. Fortunately, there is now a growing recognition that price adjustments are not the sole or even the necessary factors that help markets to clear. In a recent paper, Michael Richter and Ariel Rubinstein show that markets can clear in different ways, some of which rely entirely on social norms. In most households,

even large ones, the refrigerator is left open and its contents do not have prices marked. But the refrigerator does not get drained within moments of being stocked. Many kinds of behavior are socially forbidden, and in some societies these prohibitions have become so deeply embedded psychologically that no outside authority is needed to enforce them. This opens up a potentially large research agenda regarding the norms we should encourage to make economies more equitable and productive. The COVID-19 pandemic, by making the tacit overt, has raised awareness of this challenge – and interesting findings are beginning to appear. In a recent paper, for example, Wooyoung Lim and Pengfei Zhang use laboratory experiments to show how provaccination behavioral norms can arise voluntarily, potentially helping populations to achieve herd immunity. But not all good norms arise voluntarily; nor do societies have to wait for the slow process of evolution to unfold before converging on them. Instead, contemporary research should enable us to isolate desirable norms that we can then consciously try to nurture.For example, we have now learned that during pandemics, we should stay six feet (two meters) from others and wear face masks. This did not happen voluntarily, or because those who did not follow these norms died, but because research by epidemiologists taught us these norms, and governments enforced or encouraged adherence to them. One hopes that the disruption caused by COVID-19 will likewise spur economists to identify norms that can help us build a more equitable, prosperous, and sustainable world.

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WEDNESDAY JUNE 24, 2020