Business24 Newspaper 17th March, 2021 by Business24 Online

WEDNESDAY MARCH 16, 2021

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NO. B24 / 172 | NEWS FOR BUSINESS LEADERS

Finance Ministry defends clean-up levy on banks

WEDNESDAY MARCH 17, 2021

Government understating public debt, Minority says; threatens boycott of budget approval By Eugene Davis ugendavis@gmail.com

he Ranking Member of Parliament’s Finance Committee, Dr. Ato Forson, has warned that the minority in parliament will not support the approval of the 2021 budget statement because the government has been “insensitive” and continues to misreport public debt figures. Cont’d on page 3

BOST revives Bolga depot… targets export to Sahelian countries

Charles Adu-Boahen

By Nii Annerquaye Abbey abbeykwei@gmail.com

he President’s representative at the Ministry of Finance, Charles Adu-Boahen, has justified the imposition of the five percent financial sector clean-up levy on banks’ pretax profits – arguing that existing banks benefitted from the government’s costly intervention in the sector. “It is important to remind

the banking sector that they are where they are today and more profitable and stronger because of the steps we took in 2017 to clean up the sector. There was a systemic risk element at play. If we hadn’t stepped in and the first bank had collapsed, it would have created a run on all the other banks, and most of the banks standing today would have been faced with a very dire situation,” Mr. AduBoahen said.

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

Cont’d on page 3

Cont’d on page 2 INTERNATIONAL MARKET

US$1 = GHC 5.7606

GHANA REFERENCE RATE PROJECTED GDP GROWTH RATE

The President’s representative, who is widely expected to be renominated to the position of Deputy Finance Minister, was speaking during audit firm PwC’s 2021 postbudget forum held virtually. In his view, the disquiet that greeted the levy’s announcement – although expected – does not take cognisance of government’s efforts to make the banking sector profitable.

hana’s quest to serve as a hub for petroleum products in the sub-region received a major boost following the revival of the Bolgatanga Depot of the Bulk Oil Storage and Transportation Company Limited, BOST. The facility, which has a capacity to hold about 46.5m litres of petroleum products, has been dormant since 2018 largely due to a defect in the 261km fuel pipeline linking the depot from Buipe, Savannah Region – which

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

WEDNESDAY MARCH 16, 2021

Editorial

Broaden the tax basket and don’t overtax a few!

he 2021 Budget Statement introduced new taxes and adjusted upward some existing ones much to the chagrin of Ghanaians, especially business owners whose operations have been highly affected by the coronavirus pandemic. New taxes that have been proposed by the government include levies to tackle sanitation and pollution as well as gaming. The National Health Insurance Levy and the VAT Flat Rate have been upped by one-percent with an upward review to the road tolls as well. There is also a five percent levy on banks’ profit before tax to make up for costs incurred during the government’s cleansing of the nation’s financial sector which, according to the Ghana Association of Bankers, will be counterproductive.

According to the government, the new taxes will cushion the struggling economy as well as recover the cost of freebies that were offered to Ghanaians during the pandemic-induced restrictions and partial lockdown. Some economists have indicated that the new taxes were not properly timed because the financial situations of business are not too well due to COVID-19 whilst others hold that increasing levies and taxes on the same sect of businesses every now and then was a lazy approach to taxation. These are sound arguments to make considering the fact that the vast majority of eligible taxpayers have not be captured by the tax net. We are aware that government’s aggressive digitisation drive has been aimed at formalising the

informal economy and suffice to say that significant impact has been made in this regard. The tax identification number, digital addressing system, and other interventions all seek to capture relevant data about both formal and informal businesses for the purpose of taxation. It is therefore disturbing for the government to overtax businesses that operate in selected sectors of the economy whilst the vast majority of informal businesses continue to have a field day. The harm of the viral pandemic has been far-reaching and the repercussions and efforts to claw back what has been lost must be borne by all and not just a few. This is the time to broaden the tax basket leveraging the gains of digitisation and not overburden the compliant few.

Finance Ministry defends clean-up levy on banks Continued from cover

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The levy, which was announced in last Friday’s budget statement, is expected to generate about GH¢290m this year. This, according to Mr. Adu-Boahen, is a small fraction of the GH¢21bn the government incurred to clean up the sector. Despite the former deputy finance minister reiterating government’s promise of reviewing the levy in 2024, George Kwatia, a Tax Partner at PwC, maintained that it is likely

the levy has come to stay. He cited the five percent National Fiscal Stabilisation Levy on banks’ pre-tax profits, which was first introduced in 2009 and was supposed to be a shortterm measure but has since been extended over the years. 2021 Budget The Senior Country Partner of PwC, Vish Ashiagbor, commended the Ministry for a budget that seeks to build on the marginal growth achieved last

year amidst the pandemic. According to the budget statement, the country’s economy is estimated to have grown at a rate of 0.9 percent in 2020 – a development Mr. Ashiagbor said demonstrates government’s efforts to prevent the economy from sinking into recession as was the case in most countries. The Senior Country Partner said government’s growth target of five percent for 2021 appears feasible if the progress made despite the pandemic last year is consolidated.

WEDNESDAY MARCH 16, 2021

Government understating public debt, Minority says; threatens boycott of budget approval Continued from cover Contributing on the floor of the house during the debate on the budget, Dr. Forson stated that the government has increased the public debt stock by GH₵171.2bn since 2017 to date. In addition, he said, there has been an increase in the debt-to-GDP ratio by 20 percentage points. He also indicated that an amount of GH₵6.2bn in energy sector payments was excluded from the budget and sent a caution to the Ministry of Finance that

Ato Forson

until the anomalies are corrected, his side will not pass the budget. “We will not be part of the passage of the budget until we

track the way we accumulate debt,” he said on Tuesday. According to Dr. Forson, who is also the Member of Parliament for Ajumako-Enyan-Esiam, in 2017 government increased the debt by GH₵25.2bn. “Our public debt moved from GH₵120bn to GH₵145bn. Sadly, we lost our way starting in 2018. Government cannot blame Covid entirely for the economic mess that we are going through. In fact, the mess started in 2018.” On his part, the chairman of the Finance Committee, Kwaku

Kwarteng, explained that the growth of the public debt has been kept at lower levels, arguing that key social interventions such as the Free SHS and NABCO have all been preserved by government. The Member of Parliament for Ofoase-Ayirebi, Kojo Oppong Nkrumah, maintained that government does not aim at just increasing revenue but instituting measures that ease the burden of Ghanaians. The country’s debt stock hit GH₵291.6bn in December 2020, equivalent to 76.1 percent of GDP.

BOST revives Bolga depot Continued from cover receives products from Accra via the Volta Lake through the Akosombo depot. Speaking ahead of the commencement of operations of the Bolga facility, Managing Director of BOST, Mr. Edwin Nii Obodai Provencal, said the facility is strategically positioned to serve the fuel needs of countries like Burkina Faso, Mali, Niger and the rest of the landlocked countries. “In line with our growth strategy, this asset in Bolga is positioned to be the export hub for the nation in terms of connecting the landlocked countries to the port with respect to the supply of fuel. The re-opening of Bolga fortunately comes at the right time to take advantage of the new AfCFTA [African Continental Free Trade Area] trade protocols. This by no small measure will boost our export capacity with additional contribution to our bottom line,” he stated. Over the past three years that the Bolga Depot had remained non-functional, the Sahelian countries that imported finished fuel products from Ghana relied on Bulk Road Vehicles (BRVs), popularly known as fuel tankers, to haul petroleum products from Tema. This mode of transport comes with huge road maintenance costs, safety risks and other related challenges. These vehicles typically have the capacity of holding about 55,000 litres of petroleum products – traversing hundreds of kilometres to access these finished products. The revival of the Bolga Depot will allow these tankers to draw fuel from the facility, cutting down distance travelled on the roads and saving

the nation a lot of cost. The move is also expected to reduce the carnage on the roads. Commenting on the significance of the revival of the depot, Board Chair of BOST Mr. Ekow Hackman stated that “with this development, we can see that the spine of the company, which starts at the Accra Plains Depot and goes through to Akosombo by barge to Buipe through Savelugu and finally to Bolgatanga, is complete.” BOST, which was established in 1993, is tasked with building strategic reserve stocks of fuel to meet a minimum of six weeks of national consumption in the short and medium term and to increase the stock level to 12 weeks in the long term. In order to fulfill its mandate, BOST developed a network of storage and distribution infrastructure throughout the country. The company currently has six depots nationwide. These are located in the Accra Plains, Mami Water, Akosombo, Kumasi, Buipe and Bolgatanga. Pipelines link the Tema Oil Refinery (TOR) to the Accra Plains Depot, which in turn is linked to the Mami Water Depot, Volta Region, and ends at the Akosombo Depot in the Eastern Region. Another pipeline links the Buipe Depot, Savannah Region, to the Bolgatanga Depot in the Upper East Region. For petroleum products to reach the northern parts of the country, it is conveyed by pipeline from the Tema Oil Refinery through the Accra Plains Depot and Mami Water to Akosombo, where it is loaded onto river barges to Buipe en route to Bolga. The Savelugu Booster Station ensures that the

A team from BOST Head Office led by its Board Chair, Mr. Ekow Hackman (third from left), and assisted by Mr. Edwin Provencal (extreme left), MD, visited the facility ahead of its operationalisation.

pressure is increased midway as products are pumped along the pipeline to Bolgatanga from Buipe. Over the last six to seven years, key components in the BOST infrastructure layout were out of shape and in need of repairs. The company, which earns its income from moving products as well as a levy – BOST margin – on petroleum products sold to the public, was unable to fix the defects due to what its MD, Mr. Provencal, said was lack of funds. In making a case for an increase in the BOST margin – a flat rate of GH¢0.03 charged on every litre of petroleum product sold in the country – Mr. Provencal explained that the amount is woefully inadequate, hence the request to increase it to GH¢0.12 to allow the company the ability to bring some of its key projects back on stream. Last year, the National Petroleum Authority (NPA) gave its approval for the BOST margin to be increased to GH¢0.06 per litre. Though lower than the request, it is a development which Mr. Provencal believes has returned BOST to a path of growth where key assets which have broken down over the years are being restored. “What the increment in the BOST margin has done to our strategy, which is two-fold, is that we are now going to sweat this

asset to achieve our operational efficiency. This facility will contribute to our revenue-earning assets. This will also help boost the morale of the staff here as well as contribute to our fortunes in future,” he said. After years of inactivity, BOST had to spend nearly US$2m to revive the Bolgatanga Depot. This cost includes the repair of the 261km Buipe-Bolga pipeline, repair works on some of the tanks as well as office space for Bulk Distribution Companies (BDCs). According to Mr. Provencal, the depot is looking at exporting at least GH¢50m of finished petroleum products this year. Beyond the immediate gains from reviving the facility, Chukwuemeka Aniebonam, Depot Manager, said the facility will attract a number of business activities. He expressed appreciation to the board, management and staff of BOST for their immense support, without which this and other milestones would not have been achieved. He also expressed confidence in the staff of the facility and reminded them that having received the relevant training, he believed they would deliver on their mandate despite the years of inactivity. The workers, too, stated they would give their all to make the Depot a success story.

WEDNESDAY MARCH 16, 2021

News

WEDNESDAY MARCH 16, 2021

Gov’t engages WTO on investment code By Eugene Davis ugendavis@gmail.com

he CEO of the Ghana Investment Promotion Centre, Yofi Grant, has said the country has begun negotiations with the World Trade Organisation and World Economic Forum for a standardised investment facilitation code. With the operationalisation of the African Continental Free Trade Area (AfCFTA), it is imperative for the continent to push through a single investment framework, he said. He added that there is also growing support for an international framework to facilitate investment for sustainable development. “The negotiations have started; every country is negotiating its position. I am happy to say that from the Ghanaian standpoint, we would be happy [to have] an investment framework that works for all of us, but it should never be binding on any country.” As African countries integrate as part of the AfCFTA, they are

Yofi Grant reckons investors will be keen on doing business in the country given the business climate and reforms being undertaken.

expected to increase efficiencyseeking as well as market-seeking foreign direct investments (FDI). Investment facilitation is broadly conceived as an international framework of noncontroversial, technical measures that can increase the quantity and quality of investment. Since virtually all economies both receive and export investment capital, investment

facilitation has the potential to benefit all economies. Furthermore, given that developing and least-developed countries often lack the capacity to attract FDIs—and that FDI is often their largest source of finance—investment facilitation is particularly important for these countries. GIPC has set a target of attracting at least US$3bn in

foreign direct investment (FDI) this year as part of the country’s post-Covid recovery strategy. Last year, the centre registered FDI projects worth US$2.65bn, an increase of 139 percent over the US$1.11bn registered in 2019. The trend defied the anticipated steep decline in the value of registered FDI projects as COVID-19 threatened to cripple the Ghanaian economy.

Decouple Tema LNG infrastructure to maximise domestic gas consumption By Joshua Worlasi Amlanu macjosh1922@gmail.com

o lessen liabilities under the “Take or Pay” contracts, there is the need to decouple the Tema LNG infrastructure to optimise the utilisation of the domestic gas, Benjamin Boakye, Executive Director for the Africa Centre for Energy Policy (ACEP), has said. Addressing issues on policy directions in the petroleum

sector, at a two day- Natural Resource Governance Institute (NRGI) dialogue, the Executive Director said: “The LNG infrastructure, which is nearing completion, must be decoupled from gas supply agreement to create room for the consumption of more domestic gas.” The Tema LNG project, subSaharan Africa’s first LNG regasification terminal, is expected to come on stream in the course of the year to improve gas supply reliability for

power and non-power industrial applications. In view of this, Mr. Boakye stated that the maximum use of the domestic gas will ensure that the country’s liabilities under the “Take or Pay” contracts are lessened -- in past years this could cost the government over US$ 500 million per annum. He also disagreed with government’s projection of gas demand in the medium-term from 2020 to 2024 saying that doesn’t correspond with the

contracted supply of gas within the period under review. “Presently, Ghana has a minimum domestic gas supply capacity of about 340 million standard cubic feet per day (mmscfd) against a current gas demand of about 320 mmscfd. The excess capacity is further complicated by the imports from Nigeria and LNG imports which, like Sankofa (OCTP) contract are governed by “Take or Pay” clauses,” he said. Tema LNG Project Once onstream, Tema LNG Terminal will operate the US$350mn project for 12 years, after which the terminal operatorship will be transferred to the Ghana National Petroleum Corporation (GNPC) and the Ghana Ports and Harbours Authority (GPHA). The new terminal has the capacity to import around 2.0 million metric tonnes per year (mtpa) of LNG and in May 2018, GNPC signed a cooperation agreement with Russia’s Rosneft to supply 1.7 mtpa of LNG over 12 years. However, Royal Dutch Shell has replaced Rosneft as the supplier of the LNG to the terminal.

WEDNESDAY MARCH 16, 2021

Maritime, Trade and Logistics

WEDNESDAY MARCH 16, 2021

Port security agencies assess contingency plans for emergencies

ecurity agencies operating within Ghana’s entry points and borders are undertaking various measures to intensify vigilance and enhance capacity towards keeping the country’s gates safe in the event of emergencies and unexpected occurrences such as pandemics and rapid migration. To this end, the Ghana Immigration Service (GIS) with support from the Integrated Centre for Migration Policy Development (ICMPD) has met with security agencies operating at the Tema Port in a forum to assess the draft contingency plan of the GIS, which forms part of the Strengthening Border Security (SBS) in Ghana project. The SBS Ghana Project is an initiative of the Ghana Government and its partners from the European Union. The forum brought together key officials of the Immigration Service, the Ghana Ports and Harbours Authority, Port Health Unit of the Ghana Health Service, the Customs Division of GRA, the Ghana National Fire and Rescue Service, the Marine Police Unit and the National Intelligence

Representatives of Ghana Immigration Service, Port Health, GPHA among others, during forum

Bureau. According to an Assistant Commissioner of the Ghana Immigration Service, who is also the Chairman of the Technical working group that developed the draft contingency plan of the GIS, Samuel Basintale, the plan will undergo initial testing in an

inter-agency simulation exercise at the Port of Tema on Thursday March 18. He said: “We strongly believe that because Tema Port has all the statutory agencies working at the entry points, if it works here, certainly it should work even better at the other frontiers.”

He explained that such comprehensive plans when deployed will ensure that the needed synergy required from all stakeholders at the country’s entry points during emergencies is achieved and emerging threats eliminated effectively.

GPHA takes over completed Kpone Unity Terminal

he Ghana Ports and Harbours Authority has been handed the Kpone Unity Terminal by the project engineers following its

completion. GPHA will now take over full control of activities at the facility. The symbolic signing of documents by top management

of GPHA and its Canadian partners and a walk through of the facility characterized the semi-formal ceremony. The Kpone Unity terminal was

General Manager, Special Duties of GPHA, George Bredu (left) and Canadian High Commissioner to Ghana, Kati Csaba (right) during handing over ceremony

originally designed to serve as an off-dock terminal for devanning activities from the Port of Tema. The world class terminal sits on a 16.2 hectares’ land and it consists of a 105,000m2 of container storage and devanning area, a car storage area, control tower, water tanks, transformer house, mechanical shop, fire bay, container freight station, an office complex, banking hall, a cafeteria and an outdoor parking area among others. The project which took 5 years to complete was funded through a USD 126 million loan procured from the Canadian Commercial Corporation under a finance, engineer, procure and construct contract. JV-Driver Projects Incorporated served as the main sub-contractor for the project. The Canadian High Commissioner to Ghana, Kati Csaba said the project’s successful completion is a demonstration of Ghana’s strong bilateral cooperation with Canada.

WEDNESDAY MARCH 16, 2021

Aviation, Travel and Tourism

WEDNESDAY MARCH 16, 2021

Emirates increases flights to Accra and Abidjan Emirates increases flights to Accra and Abidjan

n response to growing passenger demand for air travel, Emirates will boost its flights from five to six weekly, starting 1 April 2021. The linked service between Accra and Abidjan to Dubai will provide Ghanaians more flexibility and convenience of travel to over 90 destinations on Emirates network, including its hub and popular global destination, Dubai. Emirates has put in a barrage of biosafety measures at every customer touchpoint to ensure a safe travel experience for customers and employees. Emirates will utilise its Boeing 777-300ER aircraft between Accra and Abidjan and Dubai. Flight EK787 departs Dubai at 07:30hrs, arriving in Accra at 11:35hrs. EK787 departs Accra at 12:50hrs, arriving in Abidjan at 13:50hrs. Flight EK788 departs from Abidjan at 15:20hrs, arriving in Accra at 16:25hrs. The flight departs from Accra at 17:50hrs, arriving in Dubai at 05:50hrs the following day. Cathrine Wesley, Emirates Country Manager Ghana & Ivory Coast commented on the boost of services: “We have seen a marked increase in passenger demand to and from Accra, especially to popular tourism and business hubs like Dubai. We hope that by increasing our frequency, we

are able to facilitate even higher tourism and business traffic as Ghana continues its economic post pandemic recovery. The increase of our flights to Accra, which are currently linked to Abidjan are a testament to our commitment to Ghana. We have been operating flights for over 15 years, connecting Ghanaians to the world and offering a world-class experience onboard, whilst prioritising the health and safety of our customers. We look forward to boosting our services further to provide better travel options for our customers as they take to the skies again.” Keeping health and safety in mind, Emirates’ Economy Class customers can now enjoy even more personal space and privacy onboard with the ability to purchase up to three empty adjoining seats on their flight. Emirates has introduced this new seat product on the back of customer feedback, addressing the needs of a range of customers seeking extra privacy and space while still flying in Economy Class. This includes couples who wish to have the entire row to themselves (maximum of three seats in same row), parents travelling with in-lap infants, or those who simply want the added assurance of more space while travelling during pandemic times.

Since it safely resumed tourism activity in July, Dubai remains one of the world’s most popular holiday destinations, open for international business and leisure visitors. From sun-soaked beaches and heritage activities to world class hospitality and leisure facilities, Dubai offers a variety of world-class experiences. It was one of the world’s first cities to obtain Safe Travels stamp from the World Travel and Tourism Council (WTTC) – which endorses Dubai’s comprehensive and effective measures to ensure guest health and safety. Flexibility and assurance: Emirates’ booking policies offer customers flexibility and confidence to plan their travel. Customers who purchase an Emirates ticket for travel on or before 30 September 2021, can enjoy generous rebooking terms and options, if they have to change their travel plans. Customers have options to change their travel dates or extend their ticket validity for 2 years. More information here Travel with confidence: All Emirates customers can travel with confidence and peace of mind with the airline industry’s first, multi-risk travel insurance and COVID-19 cover. This cover is offered by Emirates on all tickets purchased on or from 1 December

2020, at no cost to customers. In addition to COVID-19 medical cover, this latest offer from Emirates also has provisions for personal accidents during travel, winter sports cover, loss of personal belongings, and trip disruptions due to unexpected air space closure, travel recommendations or advisories, similar to other multirisk travel insurance products. Some limitations and exclusions apply. Policy details and more information here. Health and safety: Emirates has implemented a comprehensive set of measures at every step of the customer journey to ensure the safety of its customers and employees on the ground and in the air, including the distribution of complimentary hygiene kits containing masks, gloves, hand sanitiser and antibacterial wipes to all customers. For more information on these measures and the services available on each flight, visit: www.emirates.com/ yoursafety Customers are encouraged to check the latest government travel restrictions in their country of origin and ensure they meet the travel requirements of their final destination.

WEDNESDAY MARCH 16, 2021

Feature

WEDNESDAY MARCH 16, 2021

Sequencing the post-COVID recovery

By Robert Skidelsky

ohn Maynard Keynes was a staunch champion of US President Franklin D. Roosevelt’s New Deal. The road to a civilized future, he wrote, went through Washington, not Moscow – a direct rejoinder to those idealists, including some of his students, who put their faith in communism. But Keynes was not uncritical of FDR. Specifically, he faulted Roosevelt for mixing up recovery and reform. Recovery from the slump was the first priority; social reforms, “even wise and necessary,” might impede recovery by destroying business confidence. Presaging today’s debates about post-pandemic economic-policy priorities, Keynes argued that proper sequencing would be the key to the New Deal’s success. The advisers in FDR’s “brain trust” were reformers, not Keynesians, and had a different view. Attributing the Great Depression to excessive corporate power, they thought that the route to recovery lay in institutional change. As a result, so-called Keynesian stimulus was a minor component of the New Deal – emergency treatment pending longer-run cures. Keynes himself repeatedly argued that the New Deal’s extra federal spending was insufficient to bring about full recovery. FDR’s total stimulus package of $42 billion – mostly spent in the first three years of his presidency, from 1933-35 – amounted to about 5-6% of US GDP at the time. Keynes, taking a rosy view of the fiscal multiplier, thought it should be double that. The Nobel laureate economist Paul Krugman said much the same about President Barack Obama’s 2009 stimulus of $787 billion, which came to 5.5% of GDP. On the basis of such uncertain reckonings, President

Joe Biden’s $1.9 trillion economic rescue plan, equivalent to 9% of current GDP, seems about right. Keynes was talking about fiscal stimulus. He was famously skeptical of the monetary stimulus attempted by both President Herbert Hoover in 1932 and FDR in 1933 – now called “unconventional monetary measures,” or, more simply, quantitative easing (QE). Then, like now, the goal was to bring about a recovery of prices by printing money. The most controversial of these schemes, Roosevelt’s gold-buying spree, was designed to offset the collapse in commodity prices. As FDR explained in one of his famous fireside chats, higher hog prices meant higher farm wages and buying power. In fact, large-scale gold buying by the US Treasury and the Reconstruction Finance Administration failed to move the price of hogs or anything else. Keynes’s reaction was scathing. Rising prices are an effect of recovery, not a cause of it, he argued, adding that trying to raise output by increasing the quantity of money was like “trying to get fat by buying a larger belt.” All that FDR’s gold-buying program did was to replace gold hoarding with currency hoarding. And yet economists continually reinvent the wrong wheel. The 2009-16 QE programs embodied the same misguided theory and similarly failed to boost the price level. Likewise, Keynes criticized those provisions of FDR’s National Recovery Administration that tried to engineer recovery by strengthening the position of labor. This, too, he thought, was the wrong way round: the time to saddle business with extra costs was after recovery was secure, not before. And while Keynes never challenged FDR’s promise to drive the money changers out of the temple, he must have wondered about how this

would affect the confidence of a paralyzed financial system. Finally, Keynes worried that mixing up recovery and reform was giving FDR’s administration “too much to think about all at once.” This observation should serve as a warning to those who see in an economic crisis the chance to push all their favorite schemes, regardless of temporal consistency. Keynes’s stress on the importance of proper policy sequencing is highly relevant today. But, as we emerge from the COVID-19 pandemic, the distinction between recovery and reform – and consequently between macro and micro policy and the short and long run – is less clear cut than it seemed to Keynes (and others) in the 1930s. For starters, full-employment policy is now obviously linked to employability, which was simply not the case in the 1930s. The reason so many people were out of work back then was not that they lacked the skills required by industry, but rather that aggregate demand was insufficient. Keynes thus wrote in December 1934 that the purpose of the government spending a “small sum of money” was to get “private individuals and corporations to spend a much larger sum.” What they spent it on was of no further concern to policymakers. But in today’s age of automation, no government can afford to take such a cavalier attitude to the sustainability of employment. As early as 1930, in fact, Keynes foresaw technological unemployment as a problem that would be outside the scope of demand management. Since then, the accelerating threat of job redundancy has enlarged what Keynes called the “agenda” of government. In particular, the state must be centrally concerned with the speed of technological innovation, the choice of

technologies, and the distribution of the productivity gains that technology enables. In the coming years, the uncomplicated Keynesian fullemployment policy will need to give way not just to a training guarantee, but also to an income guarantee as the character of work changes and the quantity of necessary human labor falls. Sustainable employment may thus be very different from what we now think of as full employment. Then there is environmental sustainability. Although Keynes understood that the state would need to account for a much larger share of investment, this was mainly a matter of smoothing out fluctuations in the business cycle, not plotting a sustainable ecological future. (Conferences on nutrition always bored him.) He was too much of a liberal, or perhaps simply too much of his time, to believe that the state’s agenda should include deliberately shaping the future through its choice of investment and consumption projects. Today, economic reform shadows recovery to a far greater extent than it did when Keynes distinguished between the two. But his way of setting out the relationship is a clear starting point from which to build both better. About author Robert Skidelsky, a member of the British House of Lords, is Professor Emeritus of Political Economy at Warwick University. The author of a three-volume biography of John Maynard Keynes, he began his political career in the Labour party, became the Conservative Party’s spokesman for Treasury affairs in the House of Lords, and was eventually forced out of the Conservative Party for his opposition to NATO’s intervention in Kosovo in 1999.

WEDNESDAY MARCH 16, 2021

Feature

WEDNESDAY MARCH 16, 2021

2021 Budgetary challenges and way forward

Dr. Raziel Obeng-Okon Founder/CEO – Cidan Investments Ltd.

Introduction Ghana’s GDP growth rate estimated for 2020 was 0.9 percent which resulted from 4.5 percent growth for agriculture, a contraction of 3.1 percent for industry and 1.9 percent average growth for services. The drastic slowdown in industry and poor performance of the services sector were largely due to the impact of COVID-19 pandemic. It is important to emphasize that in spite of the pandemic the agricultural sector showed positive resilience due to the government’s flagship planting for food and jobs program. Clearly the COVID-19 pandemic impacted negatively on the manufacturing sector more than any other sector. In my view, it presents an opportunity to look inward and domesticate the economy. Our governments need to focus more on bottom-up approach of development i.e., from the grassroots (informal sector) which constitute the majority of our productive capacity rather than the existing top-down approach where the emphasis continues to be on macro-economic gains in GDP and FDIs. It is about time we made

conscious efforts to rope in the informal sector as the basis of growing our GDP. This route is the narrow gate to economic prosperity (domestication), even though it might be time consuming. For the 2021 budget, the key macro-economic challenges for Government include: (a) funding for COVID-19 pandemic; (b) the growing budget deficit; (c) increasing levels of public debt; and (d) youth unemployment. Funding for covid-19 pandemic Due to the exceptional impact of COVID-19 on the economy of Ghana especially on industry, I expect the GoG to find creative ways of creating more money through quantitative easing since tax revenue cannot be increased over-night given the structural rigidities in the system. Total revenue and grants represented 14.4% of GDP in 2020 which is very low given that Ghana is a middle income country. The government acknowledges the difficulties in revenue creation and have instituted tax measures in the 2021 budget and these include: (1) introduction of 5% financial sector clean-up levy on profits before tax on banks;

(2) increment in road tolls; (3) increment in special petroleum levy by 10 pesewas per litre; (4) waiver of penalty on unpaid taxes up September 2021; (5) increment of NHIL by 1% from 2.5% to 3.5% and (6) increment in VAT Flat rate by 1% from 3% to 4%. The above measures when implemented is expected to improve the total revenue and grants to GDP ratio to 16.7% which will still be tight for government. In the medium term, our target should be at least 20%. My take is that the GoG should be supporting the management of COVID-19 pandemic through the creation of money in the form of quantitative easing. Since the onset of COVID-19, most developed economies have funded their budgets 100% from local sources either through quantitative easing or printing more money through their central banks without creating inflation. Budget deficit - domestication of the economy The budget deficit has lived with the Ghanaian economy for a long time but COVID-19 pandemic made our case worse in 2020 even though Ghana outperformed a number of African

countries. Per the medium-term strategy of government, it will take another 4 years to get back to normalize the 5% threshold of the fiscal responsibility act of 5%. According to the Finance Minister in his mid-year budget review, COVID-19 pandemic has reinforced the importance of the government flagship programmes. It has also exposed new vulnerabilities and the need to scale up some programmes and introduce new interventions. The responses to some of the emerging issues are in the areas of food security, and support to SMEs and the manufacturing sector. To this end, Government plans to take several measures to help businesses to meet the challenges of COVID-19 and to protect workers. As at the end of 2020, the government had disbursed about GH¢412.88 million to support 277,511 businesses of which 69% were female-owned under the Coronavirus Alleviation Program. This saved over 650,000 MSME jobs. In addition, 8,159 beneficiaries received technical training on Entrepreneurship, Financial Literacy and Bookkeeping business practices.

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15 CONTINUED FROM PAGE 13 No doubt, the coronavirus pandemic has increased the consciousness of domesticating the economy. It is obvious that the country needs to improve local production rather than depend on foreign imports. Local production will help not only to create employment and increase income but it has the potential to stabilize our currency (Cedi). Until we put in place an implementable strategic document that would address the needs of our SMEs, we would continue to focus on scoring macro-economic gains in the area of growing our GDP and FDI while our SMEs wallow in poverty and face eminent collapse due to the eventual foreign domination of our economy. Monetary and fiscal policies of government do not impact significantly on most of the activities of most of our SMEs in the informal sector which also imply a significant revenue loss to government in the form of taxes. Most trading businesses do not pay the required tax because payment is a function of disclosure. GoG’s initiative to digitize the economy to augment the tax base is in the right direction. Managing the public debt To mitigate the impact of the COVID-19 pandemic, the Government had to raise additional financing of approximately

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GH¢25 billion (6.52 percent of GDP) to address the funding gap. This was primarily financed with debt, resulting in an increase of our Debt/GDP from about 69% in 2019 to 76% which has created an over-heating situation on public debt sustainability. To address this issue, the Government plans to place nominal limits on both contracting concessional and nonconcessional external borrowing to ensure the reduction in the rate of debt accumulation. Revenue generation is critical to solving our debt profile but not much can be expected in the short term to medium term. The forecast for government in the medium term is to achieve a Revenue to GDP ratio of 16.7% and this is still inadequate to reduce our debt levels to tolerable levels. As a middle-income country, we should be targeting about 25%. In the short term we should focus our borrowing from domestic sources using quantitative easing because It provides a vicious cycle which allows funds to stay within the country and grow the economy. For example, the Fed of US creates dollars by buying government debt in the form of securities issued by the U.S. Treasury. The Treasury then pays the Fed what it owes in interest on those securities. In turn, the Fed is required by law to return the profit it makes to the US Treasury. Using the same analogy for Ghana, will mean that the Bank of Ghana (BoG) buys GoG securities

issued by the Ministry of Finance (MoF) on behalf of Government, then the MoF will pay interest on the GoG securities purchased by the BoG and thereafter BoG returns its profit back to MoF as dividends and this becomes a positive vicious cycle. This has the potential to not only grow the economy but it also gives GoG a fiscal space to do other things. Employment creation According to the 2021 Budget, the Youth Employment Agency (YEA) engaged 80,538 beneficiaries under the various YEA modules. The Agency also launched other innovative modules such as Artisan Directory and “The Job Centre” — an interactive web- based system that links job seekers to potential employers. In 2021, YEA will introduce other innovative modules such as the Youth in Export program to support Government trade facilitation initiatives The Ministry of Employment through the Department of Cooperatives facilitated the formation of 5,955 new cooperative societies, inspected 150 and audited 370 existing ones. A total of 1,820 farmer groups and 282 artisans were trained by the Department of Co-operatives, Ghana Co-operatives College and the Ghana Cooperatives Council Agriculture provides a safety net for employment creation because it is the only sector

that performed so well in spite of the pandemic and I urge the government to continue to intensify its flagship program in such a way that the agricultural sector feeds industry for rapid industrialization of the economy. Conclusion In conclusion, I expect the MoF to focus on funding its COVID-19 programs using domestic sources through quantitative easing and not more foreign loans. The Ministry must lead an ambitious domestication of the economy through strategic resource allocation to boost local production and increase employment and income. BoG should create more money in ways that will have underlying assets to check inflation. Most of the world’s greatest central banks have embarked on serious quantitative easing to solve the economic setback of coronavirus pandemic and the I recommend the Bank of Ghana to do same to improve market liquidity and confidence in the financial service sector especially within the lower tiers such as Savings & Loans, Finance Houses, Microfinance Companies and other non-bank financial institutions. It is important to stress that quantitative easing through creating money and/or printing money can be done without creating high inflation especially during recessions caused by pandemics

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News

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World Bank adds funding to the regional off-grid electricity access

he World Bank’s Board of Executive Directors approved today a total of $22.5 million in additional financing to the Regional OffGrid Electricity Access Project (ROGEAP) –in the form of grants from the International Development Association (IDA) and the Clean Technology Fund (CTF)— to support the development of the market for stand-alone solar products in Western and Central Africa, including a dedicated effort for the Sahel countries. This complements the $150 million of IDA and $67.2 million CTF approved by the Board in April 2019 for this project. The project will support activities to accelerate the deployment of stand-alone solar products, in a sub-region where 50 percent of the population does not have access to electricity, and where less than 3 percent of the population uses such innovative technologies. It seeks to harmonize policies and standards as well as business procedures to develop a regional market of stand-alone solar products, support entrepreneurs in business acceleration activities,

and provide credits and grants for the deployment of stand-alone solar home systems. The project is expected to contribute to human capital development by electrifying public health centers and schools which are needed to improve health and education outcomes. It will support job creation, for instance in the farming communities which can use solar water pumps for irrigation, solar milling equipment for product transformation, and solar refrigerators to bring products to market. The project will support the

small and innovative business enterprises through solar home systems and will make an impact in economic recovery following the COVID-19 pandemic. The Project’s geographic scope covers 19 countries in Western and Central Africa, 15 of which are members of ECOWAS (Benin, Burkina Faso, Cabo Verde, Côte d’Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo), as well as Cameroon, the Central African Republic, Chad, and Mauritania. “Stand-alone solar systems have a large market potential

Upfield joins the Global Shea Alliance

pfield, the global leader in plant-based nutrition and the leading producer of plant-based margarines, spreads and cheeses has joined the Global Shea Alliance (GSA). Upfield has also registered as a GSA sustainability partner, committing to promoting the sustainable development of the shea sector. Joining the Global Shea Alliance is an important component of Upfield’s sustainability strategy. In addition to the company’s Responsible Sourcing Policy and Human Rights Statement,

Upfield’s position on shea will be directed by the sustainability guidelines and implementation criteria laid out by the Global Shea Alliance. By joining the GSA, Upfield will work with NGOs, producer groups and women’s groups to jointly advocate for shea production practices that benefit both people and planet. Speaking on the membership, Upfield’s Head of Sustainability, Sally Smith, noted: “Upfield is committed to the responsible and sustainable sourcing of all our ingredients. Whilst shea is widely

considered to be a sustainable crop, we also recognize the potential safety, labour, environmental and economic risks associated with shea kernel collection and processing. We are excited to work with the Global Shea Alliance and partners across the shea value chain to help address these issues.” Simballa Sylla, President of the GSA said, ‘We are excited to have Upfield onboard! The Global Shea Alliance welcomes their contributions to promoting the use of shea in the plant-based products, a fast-growing sector that

in Western and Central Africa including in the Sahel, but investments in off-grid solutions have lagged behind in the subregion”, said Ms. Deborah Wetzel, World Bank Director of Regional Integration for SubSaharan Africa, the Middle East, and Northern Africa. “The new financing will help address the important growth in demand for reliable electricity and will help create jobs for the millions of people currently living without an electricity connection or with unreliable supply, as well as for businesses and public institutions who will use modern stand-alone solar systems to improve their living standards and economic activities”. Through this additional funding and restructuring, the Economic Community of West African States (ECOWAS) has been appointed as a new implementing agency of the project, which will work on developing a regional market, and supporting activities for entrepreneurs. ECOWAS will coordinate the project activities with the West African Development Bank (BOAD), the other implementing agency of the project, which will support the provision of a line of credit with commercial banks operating in the sub-region.

would drive additional economic opportunities to wome collectors/ processors and their communities. We truly look forward to an exciting partnership.” Upfield will work with its suppliers to implement the GSA’s sustainability principles in their shea sourcing supply chains in West Africa. Some of these principles include enabling economic empowerment and increased income for collectors, improving the safety, health and welfare of collectors, respecting land tenure rights, protection of women collectors, implementing environmental protection and regeneration measures and improving traceability.

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Markets

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WEEKLY MARKET REVIEW FOR WEEK ENDING MARCH 12, 2021

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WEEKLY MARKET REVIEW FOR WEEK ENDING MARCH 12, 2021

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