Business24 Newspaper 5th May, 2021 by Business24 Online

WEDNESDAY MAY 5, 2021

BUSINESS24.COM.GH

NO. B24 / 191 | NEWS FOR BUSINESS LEADERS

MONDAY WEDNESDAY MAY 3,MAY 20215, 2021

Experts back royalties monetisation as gov’t considers Agyapa reboot

Hakim Ouzanni, Managing Director of Societe Generale Ghana Plc

Société Generale targets 7.5% credit market share by 2022

ublicly-listed lender Société Generale Ghana Plc has announced plans to grow its lending to businesses and clients, targeting a credit market share of 7.5 percent by the end of next year. Cont’d on page 3

NPA reduces fuel price by 8 pesewas per litre effective today

The mining sector has largely braved the Covid-19 storm

By Eugene Davis ugendavis@gmail.com

financial expert, Dr. Carl Odame-Gyenti, has justified the need for the country to monetise its gold royalties, explaining that it will help reduce Ghana’s heavy budgetary risk.

According to him, Ghana has been mining gold for over 100 years but has nothing to show for it, and that an innovation in the form of royalties monetisation would enable the country build a buffer to shore up the economy. “Monetising a portion of our gold royalties prudently

ECONOMIC INDICATORS EXCHANGE RATE (INT. RATE)

POLICY RATE

14.5% 14.77%

OVERALL FISCAL DEFICIT

11.4% OF GDP

AVERAGE PETROL & DIESEL PRICE:

Cont’d on page 2 INTERNATIONAL MARKET

US$1 = GHC 5.7606

GHANA REFERENCE RATE PROJECTED GDP GROWTH RATE

reduces Ghana’s heavy budgetary risk. It would help all of us,” said Dr. OdameGyenti at a public forum held by the Minerals Income Investment Fund (MIIF) in Accra on monetisation of mineral royalties.

4.2% GHC 5.13

he price of fuel at the pumps has been reduced by eight pesewas per litre effective Wednesday, May 5, 2021. That implied that the recent 17 pesewas per litre increment announced by the National Petroleum Authority (NPA) had been reduced to 9 pesewas per litre.

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

CORN $/BUSHEL

$543.75

COCOA $/METRIC TON

$123.55

COFFEE $/POUND:

Cont’d on page 3

facebook.com/business24gh twitter.com/business24gh linkedin.com/pg/business24gh instagram.com/business24gh

Editorial / News

WEDNESDAY MAY 5, 2021

Editorial

Be strategic in vaccine procurement

hana’s covid-19 vaccination plan has been distorted by the seeming lack of vaccines to continue the inoculation programme that commenced nearly three months ago. Globally, vaccines are in short supply as vaccination is viewed as one of the surest paths to recovery. The shortage in itself is not surprising as this development was rightly predicted with a number of global actors coming together to establish the COVAX facility to help poorer countries like Ghana access to vaccines. But given the dire Covid situation in India, the lead manufacturer of the Covax vaccines, the problem envisaged

by the proponents of the Covax facility seems compounded. Indeed, the rate of infections and mortality arising from the virus in New Delhi and beyond reveal exactly just how crucial the vaccines are needed. It is difficult to begrudge the highly populous Asian country when they seek to step up their own inoculation programme to prevent more casualties rather than export these vaccines to other parts of the world. And at the same time, while we look on and pray with the people of India, their current state must serve as guidance to us and push us to explore alternatives to the Covax facility as soon as practicable. No one knows exactly when

India will get out of the woods but we can all tell how bad things could be if we don’t act fast. This paper believes that the Covax facility has been a gamechanger but the uncertainties surrounding it at this point in time make it a gamble we can barely afford. The country has survived the first and second wave of the pandemic and no one knows exactly how a third wave will look like – whether a mutated virus may even cause more damage or not. As a matter of urgency, the government must, if possible, partner with the private sector to help procure vaccines from other sources to protect its citizens at all costs.

Experts back royalties monetisation as gov’t considers Agyapa reboot Continued from cover

Your subscription -- along with the support of businesses that advertise in Business24 -- makes an investment in journalism that is essential to keep the business community in Ghana well-informed. We value your support and loyalty. Contact Email: hello@thebusiness24online.net Newsroom: 030 296 5315 Advertising / Sales: +233 24 212 2742

He said Ghana has historically failed to realise the full benefits of its gold resources because of factors including the failure to use the resources to leverage additional income for development. He added that there has been a failure to track the use of gold revenue by the government, while the gold sector has experienced limited reinvestment. Outlining key recommendations the country should consider if it is serious about monetising mineral royalties, he said the government should consider safeguards against the risk of undervaluation of the royalties, adding that anything less than a US$1bn valuation—as was the case in the controversial Agyapa royalties deal—may be too low for Ghana. He also stressed that government should protect its right to adjust fiscal terms, adding that parliamentary oversight of the use of mineral income is key to ensure success. The founder of the Songhai Group, Hene Aku Kwapong, said the time had come for Ghana to move away from rent collection and become a real player in the mineral extractive industry.

He explained that moving away from rent collection would require a look at the option of monetising mineral royalties. He added, however, that for the country to derive the full benefits of monetisation, there must be a plan that establishes a baseline to identify the gap between where the country is now and where it desires to be. This, he said, would help the country know exactly what funding would be required to

Dr. Carl Odame-Gyenti

achieve its objectives. Gold mining has been a mainstay of the country’s economy for almost a century and contributes about 5.5 percent of GDP currently. The forum by the Minerals Income Investment Fund provided a platform for financial experts, minerals governance experts, academics and students to explore the concept and best practices in monetising mineral royalties.

WEDNESDAY MAY 5, 2021

Société Generale targets 7.5% credit market share by 2022 Continued from cover The ambitious plan, according to its Managing Director, Hakim Ouzanni, will also see the bank grow its market share in other key operational areas, such as deposits, flows and market activities, in a bid to reposition the bank as a major player in the banking industry. “With the stable political environment, we will continue to grow our share of market activities—forex activities, derivatives, fixed income trading—from our current ranking to a market ranking of sixth position by 2023,” he added. Société Generale posted a 20 percent profit growth in the 2020 financial year on the back of a strong net cost of risk performance, which improved by almost 40 percent. Profit after tax stood at GH¢154.2m compared with the previous year’s figure of GH¢128.5m. The bank remained resilient despite the pandemic and posted gains on most of its notable indicators, according to its financial results. Net banking income increased by 7.8 percent, operating expenses went up by 6 percent, total assets grew by over 15 percent, while shareholders’

funds also saw a 15.4 percent growth. The bank’s treasury activities grew by 26.7 percent, but the pandemic-related liquidity crunch led to a marginal 9.1 percent growth in deposits and a 3.1 percent decline in its loan book. “The surge of the Covid-19 pandemic during the year led to

a visible change in our banking operations and also had an impact on the various projections for growth and performance,” Mr. Ouzanni said in the bank’s annual report. To improve deposit mobilisation, the bank plans to roll out a market collections strategy that will see the setting up of cash collection hubs to

serve traders and businesses in key commercial spaces. It has also implemented a wide range of IT transformation plans aimed at accelerating its digital strategy towards the establishment of an open, agile and flexible infrastructure that would offer fast and convenient banking to clients.

NPA reduces fuel price by 8 pesewas per litre effective today Continued from cover The reduction will take effect from Wednesday, May 5, 2021.

This was contained in a communique issued by petroleum stakeholders on Tuesday, May 4, after a crunch

meeting held at the Ministry of Energy earlier today between the Minister of Energy, Dr Matthew Opoku Prempeh, and the National

Petroleum Authority (NPA), the Association of Oil Marketing Companies (AOMCs), the Bulk Oil Storage and Transportation Co Ltd (BOST, the Chamber of Petroleum Consumers (COPEC), the Institute for Energy Policies and Research (INSTEPR). “The 17 pesewas per litre increase in fuel margins previously announced by the NPA has been reduced to 9 pesewas per litre effective Wednesday 5th May 2021,” the communique stated. The communiqué was signed by the Minister of Energy, NPA, BOST, AOMCs. COPEC and INSTEPR.

WEDNESDAY MAY 5, 2021

News

WEDNESDAY MAY 5, 2021

Cocobod, FairTrade Africa organises training on standards, sustainability

hana Cocoa Board (COCOBOD) in partnership with Fairtrade Africa has held a two-day training workshop for some staff of the research department on Fairtrade’s standards and sustainability. The training workshop sought to enhance the capacity of the Cocobod Research team to monitor and evaluate sustainability programmes in the cocoa industry to ensure value for money for its major stakeholders -- farmers and government. Speaking at the opening of the training seminar, Randolph Adei, Director of Human Resource at COCOBOD indicated that training and moulding of human resource of organisations is key as it shapes and prepares staff to be effective and make systems work effectively and efficiently Mr. Abubakar Benjamin Afful, the Cocoa Programmes Team Leader together with Solomon McBanasam in charge of Protection and Advocacy from Fairtrade Africa facilitated the

training. The training highlighted on the principles of Fairtrade including democracy, transparency, accountability, nondiscrimination and participation, which must be adhered by certified farmer cooperatives. The facilitators explained the Fairtrade system as well as the benefits that come with it including the payment of

additional Fairtrade Premiums for the farmers who in turn dedicate some to developmental projects in their communities. Fairtrade recognises issues of living income and wage as human rights issues that must be respected by stakeholders and actors of the various commodity value chains. Mr. Afful explained that Fairtrade certifies Cocoa

Cooperatives and Farmer Associations rather than Licensed Buying Companies. This is because the ownership of the Fairtrade certificate should be held by the farmers to help deepen benefits to the farmers. To ensure compliance, FLOCERT; an independent body within the Fairtrade system is solely mandated to audit producers according to Fairtrade Standards.

Partner private sector in vaccine supply drive – Minority By Eugene Davis ugendavis@gmail.com

he Ranking Member on Health Committee in Parliament, Kwabena Mintah Akandoh has urged government to consider partnering a private entity in order to have access to more Covid-19 vaccines. Government in January indicated that plans were underway to procure 17.6m doses of COVID-19 vaccines for Ghanaians by June this year. Addressing a press conference in parliament in Accra, the Minority stated that following the President’s assurance of the procurement of additional vaccines, this year’s budget made an allocation of US$420m for the procurement of more than 42 million jabs of vaccines targeted at vaccinating 20 million Ghanaians by year end. “The health needs of Ghanaians must remain paramount in all considerations of this government and failure is not an option. If funding is becoming a challenge for government, it should consider partnering the private sector in a PPP arrangement to source for these vaccines and

supply them to public,” he said. The country has so far received 966,850 doses of vaccines from sources including the Covax initiative. “We cannot continue to depend on generic research results of the impact of vaccines on general populations. We must conduct our own localised research in order to have country specific results that will inform our strategy and tactical deployments. We, therefore, urge government to get back to the drawing board

and put in place an effective plan that is not highly dependent on one manufacturer and procure the 17.6m doses of COVID-19 vaccines in order to meet the President’s June deadline,” he added. They also expressed concern over putting Ghanaians who had already received the first jab at risk of losing the partial immunity they have acquired through vaccination, according to them it has the potential to make some desperate Ghanaians procure

from unauthorized sources substandard jabs of COVID vaccines in order to extend the protections they have after taking their first jabs. According to the minority they find it unfortunate that after provisions were made in this year’s budget for the procurement of vaccines and the assurance by government, not a single vaccine has been procured for Ghanaians. Furthermore, they said that government should take additional steps to ensure that the vaccines from the Democratic Republic of Congo or any other country meet all the necessary requirements in terms of safety standards and efficacy before it will be deployed across the country. “We know that India, a major exporter of AstraZeneca’s COVID-19 vaccines is currently facing challenges with high numbers of infections and associated deaths. However, government has had almost three months to put in place a vaccination plan and it is rather unfortunate that such a plan should now be rendered almost ineffective because of a challenge with one supplier,” he added.

WEDNESDAY MAY 5, 2021

Companies

WEDNESDAY MAY 5, 2021

Benso Oil doubles after-tax profit in 2020 By Joshua Worlasi Amlanu macjosh1922@gmail.com

enso Oil Palm Plantation (BOPP), the company involved in growing and processing crude palm into oil products for domestic consumption, posted a stellar performance in 2020 despite the coronavirus pandemic, doubling profits achieved in 2019. The company delivered profit after tax of GH¢20.69m compared with GH¢9.65m the previous year, representing an improvement of 156 percent. It said the performance was largely as a result of stable oil palm production amidst relatively higher palm oil prices on the international market. “The level of profitability was impacted by the 19 percent growth in the trading prices of crude palm oil and crude palm kernel oil notwithstanding the 5 percent decline in crop production. There was however improvement in operating efficiencies to tame the cost

of business amid the Covid-19 pandemic,” it said in its 2020 annual report to investors. In 2020, the world market price of crude palm oil (CPO) increased from an average of US$574 in 2019 to US$683, representing a 19 percent growth in dollar terms,

while the price of palm kernel oil (PKO) surged from an average of US$655 in 2019 to US$782, also representing 19 percent growth. Despite the uncertainties in the business operating environment resulting from the Covid-19 pandemic, BOPP

said that prices are expected to remain fairly stable on the global market. It added that given the good rainfall in 2020 and best agronomic practices in place, the business will continue to post reasonable results.

Asharami Energy promotes responsible engineering with Prevention and Early Detection take proactive steps in mitigating 1.8m LTI-free man-hours Management Procedure as well workplace safety and health risks.

sharami Energy, a Sahara Group upstream company, has achieved 1,852,052 man-hours without Lost Time Injury (LTI) across its operations, driven by responsible engineering and an unwavering commitment to global occupational safety and health (OSH) standards. This feat represents LTI-free man-hours over 873 days of zero work-related incidents, enabled by the company’s robust Health, Safety, Security and Environment (HSSE) policies. In 2020, Asharami achieved 1,712,295 LTI-free manhours, a record that surpasses the industry recording standard, which is set at 1,000,000 LTI-free man-hours. A key oil and gas sector OSH benchmark, Lost Time Injury is a measure of injury or illness resulting from a work-related event which involves lost days away from work or results in downtime in operations. Henry Menkiti, Chief Operating Officer of Asharami Energy, said the leading exploration and production company puts the safety and health of its workers, partners, and stakeholders above all other considerations. “We are delighted at achieving this feat of 1,852,052 LTI-free

man-hours as of March 31, 2021. At Asharami Energy, we have adopted responsible HSSE policies which align our upstream operations, community relations, procurement, environmental, social and governance impact with global best practice. We are happy to be leading the charge towards promoting sustainability in Africa’s oil and gas sector,” he added. Menkiti said Asharami’s safety and health protocols were instrumental to achieving hitch-free operations during the Covid-19 pandemic. “Guided by our Covid-19

as consistent test administration, we recorded zero cases during the period that had 2,136 employees actively involved in our operations.” He said the company holds regular safety and health awareness campaigns and training sessions targeted at employees and stakeholders to ensure consistent levels of commitment to making safety everyone’s business. “With almost 3,000,000 workrelated deaths annually and 4 percent of the world’s GDP attributable to lost work days globally, all businesses need to

Henry Menkiti, Chief Operating Officer, Asharami Energy

The sustainability of work today and work as we will know it to be in the future depends on this.” According to Menkiti, continuing investment, technology, self-appraisals, and peer reviews will help the oil and gas sector promote OSH standards which are critical to achieving sustainable growth, inclusive employment, and decent work for all. He lauded the contribution of Asharami’s employees, host communities and other partners to the company’s sterling HSSE records, adding: “Asharami Energy will continue to work towards sustaining and improving our safety machinery across all our operational touchpoints.” Asharami Energy is one Africa’s leading independent exploration and production (E&P) companies with a diverse portfolio of nine oil and gas assets in prolific basins across Africa. Asharami Energy Limited and Sahara Energy Fields Holdings UK Limited are the entities at the forefront of Sahara’s upstream operations. These assets are at various stages of development, ranging from exploratory fields to mature producing fields with huge potential for positive returns.

WEDNESDAY MAY 5, 2021

Maritime, Trade & Logistics

WEDNESDAY MAY 5, 2021

Boost for fisheries sector with new vessel monitoring centre established

he Fisheries Committee for the West Central Gulf of Guinea (FCWC), an intergovernmental organisation with its headquarters in Tema, Ghana, has set up its Regional Monitoring, Control and Surveillance Centre (RMCSC), a new centre for monitoring fishing and related activities in the Gulf of Guinea. The centre is scheduled to be launched on May 12 at an event to be attended by FCWC Chairperson and current Minister of Agriculture, Livestock, and Fisheries for Benin, M. Gaston Dossouhoui; the Ambassador of the European Union Delegation to Ghana, Diana Acconcia; and Ghana’s Minister for Fisheries and Aquaculture Development, Mavis Hawa Koomson. “The establishment of the Regional MCS Centre fulfils a number of long sought-after goals, including: to improve national and regional capacity in fisheries enforcement; greater information-sharing; to reduce costs to member states; and to increase oversight of vessel activity to address global challenges in combating illegal, unreported and unregulated fishing and related fisheries crimes.

The RMCSC’s establishment brings us a step closer to having coordinated approaches to joint action, including patrols for better security in the maritime domain of our region,” said Seraphin Dedi, Secretary-General of the FCWC. The RMCSC will develop and support vessel monitoring and analysis to support coordinated efforts of fisheries inspection at port and at sea. It will also host a regional record of authorised fishing vessels to maintain an up-to-date and easyto-access list of authorised and

IUU listed fishing vessels. The RMCSC will furthermore coordinate regional and joint at-sea patrols to identify vessels operating illegally, without authorisation, or in contravention of national or regional conservation and management measures, and also undertake a regional observer programme to enforce compliance as well as provide training and capacity building. The RMCSC has been established under the European Union-funded Improved Regional Fisheries Governance (PESCAO)

project to allow member states to track and monitor fishing activities across the region. The RMCSC, which has been operational since April 2020, is located in the Fisheries Research Institute building in Tema. Established in 2007, the FCWC facilitates cooperation in fisheries management between its member countries: Liberia, Côte d’Ivoire, Ghana, Togo, Benin, and Nigeria. The countries have several shared fish stocks and have identified a need for cooperation and shared management of these resources.

GPHA, GPMS conduct oil spill response drill at Tema Port

s part of continuous efforts to promote safe maritime operations in Ghana’s waters, the Ghana Ports and Harbours Authority has assisted the Ghana Petroleum Mooring

System (GPMS) to conduct an oil spill response drill. The drill, which is expected to be done periodically, is to augment the state of readiness of GPMS to contain any oil spills that

may occur offshore during the handling of petroleum cargo that arrive in the country. GPMS, after the procurement of some oil containment equipment, such as a troilboom,

oil skimmer and recovery tank, relied on the collaboration with the Ports Authority to perfect its usage ahead of a possible real-life occurrence. Captain Francis Kwesi Micah, the Harbour Master for the Port of Tema and one of the facilitators of the drill demonstration, said new equipment have been acquired and therefore there is the need to prepare for its usage. “This demonstration is very important so that in case there is a reality of oil spillage, we can contain it with the wonderful gadgets.” The Health, Safety, Security and Environment Manager at GPMS, Patrick Yeboah, said his outfit is committed to leverage these exercises that would boost their skills for such operations. “If we have an oil spill, it will affect a lot of people, and environmentally it takes a lot of time for oil to break down into harmless substances. Because of this we thought it wise to have this simulation,” he explained.

WEDNESDAY MAY 5, 2021

International

WEDNESDAY MAY 5, 2021

Tanzania cuts income tax but rules out public sector pay rises

anzania’s president has cut income tax to help workers deal with the economic effects of Covid-19 but refused to increase public sector pay, which has remained static for nearly six years. In a speech commemorating International Workers’ Day, Samia Suluhu Hassan said the move, reducing the pay-as-youearn levy on salaries from 9% to 8%, will “improve the welfare of the workers”. The change, which will come into force at the beginning of the new fiscal year in July, comes a year after her predecessor reduced the rate from 11%. Samia Suluhu Hassan blamed Covid-19 for keeping public sector pay frozen for another year, after the virus helped knock GDP growth from a projected 6.9% to 4.7% in 2020. “I am aware that workers’ salaries have not been increased for approximately six years in the public sector and eight in the private sector,” she said, according to Tanzania Daily News.

“I personally wish that your salaries increased this year, but unfortunately I have failed to fulfil your expectations.” She promised pay would increase next year. Suluhu, who took office in March after the death of John Magufuli, has said she wants to

enact reforms to make Tanzania’s economy more business friendly to drive growth. The east African country was recognised as reaching ‘lowermiddle-income’ status by the World Bank in July last year, after gross national income per capita increased to $1,080.

Its economy has suffered during Covid-19 because of lower tourism and exports, and although the government did not impose lockdown measures – Magulfuli was sceptical of the pandemic – people and businesses have been cautious, reducing domestic spending.

Saudi Aramco beats quarterly profit forecast, maintains dividend

tate-run oil producer Saudi Aramco beat analysts’ forecasts on Tuesday with a 30% rise in first-quarter net profit and maintained its dividend payout, helped by strong oil prices. Earnings by global energy companies such as Exxon Mobil have climbed on the back of rising crude prices, which are up by about a third this year, as fuel demand recovers from the pandemic and as a global surplus of crude shrinks. “Given the positive signs for energy demand in 2021, there are more reasons to be optimistic that better days are coming,” Amin Nasser, chief executive of the world’s top oil exporter, said in a statement. “And while some headwinds still remain, we are well-positioned to meet the world’s growing energy needs as economies start to recover,” he said. Net income rose to US$21.7 billion for the quarter to March 31 from US$16.7 billion a year earlier. Aramco was expected to post net profit of $19.48 billion, according

to an average of estimates by five analysts. Aramco, which listed in 2019 with the sale of a 1.7% stake mainly to the Saudi public and regional institutions, said earnings were boosted by stronger crude prices and higher refining and chemicals margins, helping offset lower production. The OPEC+ group, the alliance that groups the Organization of the Petroleum Exporting Countries, Russia and several other producers, have cut output to support prices but agreed on a plan in April to start gradually easing those curbs from May 1. Aramco, which reduced its output as part of that pact and as a result of Saudi Arabia’s additional voluntary production cuts, said global demand for petroleum products was recovering from its lows in 2020 but remained below pre-pandemic levels. Aramco declared a dividend of $18.8 billion for the first quarter, to be paid in the second quarter, in line with company guidance of a $75 billion dividend for this year.

“Aramco’s dividend commitment is already pretty ambitious, particularly given the continued volatility in the market,” said Dmitry Marinchenko, oil and gas analyst at Fitch Ratings. Aramco would possibly prefer to keep dividends stable, particularly in light of some uncertainty around the Shareek or Partner programme by the Saudi government, he said. The programme encourages Saudi companies including Aramco to lead private sector investments in the domestic economy. HSBC, in an equity note to

clients, said the move could restrict headroom to boost dividends in the next few years. Aramco average total hydrocarbon production came in at 11.5 million barrels per day of oil equivalent in the first quarter of 2021. That includes 8.6 million barrels per day of crude oil. Saudi Crown Prince Mohammed has said more Aramco shares could be sold in the next year or two, including to international investors. He has said the kingdom was in talks to sell 1% to a leading global energy company.

WEDNESDAY MAY 5, 2021

Feature

WEDNESDAY MAY 5, 2021

The principle of taxing mobile money and its unintended consequences (I) By Derek B. Laryea and Kojo Dougan “I contend that a country that tries to tax itself into prosperity is like a man standing in a bucket trying to lift himself up by the handle.” (Sir Winston Churchill, 1904) One of the basic principles of taxation is fairness and neutrality. This principle demands that taxes should not favour any one group over another and should not be designed to influence individual decision making. To understand this principle, imagine two primary school teachers, earning the same salary would be paying different levels of taxes provided one uses their mobile money account or bank account. This is only because one of them decided to use mobile money rather than the known traditional means. All over the world, particularly developing countries are faced with the audacious task and desire to widen the tax base to include all persons earning from all economic activities particularly the informal economy. With up to 40% of economic activity and more than 85% of employment in Sub-Saharan Africa taking place in the informal sector according to the IMF, there is a perception within policy circles that anything that smells like revenue, behaves like revenue and acts like revenue needs taxing. The re-introduction of the Value Added Tax Act (870) of 2013 and its implementation in 2015, disrupted largely service offerings, usage patterns and charges within the banking environment as the cost of banking transactions (no matter how minimal) increased. For a country like Ghana, the importance of predictability, stability and simplicity in its tax system cannot be underscored. When these are ignored, we have a tax system that is reactive, resulting in tax changes that are unexpected and have not been thoroughly thought through and analyzed. This is why recent comments of policymakers need to be carefully looked into and further clarification provided to the ecosystem. These comments are not new to industry watchers, and they follow a pattern of analyzing transaction volumes and values largely upon which these proposals to tax mobile money are reached. For emphasis, one policymaker has said that the revenue from transaction fees that Electronic Money Issuers (EMIs) or mobile money operators

make is what she believes must be taxed, in another submission, it is the transaction charge that needs to be taxed One might be wondering, do these service providers pay any tax at all? Corporation Taxes and Withholding Taxes readily come to mind as taxes that mobile money operators pay to the Ghana Revenue Authority. Their profits and/or net incomes are subject to corporate income taxes as well as withholding taxes applied on the commission incomes, they pay to their over 300,000 agents and merchants across the country. The Ghana Chamber of Telecommunications put the 2019 figure on taxes earned from mobile money operations alone at a little over ₵30million cedis ($5million). If the policy intent, or proposal as shared by the Minister was to target revenues directly or transaction charges, experience shows that this attempt will lead to a pass-through cost back to the consumer and this will be inimical to our financial inclusion drive on the back of our growing digital economy. A tax on Mobile Financial Services (MFS), is simply a tax on the movement of money. Borrowing the words of the present government when it abolished the VAT on financial services in 2017; this tax will be a huge “NUISANCE” to every sector of the economy that leverages digital financial services too. This tax policy will discourage trade and commerce and retard the formalization of our economy. We need to always note if the tax interferes with financial intermediation, it will undermine our progress and strides chalked as a country in respect of financial inclusion. Equally, beyond increasing the cost of doing business in Ghana, it will hurt the marginalized citizens and discourage usage of mobile money services. For any sector or straight end service that employs over 400,000 direct and indirect individuals, one may need to relook the business model carefully before attempting to

target it with a sector specific tax. The point here is there is no tax value that can account for or provide new livelihoods for the loss of employment to be occasioned should the tax on mobile money kick in today. For Ghana to create a competitive and effective tax system, the principle must be hinged on the quality of its tax laws and the way in which tax policy is made largely. The questions is, how a tax on traditional banking as we know it to be the preserve of the middle and upper class be abolished and then be re-engineered back unto the laps of the lower class and informal economy. In our study of Operationalising Mobile Money, and experience working with all the mobile money operators in Ghana, what is clear is that, only about 40% of the large transaction volumes recorded and announced attract revenue to the service providers. A greater portion of these free transactions include cash in, transactions between distributors and agents for the purposes of liquidity management and let’s not forget the ongoing promotions like that of Vodafone Cash which are all free transactions. It seems quite unfair that while service providers are providing free transactions to grow their base and ignite usage within their networks, policymakers would be fixated on what they can get from what largely appears to be a free service for some. Let’s critique values and volumes in a sentence; if I send you 100 cedis and you send it back to me and we do that 5 times each, this is recorded as volume being 10 times of transactions and the value of the (10) transactions being 1000gh cedis. Lest we forget! this is the same 100gh we kept moving on the platform. Last year, government launched three key policy documents namely, The National Financial Inclusion and Development Strategy, The Digital Financial Services Policy and The CashLite Roadmap to drive financial inclusion as well as support

growth within the digital financial services ecosystem. Government’s revenue growth efforts should be done in a manner that is supportive of economic growth, employment and investment. It is always counterproductive to witness revenue growth policies competing with the greater objectives of economic growth. The President’s 2021, state of the nation address signaled governments intention to switch the National ID into TIN numbers and equally link these IDs to SIM cards which will support identification within the digital financial services space. In a country where roughly 19 million adults have 15 million active mobile money accounts, these are the positive signals that can ultimately widen the tax base without taxing directly the enabling bridge that gives the state access to persons within the informal economy. In the second part of this article, we will explore the confusion related to taxing mobile money and lessons from four African countries to support our argument that, Mobile Money is the bridge that gives any State access to its informal economy and this bridge needs protection and upgrade to keep the linkage active. On the back of any digital economy, e-payments is the backbone to support trade and commerce and over here that platform remains largely Mobile Financial Services. About the authors The writers, Derek B. Laryea, a Certified Digital Finance Practitioner and Kojo Dougan, Digital Finance Professional are both executives of the Digital Finance Practitioners Association (Ghana.)

Derek B. Laryea

Kojo Dougan

WEDNESDAY MAY 5, 2021

Feature

WEDNESDAY MAY 5, 2021

Is the US economy recovering or overheating?

By Bradford Delong

he financial and economic news in the United States lately has been dominated by concerns about inflation. “Runaway inflation is the biggest risk facing investors, Leuthold’s Jim Paulsen warns,” according to the cable news channel CNBC. As a potential hedge against inflation, “Bitcoin’s time to shine is fast approaching,” reports Fortune’s Robert Hackett. According to US News and World Report, “There is a lot of talk about inflation in 2021 as fears of high government spending creep in and the recent rebound in prices from pandemic-related levels has some investors worried that the trend will continue for some time.” And yet, one also reads that “US Treasury yields hold ground even as inflation picks up.” After growing at an annualized rate of 33.4% in the third quarter of 2020, 4.3% in the fourth quarter, and 6.4% in the first quarter of this year, the US economy is on track for a full recovery. The second-quarter growth rate is expected to be at least 8%, and perhaps significantly higher, which means that the US economy, in aggregate, will

have fully returned to its prepandemic production level by the third or fourth quarter of this year. In this context, it is no surprise that core inflation (which excludes food and energy prices) rose 0.4 percentage points over the past month. That rate implies nearly a 5% annual inflation rate. But looking back over the past 12 months, the core inflation rate (as measured by the consumer price index) was 2.3%, which is in keeping with the US Federal Reserve’s 2-2.5% target. The question is not whether there will be some inflation this year, but whether it will represent “overheating” of the economy as a whole. Most likely, it will not. The amount by which economic output in 2021 exceeds potential output will be less than zero. And as the Fed makes clear with every statement it issues, it will not allow a transient wageprice spiral to become embedded in inflation expectations. The outlook for 2021 and beyond is that inflation will hover around the Fed’s target, rather than consistently falling short, as it has for the past 13 years. Moreover, the US economy is emerging from the pandemic recession with a fundamentally

altered inter-sectoral balance. Spending on durable goods currently accounts for an additional 1.7 percentage points of GDP, relative to its 2019 level, and spending on housing construction is running at 0.5 points above its 2019 share. At the same time, business spending on structures and consumer spending on energy are both running at 0.5 points below their 2019 shares, and spending on services (hospitality, recreation, and transportation) is 2.2 points below its 2019 share. These sectoral dynamics will be the most important determinants of inflation this year. By the end of 2021, some 4% of all workers will have moved not only to new jobs but to entirely different sectors. In an economy where businesses very rarely cut nominal wages, the pull of workers from sectors where demand is relatively slack to sectors where it is more intense will require firms to offer wage increases to encourage workers to make the jump. But we cannot know how much inflation this reshuffling will cause, because we have not really seen anything like it before. Economists will have a lot to learn this year about the shortterm intersectoral elasticity of

employment supply. One thing that should be clear, however, is that an uptick of inflation this year is nothing to be upset about. After all, wage and price increases are an essential part of rebalancing the economy. Real production, real wages, and real asset values will all be higher as a result of this year’s inflation, whereas the price level will remain far below what it would have been had the Fed managed to hit its inflation targets in the years since the Great Recession following the 2008 global financial crisis. While some commentators worry that we may be returning to the 1970s, this is highly unlikely. That decade’s stagflationary conditions followed from a perfect storm of shocks, and were exacerbated by the Fed’s conflicted and confused response under then-Chair Arthur Burns. Today’s Fed leadership is very different, and there is no perfect storm of repeated shocks to match the effects of the Yom Kippur War, Iran’s Islamic Revolution, the 1970s productivity-growth slowdown, and so forth. Burning rubber to rejoin highway traffic is not the same thing as overheating the engine.

WEDNESDAY MAY 5, 2021

Markets

WEDNESDAY MAY 5, 2021

CONTINUED ON PAGE 18

CONTINUED ON PAGE 20 CONTINUED ON PAGE 20

WEDNESDAY MAY 5, 2021

CONTINUED FROM PAGE 17

CONTINUED ON PAGE 20 CONTINUED ON PAGE 20

WEDNESDAY MAY 5, 2021