Ghana – Economic Perspectives • Razia Khan • Regional Head of Research, Africa • March 2014
Ghana – The once-promising outlook changes Ghana – Key concerns
Weak fiscal management Double-digit deficits (as % of GDP) for two consecutive years Downside surprises predominate Weak policy execution, spending out of control? Public sector wage-bill crowding out capital expenditure Spending on salaries and arrears – 71.3% of 2014 tax revenue, excluding tax exemptions Build-up of debt to worrying levels Despite upward trend in revenue mobilisation, public debt of over 50% of GDP (up from mid-20s post debt-forgiveness) Heavy reliance on short-term financing of fiscal deficit Debt service costs in 2013, +111% higher than corresponding period in 2012 – despite decline in front-end yields Domestic interest costs up 140% y/y Growth concerns Growth rate of debt, debt service – faster than nominal GDP growth rate of economy Ghana at risk if growth slows
Source: Standard Chartered Research
2
Fiscal & sovereign credit concerns Public spending still prone to boom-bust cycles. IMF analysis suggests public consumption must be cut to reduce current account deficit to sustainable levels
Weaker growth in 2013 will pressure revenue further Revenue mobilisation has improved, but spending is up even more
Public sector salaries: wage bill up 47% in nominal
terms in 2012, up further in 2013 Debt service costs – will worsen as size of debt increases, external environment deteriorates
Need to shift composition of spending from wages and subsidies to investment Risk is that rising recurrent spending squeezes out room for investment Little room for manoeuvre – ‘inflexible’ element of spending rising as % of revenue Even with benign budget deficit assumptions, debt still rises to c. 60% of GDP
Source: IMF, Standard Chartered Research
3
QE tapering is not to blame • Problems are seen as more Ghana-specific
World growth is set to pick up
GDP growth, % yoy
Source: Datastream, Standard Chartered Research
End of QE brings credit fundamentals into stronger focus Africa current account, fiscal balance – % of GDP
Source: IMF WEO April 2013, Standard Chartered Research
6
Cost of external borrowing rises on suggestion of QE tapering… Eurobond yields, selected frontier African economies
Source: Bloomberg
7
But Ghana is impacted more than most Yield on Ghana 2017 spikes. Ghana 2023 yield is now over 10%
Source: Bloomberg
8
GHS is the most impacted of SSA currencies – it’s not tapering FX rate vs. USD, rebased to 2006 (2006=100)
Source: Bloomberg, Standard Chartered Research
9
So far, rise in US interest rates has been relatively benign 10Y UST yield
As the Fed tapers. UST yields have fallen. This could change Short-covering, weak data keep UST yields contained This will be short-lived We forecast 10Y yields at 3% by end of Q1 2014 We forecast 10Y yields at 3.5% by the end of the year Risk of more volatility in market interest rates as everyone switches focus to Fed tightening
December payrolls released 10 Jan FOMC tapering decision 29 Jan
Flash China PMI released 23 Jan
ISM survey released 03 Feb
10Y T-note future Net position of speculative accounts
Source: Bloomberg
10
Actual Fed tightening would trigger more volatility in rates Two different rate-hiking cycles and market reactions: 1994 vs. 2004 Federal funds target rate and 10Y Treasury yield, % 2004 - Gradual but steady tightening - UST market broadly steady
2013-14 - 10Y yields briefly touch 3% after the Fed tapers its QE programme - The Fed maintains the first rate hike remains distant as the job market recovery is “far from complete”
1994 - Fed tightening seen as ‘unexpected’ - Sharp UST sell-off
Source: Bloomberg, Standard Chartered Research
11
Ghana’s reliance on short-term debt limits policy options Ghana – Government Securities outstanding, by tenor GHS mn
Source: Bank of Ghana Statistics Bulletin,, Dec 2013 – data up to Sept 2013, Standard Chartered Research
12
Ghana cedi is vulnerable – implications for market access Gold –USD/oz, cocoa – USD/mt, oil – USD/bbl
Source: Datastream, Standard Chartered Research
13
A longer-term view
Success stories of sustained, high growth
Period of High Growth
Per capita y at beginning (in 2005 prices, USD)
Per capita y in 2012 (current USD)
Botswana
1966-2005
210
7020
Brazil
1950-1980
960
11358
China
1961 - present
105
6071
Hong Kong
1960-1997
3100
36676
Indonesia
1966 - 1997
200
3594
Japan
1950-1983
3500
46707
Korea, Rep.of
1960-2001
1100
22589
Oman
1960-1999
950
25356
1967-present
2200
52051
Country
Singapore
15
A checklist for sustained growth
1
Strategic integration with the world economy
2
Mobility of resources, particularly labour
3
High savings & investment rate
4
Committed, credible and capable government.
16
Savings and investment – rising in Africa, but still weaker than in developing Asia. As a % of GDP, developing Asia vs. Sub-Saharan Africa
Source: IMF WEO, Standard Chartered Research
17
Savings – Ghana performs poorly even relative to SSA peers Savings, Investment as % of GDP, developing Ghana vs. Sub-Saharan Africa
Source: IMF WEO, Standard Chartered Research
18
Succumbing to the oil curse 1
Strong real effective exchange rate (REER) appreciation tends to be a feature of oil economies
2
Does revenue collection from the non-oil economy continue to grow?
3
Is employment in other sectors growing?
4
Governance indicators – what is measurable?
5
Does the size of the budget balloon? Does government become ‘too big’?
6
Does foreign borrowing, especially oil-backed borrowing, soar? To unsustainable levels?
7
Inflation – tradeable vs. non-tradeable
8
Is there a counter-cyclical oil saving rule in place?
9
Do communities in oil-based regions start agitating for a higher share of oil wealth?
10
Human development indicators tend to be poor
Source: Standard Chartered Research
19
Implications & policy recommendations
Policy recommendations Immediate action is needed to avoid further deterioration
Rationalise spending Benefits of single spine salary reform need to be seen more rapidly Restore competitiveness Ghana has run out of fiscal headroom. Debt is dangerously high – the medium-term no longer matters
Take rapid action to deal with debt Lengthen yield curve Diversify sources of funding Bring down front-end yields (more liberalisation?) –Timing is important Deal with FX market overhang Restore confidence Tough measures are needed to boost confidence, but inaction is no longer an option
Source: Standard Chartered Research
21
Global Disclaimer (page 1 of 2) Analyst Certification Disclosure: The research analyst or analysts responsible for the content of this research report certify that: (1) the views expressed and attributed to the research analyst or analysts in the research report accurately reflect their personal opinion(s) about the subject securities and issuers and/or other subject matter as appropriate; and, (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views contained in this research report. On a general basis, the efficacy of recommendations is a factor in the performance appraisals of analysts.
Global Disclaimer: Standard Chartered Bank and or its affiliates (“SCB”) makes no representation or warranty of any kind, express, implied or statutory regarding this document or any information contained or referred to on the document. The information in this document is provided for information purposes only. It does not constitute any offer, recommendation or solicitation to any person to enter into any transaction or adopt any hedging, trading or investment strategy, nor does it constitute any prediction of likely future movements in rates or prices, or represent that any such future movements will not exceed those shown in any illustration. The stated price of the securities mentioned herein, if any, is as of the date indicated and is not any representation that any transaction can be effected at this price. While all reasonable care has been taken in preparing this document, no responsibility or liability is accepted for errors of fact or for any opinion expressed herein. The contents of this document may not be suitable for all investors as it has not been prepared with regard to the specific investment objectives or financial situation of any particular person. Any investments discussed may not be suitable for all investors. Users of this document should seek professional advice regarding the appropriateness of investing in any securities, financial instruments or investment strategies referred to on this document and should understand that statements regarding future prospects may not be realised. Opinions, forecasts, assumptions, estimates, derived valuations, projections and price target(s), if any, contained in this document are as of the date indicated and are subject to change at any time without prior notice. Our recommendations are under constant review. The value and income of any of the securities or financial instruments mentioned in this document can fall as well as rise and an investor may get back less than invested. Future returns are not guaranteed, and a loss of original capital may be incurred. Foreign-currency denominated securities and financial instruments are subject to fluctuation in exchange rates that could have a positive or adverse effect on the value, price or income of such securities and financial instruments. Past performance is not indicative of comparable future results and no representation or warranty is made regarding future performance. While we endeavour to update on a reasonable basis the information and opinions contained herein, there may be regulatory, compliance or other reasons that prevent us from doing so. Accordingly, information may be available to us which is not reflected in this material, and we may have acted upon or used the information prior to or immediately following its publication. SCB is not a legal or tax adviser, and is not purporting to provide legal or tax advice. Independent legal and/or tax advice should be sought for any queries relating to the legal or tax implications of any investment. SCB, and/or a connected company, may have a position in any of the securities, instruments or currencies mentioned in this document. SCB and/or any member of the SCB group of companies or its respective officers, directors, employee benefit programmes or employees, including persons involved in the preparation or issuance of this document may at any time, to the extent permitted by applicable law and/or regulation, be long or short any securities or financial instruments referred to in this document and on the website or have a material interest in any such securities or related investment, or may be the only market maker in relation to such investments, or provide, or have provided advice, investment banking or other services, to issuers of such investments. SCB has in place policies and procedures and physical information walls between its Research Department and differing public and private business functions to help ensure confidential information, including ‘inside’ information is not disclosed unless in line with its policies and procedures and the rules of its regulators. Data, opinions and other information appearing herein may have been obtained from public sources. SCB makes no representation or warranty as to the accuracy or completeness of such information obtained from public sources. You are advised to make your own independent judgment (with the advice of your professional advisers as necessary) with respect to any matter contained herein and not rely on this document as the basis for making any trading, hedging or investment decision. SCB accepts no liability and will not be liable for any loss or damage arising directly or indirectly (including special, incidental, consequential, punitive or exemplary damages) from use of this document, howsoever arising, and including any loss, damage or expense arising from, but not limited to, any defect, error, imperfection, fault, mistake or inaccuracy with this document, its contents or associated services, or due to any unavailability of the document or any part thereof or any contents or associated services. This material is for the use of intended recipients only and, in any jurisdiction in which distribution to private/retail customers would require registration or licensing of the distributor which the distributor does not currently have, this document is intended solely for distribution to professional and institutional investors.
22
Global Disclaimer (page 2 of 2) Country-Specific Disclosures - If you are receiving this document in any of the countries listed below, please note the following: United Kingdom and European Economic Area: SCB is authorised in the United Kingdom by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. This communication is not directed at Retail Clients in the European Economic Area as defined by Directive 2004/39/EC. Nothing in this document constitutes a personal recommendation or investment advice as defined by Directive 2004/39/EC. Australia: The Australian Financial Services License for SCB is License No: 246833 with the following Australian Registered Business Number (ARBN: 097571778). Australian investors should note that this document was prepared for wholesale investors only within the meaning of section 761G of the Australian Corporations Act 2011 and the Corporations Regulations. This document is not directed at persons who are “retail clients” as defined in the Australian Corporations Act 2011. Brazil: SCB disclosures pursuant to the Securities Exchange Commission of Brazil (“CVM”) Instruction 483/10: This research has not been produced in Brazil. The report has been prepared by the research analyst(s) in an autonomous and independent way, including in relation to SCB. THE SECURITIES MENTIONED IN THIS REPORT HAVE NOT BEEN AND WILL NOT BE REGISTERED PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE COMMISSION OF BRAZIL AND MAY NOT BE OFFERED OR SOLD IN BRAZIL EXCEPT PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS AND IN COMPLIANCE WITH THE SECURITIES LAWS OF BRAZIL. China: This document is being distributed in China by, and is attributable to, Standard Chartered Bank (China) Limited which is mainly regulated by China Banking Regulatory Commission (CBRC), State Administration of Foreign Exchange (SAFE), and People’s Bank of China (PBoC). Germany: In Germany, this document is being distributed by Standard Chartered Bank Germany Branch which is also regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). Hong Kong: This document, except for any portion advising on or facilitating any decision on futures contracts trading, is being distributed in Hong Kong by, and is attributable to, Standard Chartered Bank (Hong Kong) Limited which is regulated by the Hong Kong Monetary Authority. Japan: This document is being distributed to Specified Investors, as defined by the Financial Instruments and Exchange Law of Japan (FIEL), for information only and not for the purpose of soliciting any Financial Instruments Transactions as defined by the FIEL or any Specified Deposits, etc. as defined by the Banking Law of Japan. Malaysia: This document is being distributed in Malaysia by Standard Chartered Bank Malaysia Berhad only to institutional investors or corporate customers. Recipients in Malaysia should contact Standard Chartered Bank Malaysia Berhad in relation to any matters arising from, or in connection with, this document. Singapore: This document is being distributed in Singapore by SCB Singapore branch, only to accredited investors, expert investors or institutional investors, as defined in the Securities and Futures Act, Chapter 289 of Singapore. Recipients in Singapore should contact SCB Singapore branch in relation to any matters arising from, or in connection with, this document. South Africa: SCB is licensed as a Financial Services Provider in terms of Section 8 of the Financial Advisory and Intermediary Services Act 37 of 2002. SCB is a Registered Credit Provider in terms of the National Credit Act 34 of 2005 under registration number NCRCP4. UAE (DIFC): SCB is regulated in the Dubai International Financial Centre by the Dubai Financial Services Authority. This document is intended for use only by Professional Clients and should not be relied upon by or be distributed to Retail Clients. United States: Except for any documents relating to foreign exchange, FX or global FX, Rates or Commodities, distribution of this document in the United States or to US persons is intended to be solely to major institutional investors as defined in Rule 15a-6(a)(2) under the US Securities Act of 1934. All US persons that receive this document by their acceptance thereof represent and agree that they are a major institutional investor and understand the risks involved in executing transactions in securities. Any US recipient of this document wanting additional information or to effect any transaction in any security or financial instrument mentioned herein, must do so by contacting a registered representative of Standard Chartered Securities (North America) Inc., 1095 Avenue of the Americas, New York, N.Y. 10036, US, tel + 1 212 667 0700. WE DO NOT OFFER OR SELL SECURITIES TO U.S. PERSONS UNLESS EITHER (A) THOSE SECURITIES ARE REGISTERED FOR SALE WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION AND WITH ALL APPROPRIATE U.S. STATE AUTHORITIES; OR (B) THE SECURITIES OR THE SPECIFIC TRANSACTION QUALIFY FOR AN EXEMPTION UNDER THE U.S. FEDERAL AND STATE SECURITIES LAWS NOR DO WE OFFER OR SELL SECURITIES TO U.S. PERSONS UNLESS (i) WE, OUR AFFILIATED COMPANY AND THE APPROPRIATE PERSONNEL ARE PROPERLY REGISTERED OR LICENSED TO CONDUCT BUSINESS; OR (ii) WE, OUR AFFILIATED COMPANY AND THE APPROPRIATE PERSONNEL QUALIFY FOR EXEMPTIONS UNDER APPLICABLE U.S. FEDERAL AND STATE LAWS. © Copyright 2014 Standard Chartered Bank and its affiliates. All rights reserved. All copyrights subsisting and arising out of all materials, text, articles and information contained herein is the property of Standard Chartered Bank and/or its affiliates, and may not be reproduced, redistributed, amended, modified, adapted, transmitted in any way without the prior written permission of Standard Chartered Bank.
23
Advisory
The Audacity to Transform the Economy of Ghana forum the role of Governance Felix Addo Country Senior Partner, PwC Ghana. May 2015 Strictly Private and Confidential
Agenda 1 2 3 4 5 6
Page Introduction Overview of Governance Establishing the nexus between Governance and economic performance Selected Governance reforms in Ghana Where do we go from here Questions and Answers
1 9 17 23 30 37
Section 1 Introduction
Introduction
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 20151
• The clock is ticking
• Time for • The audacity to transformation is reach and NOW! sustain our goals
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 20152
Governance failures - International
Lehman Brothers file for bankruptcy
Greece financial crisis Banks to Pay $5.6 Billion in Probes
Global financial crisis
BP Oil Spill in 2010 The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 20153
Governance failures - Local
Recruitment Scam hits Ghana Police… an estimated 200 young males and females were each defrauded to the tune of about 2000 to 4000 cedis
Ghana's Bureau of National Investigations (BNI) reveals that the government paid a whopping Ghc7.9 million to 22,612 ghost workers in a year.
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
GYEEDA scandal: Gov’t reclaims GH¢ 14.5 million illegally paid cash
GRA/Subah Scandal: How The GHC 75m Was Spent May 20154
Section 1 – Introduction
#61 – Globally #8 – Sub-Saharan Africa SA
NG
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 20155
0
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana. Eritrea
Central African Republic
South Sudan
Chad
Congo, Dem. Rep.
Angola
Guinea-Bissau
Congo, Rep.
Mauritania
Liberia
Zimbabwe
Nigeria *
Guinea
Niger
Burkina Faso
Equatorial Guinea
Malawi
Madagascar
Senegal
Sudan
Comoros
Cameroon
São Tomé and Príncipe
Burundi
Benin
Uganda
Togo
Côte d'Ivoire
Mali
Gabon
Sierra Leone
Gambia, The
Kenya
Ethiopia
Tanzania
Lesotho
Mozambique
Cabo Verde
Zambia
Swaziland
Namibia
Seychelles
Botswana
Ghana
Rwanda
180
Mauritius
200
South Africa
Ease of Doing Business Ease of Doing Business Rank (189 Countries globally)
#70 Globally
160
140
120
100
80
60
40
20
May 20156
Afrobarometer - Most Ghanaians mistrust public institutions/officials. Perceived corruption by public officials |2014 Don't know
Some, most, or all of them
34%
6%
89%
32%
20%
8%
86%
37%
29%
19%
9%
85%
6%
36%
27%
22%
8%
85%
Tax officials of Ghana Revenue Authority
6%
34%
31%
20%
8%
85%
District chief executive
6%
35%
29%
20%
9%
84%
President and officials in his office
8%
35%
25%
23%
9%
83%
Local government representatives
8%
41%
25%
17%
8%
83%
Officials of Electoral Commission
10%
35%
25%
21%
9%
81%
None of them
Some of them
The police
5%
25%
29%
National government officials
5%
34%
Members of Parliament
6%
Judges and magistrates
Most of them All of them
Respondents were asked: How many of the following people do you think are involved in corruption, or haven’t you heard enough about them to say: (a) The president and officials in his office? (b) Members of Parliament? (c) Electoral Commission officials? (d) Government officials? (e) Assembly men and women? (f) District chief executives? (g) Police? (h) Tax officials (i.e. Ghana Revenue Authority officials)? (i) Judges and magistrates? The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 20157
Afrobarometer – Perceived corruption by informal leaders. More people distrust business executives. •Large majorities believe “some,” “most,” or “all” business executives
(82%), traditional leaders (78%), and religious leaders (69%) are involved in corruption.
Perceived corruption by informal leaders |2014 None of them
Some of them
Most of them
Business executives
7%
38%
29%
14%
11%
82%
Traditional leaders
14%
41%
22%
15%
8%
78%
Religious leaders
24%
44%
15%
10%
7%
69%
All of them Don't know
Some, most or all of them
Respondents were asked: How many of the following people do you think are involved in corruption, or haven’t you heard enough about them to say: (a) Traditional leaders? (b) Religious leaders? (c) business executives?
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 20158
Section 2 Overview of Governance
Overview of “Governance” The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 20159
Governance defined… • Governance consists of the traditions and institutions by which authority in a country is exercised. This includes the process by which governments are selected, monitored and replaced; the capacity of the government to effectively formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them.
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
• World Governance Indicators; Measuring the quality of governance..
May 2015 10
Governance defined… • Public governance is about the broader governance ecosystem of a society. It is the examination of the role of institutions, citizens, civil society, norms, and processes that affect societal priority setting and service delivery.
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 11
Good Governance encompasses the values of transparency, accountability and integrity.
Voice and Accountability
Political Stability & Absence of Violence
Government Effectiveness
Regulatory Quality
Rule of Law
Control of Corruption
Worldwide Governance Indicators (WGI) The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 12
3
1
4
2
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
Worldwide Governance Indicators (WGI)
May 2015 13
5
6
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
Worldwide Governance Indicators (WGI)
May 2015 14
Corporate governance defined.. • The Cadbury Committee defines corporate governance as system by which companies are directed and controlled. Good corporate governance… • Makes companies operate more efficiently • Improve access to capital • Mitigate risk and safeguard against mismanagement • Makes companies more accountable and transparent to investors and give them the tools to respond to respond to stakeholder concerns
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 15
King’s selected principles of corporate governance • Full disclosure – report on both positive and negative impacts on community and environment;
• Simplified business reporting • Develop responsible investor code
• Adopt integrated reporting • Stop mindless compliance
• Professor Mervyn King The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 16
Section 3 Establishing the nexus between Governance and economic performance
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 17
Establishing the nexus between governance and economic performance… • The exercise of authority in any country matters much to economic development. Executive authority through institutions are critical to providing the enabling environment for economic growth – World Bank • Several empirical studies show a positive relationship between the quality of institutions & governance structures and economic growth. Weaker governance structures invariably result in misallocation of resources, waste, fraud and abuse which undermine development efforts… - Knack and Keefer (1995)
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 18
Establishing the nexus between governance and economic performance… • Good governance is a pre-requisite to sustained increases in living standards. A broad consensus among growth economists, development experts and international policy-makers has begun - (Kaufmann et al. 2000; Knack 2003)
• Institutional quality, as measured by bureaucratic efficiency, absence of corruption, protection of property rights, and the rule of law, is important for economic growth – Alesina (1998)
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 19
Governance in Ghana – Selected legal/institutional framework The Constitution of the Republic of Ghana 1992
Financial Administration Act, 2003, Act 654
Financial Regulation 2004
Public Procurement Act (2003),
Audit Service Act (2000),
Internal Audit Agency Act (2003),
Internal Revenue Act (2000) and its successor -the Ghana Revenue Authority Act (2009).
Various enactments establishing Sub-vented Agencies
The Companies Act 1963, Act 179
Local Government Act (1993), the Local Government Service Act (2003),
District Assemblies Common Fund Act (1993), and the Chieftaincy Act (2008)
Bodies Corporate and Insolvency Act 1963, Act 180
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 20
Public sector governance; some observations…. • Medium-term National Development Policy Framework: Ghana Shared Growth And Development Agenda (GSGDA), I & II GSGDA I – Highlights of governance focus areas
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
• GSGDA II – 4 anchors 1. Investing in people 2. Building a strong and resilient economy 3. Expanding infrastructure 4. Ensuring transparent and accountable governance May 2015 21
Corporate governance; some observations • Good corporate governance is making companies more resilient to sustain extra-ordinary economic development;
• Regulations and Initiatives/Reforms across the globe – Sarbanes Oxley (SOX), King’s Report, Global Reporting Initiative (GRI), United Nations Global Compact (UNGC), Sophisticated Codes of Conduct, Ghana Business Code, Business Integrity Forums… • Corporate governance principles are calling for strong disclosure regimes for companies making them more transparent and accountable – key elements of effective corporate governance The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 22
Section 4 Selected Governance reforms in Ghana
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 23
Revenue Administration and Tax Policy Public Financial Management Public Service Reform Debt Management
Other On-going Reforms
Adoption of International Public Sector Accounting Standards (IPSAS)
Implementation of National AntiCorruption Action Plan (NACAP)
IMF Economic and Financial Reforms
Ghana Integrated Financial Management and Information Systems (GIFMIS)
Public and Corruption management
Public Financial Management
Selected on-going governance reforms Revision of the Companies Act Revision of the Corporate Insolvency Act Deposit Insurance Bill
Monetary Policy Financial Sector Reforms
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 24
Implementing institutions and key areas of reforms
Ghana Integrated Financial and Information Systems (GIFMIS) – as an enabler towards PFM Financial management and control
Controller and Accountant General
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
+
+
Budget reforms using Performance Based Budgeting
Ministry of Finance
+
+
Human Resource Information Management System (HRMIS)
Public Service Commission
May 2015 25
Adoption of International Public Sector Accounting Standards (IPSAS) – a catalyst for high-quality •Adoption of International Public Catalyst for Sector Accounting Standards PFM performance
improvement
IPSAS is a catalyst to providing high-quality financial information and, even more importantly, improving public finance management
Cash Accounting
Cash Accounting + Cost + Budget Analysis
Accrual Accounting
Integrated Budget + Accrual
Performance, Reliability and Comparability
Moving towards a greater degree of maturity in public financial management and reporting
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
Sound public finance management
IPSAS
•
Highly quality accounting standards May 2015 26
National Anti-Corruption Action Plan Key Elements of the NACAP
Macro level issues – National, economic develoment and poverty redution Public sector reform – Implementation of a number of reforms including constitution, civil service, etc Strengthening key anti-corruption and law enforcement agencies – need for institutional integrity, inter-agency relations, organisation support etc.. Public awareness and education – Education and awareness of both public officer and the general public. Prevention of corruption – reduce opportunities for, the occurrence of corruption and rent-seeking behaviour. Improving investigation and prosecution – Capacity building, appropriate case management systems, adoption of prosecution led investigations. Creating an enabling environment – Political will, enactment of legislation, continuous demand for transparency and accountability.. Coherent stakeholder engagements and role – complementary roles by CHRAJ, Parliament, the Executive, Judiciary, private sector, etc..
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 27
IMF economic and financial reforms (April 2015) – validating on-going home-grown solutions Revenue Administration and Tax Policy Public Financial Management Public Service Reform Debt Management Monetary Policy Financial Sector Reforms
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 28
Other on-going reforms
Revision of the Companies Act
Revision of the Corporate Insolvency Act
Deposit Insurance Bill
etc, etc The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 29
Section 5 Where do we go from here
The way forward
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 30
Education and Character transformation of Ghanaians Continuous education and awareness of general public
Changing mind-sets/Tone in the organisation
Strengthening our value system Inculcating moral and ethics training in our formal education system
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 31
A. Strengthening public sector management • Enforcement, enforcement, enforcement – laws, regulations and the relevant policies and frameworks including (in some cases) the structures exist. What is needed is the political will to ACT. • Curtail motivations, opportunities and possibilities of corruption; o Motivation – Disincentivise corruption o Opportunity – ensure openness and transparency of transactions; comprehensive vigilance on transaction involving public-private actors o Possibility – curtail the ability to undermine control mechanism
• Strengthen the institutions implementing NACAP The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 32
B. Ensuring sound, effective and efficient public financial management (PFM) • Develop/Finalise a comprehensive PFM strategy document with inputs from all stakeholders such as development partners, civil society, regulators ,private sector among others; • The office of the Auditor General, Public Accounts Committee, Audit Report Implementation Committee should be further strengthened and supported to discharge their mandate under the Constitution of the Republic of Ghana. • Fast-track the roll-out of GIFMIS to all MDAs and include the Donor, IGF and other statutory funds in the system to facilitate the reporting of consolidated financial statements of Government. The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 33
B (cont’d). Ensuring sound, effective and efficient public financial management (PFM) • Enforcement and strict compliance with Budget and commitment module in GIFMIS as a means of budget control budget and spending. • Speed up the finalisation of the IPSAS adoption road-map as announced by Government and the Institute of Chartered Accountant Ghana with the support of all key stakeholders.
• Ensure the revision of regulatory and legal financial documents such as the FAA,FAR, PPA to conform to current trends and developments in the Public Financial Management system. The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 34
C. Ensuring Sound Corporate Governance: • Promote ethical standards in the private sector with clearly outlined and enforced organisation codes of conducts. • Share best practices – professional and regulatory bodies • Adopt best practice codes of conduct/frameworks for sound corporate governance – King’s Report, Global Reporting Initiatives (GRI), etc. • Incentivise best players in corporate governance practices
• Hold SOEs to strict accountability in terms of financial and other mandates…(State Enterprise Commission?)
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 35
• Allow the institutions and the laws of the land to work!!!!!
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 36
Section 6 Questions and Answers
The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 37
Q&A •© 2015 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. The Audacity to Transform the Economy of Ghana forum the role of Governance • Felix Addo PwC Country Senior Partner, PwC Ghana.
May 2015 38
Role of Fiscal Policy in Transforming the Economy of Ghana
Introduction • Fiscal policy is the application of government's taxing, spending and debt activities to meet public objectives. • Spending covers goods and services, transfer/interest payments while tax covers income, profit, customs, and sales tax and VAT among others. • Government operations are to fulfill its stabilization, allocation and distribution functions. • Some objectives are economic (health, roads) while others are noneconomic but required (defense, justice) • Competing objectives create conflict for resources. • Government operations constitute a large part of economic activity through its resource mobilization and spending.
Government Dominance • Fiscal policy influences resource allocation in the non-government sector directly and indirectly. • Fiscal policy has an important if not critical role in influencing the core objectives of economic policy namely: • viable balance of payments (external balance); • low and stable inflation rates (internal balance); • sustainable economic growth. • Abundant evidence to suggest that government's fiscal policy has been the primary cause of both economic and financial imbalances and sluggish growth in output. • Led to high debt levels and issues of sustainability and vulnerability. • Fiscal policy should be at the core of any economic transformation.
Reduce external current account deficits • An improved fiscal stance will improve the external current account balance (ceteris paribus, notably private sector savings/investment). • Current account balance is difference between income/current output and absorption. • Improve external balance through a combination of increasing output and curtailing absorption. • Excessive domestic absorption or demand can be largely attributable to government/public sector. • Without new taxes or measures to control private sector demand, imports will grow relative to exports and the current account will deteriorate. • Cutting expenditure or raising revenue is critical for reducing domestic and external debt and slowing capital flight. • Restore stable and predicable exchange rate though lower demand.
Reduce inflation rates • Inflation occurs when aggregate expenditure exceeds output of productive capacity at existing price levels. • The converse could lead to deflation or fall in employment and /or other resources. • Fiscal deficits financed by domestic monetary accommodation contributes to high inflation. • Nominal interest rates shoot to compensate. • Frequent adjustment in administered prices (fuel, utilities) and nominal wage creates uncertainties. • High and variable inflation interferes with the efficient allocation function of price mechanism. • High inflation could have a negative impact on real tax revenue.
Grow economy • Policies to increase output from existing productive capacity through reforms in pricing mechanisms-exchange rates, interest rates, and other input/output prices. • Policies to increase the growth of productive capacity itself through specific policies to accelerating domestic savings and domestic investment. (Impact of chronic inflation on savings and investment). • Fiscal policy has a central role in ensuring efficient resource allocation: subsidy policy; utility prices’ policy; interest rate policy; exchange rate policy. • Encourage private sector investment: avoid crowding out and reduce impact of high interest rate on growth and real incomes of households. • Support measures to lower input costs through stable exchange and interest rates, and stable supply of energy and prices.
• Improve human and physical infrastructure investment through reallocation of government expenditure away from consumption. • Avoid taxes and expenditure with disincentives for investment, savings and employment creation such as high payroll tax, income tax, and profit tax. • Reduce fiscal deficits to remove uncertainty and restore confidence.
Path to Reform and Transformation • Drastically reduce fiscal deficits (ideally below 2 percent of GDP) and live within means through mainly expenditures and some limited revenue measures: • Curtail size of government by reducing the number of ministries, agencies and departments and consolidating others. • Ensure financial autonomy and reduce dependency of subvented organizations and public corporations. • Remove non-essential subsidies and transfers and target limited income subsidies (social safety nets) to the “truly poor citizens’. • Reduce interest costs over time by prudent borrowing, debt transformation and by building primary balance surpluses. • Sharply reduce domestic short-term debt and limit foreign borrowing to concessional ones. • Initiate dialogue with donors and development partners on the need for budgetary and developments grants to support the transformation agenda. • Initiate dialogue with social partners on how to adopt a meaningful medium-term wage bill for the public sector, quite apart from measures to clean up the bill and enhance monitoring. • Broaden tax base to target consumption expenditures. • Above all, develop policy credibility over a long period through performance, including eliminating arrears.
The Role of Monetary Policy in Transforming the Economy of Ghana Nii K. Sowa
Introduction • The world is changing. • Political systems are changing. • Economic systems are changing. • Ghana must certainly have the audacity to transform its economy.
October 5, 2016
© Nii K. Sowa
72
Introduction • Economic policy management in Ghana has gone through several phases since independence. • Until the 1980s, economic management was dictated by the political ideology of sitting governments rather than ideas reflecting national consensus. • As the regimes vary from dirigiste socialist regimes to quasi-capitalist regimes economic policy management swayed between planned directcontrol systems through to near laisser-faire systems. October 5, 2016
(c) Nii K. Sowa
73
Introduction • The general objective of policy has, however, always been the improvement in the living standard of the Ghanaian, with increased output and stable prices as the main goals. • Unfortunately, with increased frustration sustained economic growth and development has eluded Ghana.
October 5, 2016
(c) Nii K. Sowa
74
Introduction • After years of stabilization, macroeconomic slippages have become more common than desired. • The fiscal budget is out of sync, exchange rates are out of control, and inflation refuses to be tamed. • Growth is stunted. • It is imperative that we change the way we manage our economy. • This must start with the creation of a stable macroeconomic environment. October 5, 2016
(c) Nii K. Sowa
75
The Changing Nature of Monetary Management • Monetary management by the central bank, as a major arm of economic policy management in Ghana, has by law and practice, often focused on price stability. • This overarching duty of the central bank has not changed over the years. • What has changed is the way and manner in which that duty is carried out.
October 5, 2016
(c) Nii K. Sowa
76
The Changing Nature of Monetary Management • The basic theory of monetary management assumes some relationship between the stock of money in the economy and the level of prices. • The central bank then chooses an appropriate instrument it can control which will have an impact on the level of prices. • In most cases, the central bank selects an intermediate target which also bears a close relationship with the ultimate target, the price level. • Of course, in practice this is more complicated than we have presented, and there are several assumptions and qualifications which adds mystic to the process. October 5, 2016
(c) Nii K. Sowa
77
Direct Control Regime • In earlier years, the central bank used a system of direct controls to effect monetary management. • This is based on an IMF financial programming model, which assumes that some broad monetary aggregate (M2 or M3) as the ‘intermediate target variable’ for monetary control, and that this in turn is connected in some reasonably predictable way with the ‘ultimate policy targets’ such as inflation and real output. • The system of direct control assumes a stable demand for money function for the public and also that the central bank can effectively control the money stock. October 5, 2016
(c) Nii K. Sowa
78
Economic Performance Under Direct Controls Table 1: Some Economic Outcomes Under The System of Direct Monetary Control (percent) 1981 1982 Real GDP
Inflation
1983
1984
1985
1986 1987 1988 1989 1990
-3.2
-5.9
-3.9
8.5
5.1
5.2
4.8
5.6
5.1
3.3
100.4
16.7
142.4
6.0
19.5
33.3
34.2
26.6
30.5
35.9
38.2
23.4
64.5
44.7
59.5
53.5
53.0
43.1
26.9
18.0
19.5
10.5
14.5
18.0
18.5
20.5
23.5
26.0
26.0
33.0
Money (M2) Interest Rates
Source: Bank of Ghana
October 5, 2016
© Nii K. Sowa
79
Indirect Monetary Control • As part of the SAP, the economy was liberalised • The liberalisation process under the ERP entailed progressive deregulatory measures, culminating in the institutionalisation of a market based system of monetary management in early 1992 • This focused largely on the use of indirect marketbased instruments in the conduct of monetary policy.
October 5, 2016
© Nii K. Sowa
80
Indirect Monetary Control • The basic underlying model remained the IMF’s financial programming model. • However, with the Indirect Approach, the central bank relied on Open Market Operations as the major tool in regulating the Net Domestic Assets of the Banking system. • Thus, the central bank released or redeemed bills on the market as appropriate to keep growth in the money stock in check. October 5, 2016
© Nii K. Sowa
81
Indirect Monetary Control • Economic outturn under the liberalized regime appeared better than in the controlled regime. • Growth in GDP improved. • Inflation under control but at only moderate levels.
• One distinct feature of the period of the marketbased monetary control was the high rates of interest that prevailed in the country.
October 5, 2016
© Nii K. Sowa
82
Economic Performance under the Indirect Monetary Control Table 2: Some Economic Outcomes Under The System of Market-Based Monetary Control (percent) 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Real GDP
5.3
3.9
5.0
3.8
4.5
5.2
5.1
4.7
4.4
3.7
Inflation
10.3
13.3
27.7
34.2
70.8
32.7
20.8
15.7
13.8
40.5 21.3
Money (M2)
15.0
59.4
27.4
46.2
37.4
34.2
45.1
28.2
19.8
33.8 47.9
Interest Rates
20.0
30.0
35.0
25.0
45.0
45.0
45.0
37.0
27.0
27.0 27.0
Source: Bank of Ghana
October 5, 2016
© Nii K. Sowa
83
4.2
Some Observations • Central banking and monetary management was shrouded in mystery and secrecy. • Monetary management focused solely on price stability. • But the world has changed. • Now resource-based development has given way to knowledge-based development
October 5, 2016
(c) Nii K. Sowa
84
Critital Policy Thinking • Government generally has several objectives it may wish to achieve: stable prices, closing a fiscal gap, lowering the rate of unemployment or increasing output. • Thus at a particular time, while government may have convinced all economic agents that policy is working towards lower rates of inflation, it may suddenly initiate surprise inflation in order to achieve another objective, say close a fiscal gap. • This is the time inconsistency problem. October 5, 2016
(c) Nii K. Sowa
85
Critical Policy Thinking • The solution to this time inconsistency problem lies in having a credible independent agency with the sole objective of implementing policies aimed at achieving the particular objective. • Hence, the need for the central bank to have operational independence.
October 5, 2016
(c) Nii K. Sowa
86
Critical Policy Thinking • Another issue that needs some attention is the focus on inflation to the neglect of other gaps in the economy. • In 1993, studies by American economist John Taylor argued that deviations of the central bank’s short-term rate from the long-term market rate can be explained by other gaps in the economy such as an inflation gap and/or an output gap. • Thus, the central bank is offered a new policy instrument which can carefully be used to close other gaps in the economy • Thus, the central bank afford to keep its eyes not only on just inflation, but be also sensitive to other gaps in the economy. October 5, 2016
(c) Nii K. Sowa
87
The MPC Process and Inflation Targeting • The MPC process and Inflation targeting monetary management provide solutions to some of these policy issues • The Bank of Ghana Law (Act 612), enacted in 2002 offered the central bank the opportunity to institute these processes. • So the MPC was born in September 2002, made up of 5 members from the central bank and two external members nominated by the government. October 5, 2016
(c) Nii K. Sowa
88
The MPC Process and Inflation Targeting • The main policy tool of the MPC is the policy rate - an indicative interest rate around which all other rates operate. • As an indicative rate the positioning of the policy rate sends signals to all economic agents on the tempo of economic activity and its expected impact on the rate of inflation in the immediate future. • In this sense the policy rate does not carry the same interpretation as the erstwhile bank rate which was the rate at which the central bank extended advances to the commercial bank as ‘lender of last resort’. October 5, 2016
(c) Nii K. Sowa
89
The MPC Process and Inflation Targeting • In setting the policy rate, the MPC evaluates developments in the economy and the threats these developments may pose to macroeconomic stability and consequently inflation. • This generally involves a thorough review of fiscal, monetary, financial market, external trade, the real sector and price developments since the previous meeting of the MPC. • Thus, the new monetary framework ensures that all information on the economy are allowed to feed into the monetary management decision-making process. • Hence, data requirements of the new monetary framework are severe. October 5, 2016
(c) Nii K. Sowa
90
The MPC Process and Inflation Targeting • A critical element in the analyses leading to the decision-making by the MPC is a review of the inflationary process in the country. The inflation report includes the following basic elements: • An analysis of the current inflation situation and the main factors driving prices in the economy; • An exploration of possible threats from monetary, fiscal, financial sector developments, real sector developments as well as external sector developments;
October 5, 2016
(c) Nii K. Sowa
91
The MPC Process and Inflation Targeting • A forward looking view of inflation with the associated uncertainties. Forecasts are generated using simple vector error correction models. The central path is then embodied in the form of FAN Charts with the upside factors and downside risks critically assessed; • The construction of a matrix of risk assessment using the available information on all aspects of the economy; and an inflation risk measure is derived from the matrix. An assessment of whether inflationary risks are rising or diminishing or rising based on the movement of this index.
October 5, 2016
(c) Nii K. Sowa
92
Economic Outcomes Under the IT Framework Table 3: Economic Performance in the MPC-Era (2000-2006, end year data, percent) GDP Growth Rate of Treasury Ave. Lending Repo Reverse Repo Rate Inflation Bill Rate Rate Rate Rate. 2000 3.74 40.5 38.0 47.0 27.0 26.0 2001 4.20 21.3 27.6 43.8 27.0 26.0 2002 4.50 15.2 26.6 38.5 24.5 21.0 2003 5.20 23.6 18.7 32.8 21.5 20.5 2004 5.80 11.8 17.1 28.8 18.5 17.5 2005 5.80 14.8 11.5 26.0 15.5 14.5 2006 6.20 10.5 9.6 23.8 12.5 10.5 Source: Bank of Ghana, Research Department; Government of Ghana, Budget Statements; and Ghana Statistical Service, various, CPI Newsletters.
October 5, 2016
© Nii K. Sowa
93
Some Remarks • On the whole, except for the recent times when economic performance has been abysmal, the economy Ghana has, on the average, exhibited robust economic fundamentals under the Inflation Targeting framework than under any other monetary management framework.
October 5, 2016
(c) Nii K. Sowa
94
Concluding Remarks • Clearly, if one has to choose a monetary framework to support the transformation of the economy of Ghana, then the Inflation Targeting process comes highly recommended. • The Inflation Targeting process comes with the openness and transparency of the policy process that is needed in today's world. Moreover, the transparency and openness of the process exemplified in the after-decision press conference adds to the credibility of policy. October 5, 2016
(c) Nii K. Sowa
95
Concluding Remarks • The Inflation Targeting process enhances policy credibility also by engaging the government and the central bank in a principal agency relationship. Thus, under the Inflation Targeting process there is accountability, as the agent must explain to the principal any deviations from the agreed targets.
October 5, 2016
(c) Nii K. Sowa
96
Concluding Remarks • Under an Inflation Targeting process, the central bank can afford to look at the closure of other gaps in the economy, as they ultimately affect inflation expectations.
October 5, 2016
(c) Nii K. Sowa
97
Concluding Remarks • In short, the MPC process and the adoption of an Inflation Targeting framework has demystified monetary policy, enhanced policy credibility, and has brought central banking more in tune with the information age we are in. • I believe that such a monetary management framework coupled with an appropriate fiscal management can establish the bedrock to transform and sustain the economy of Ghana.
October 5, 2016
(c) Nii K. Sowa
98
OECD Ranking of 15yr Olds in Math and Science If Ghana, the lowest ranked country, achieved basic skills for all its 15-yearolds, the report says that it would expand its current GDP by 38 times, over the lifetime of today's youngsters.
Courage as the Basis for Transformation Patrick Awuah Founder and President, Ashesi University College
Without courage, we cannot practice any other virtue with consistency We can’t be kind, true, merciful, generous, or honest
Without courage, we cannot innovate or invent We can’t imagine, act, or persist
Success factors for any society
• • •
innovation entrepreneurship great teams
The world at night A map of development
A map of encouragement And discouragement
Consider the two Koreas
Leveraging Human Capital • Educate everyone • Maintain public health • Execute economic and public policies that empower citizens
Nurturing Courage
Encourage curiosity and exploration
Celebrate human imagination Enable “safe” failure
Ashesi’s learning goals 1. Ethics and civic engagement 2. Critical thinking and quantitative reasoning 3. Communication 4. Leadership and teamwork 5. Innovation and action 6. Curiosity and skill 7. Technological competence
The Ashesi Way Scholarship
Leadership
Citizenship
• Consistently striving for deeper expertise
• Helping colleagues be more successful
• Asking questions that broaden the conversation
• Engaging talents, experiences and capabilities of others
• Being socially and environmentally conscious
• Embracing fresh thinking
• Communicating effectively
• Connecting with others in our chosen fields
• Taking initiative and going beyond the call of duty
• Proactively sharing skills and knowledge with others
• Setting ambitious, yet attainable goals
• Recognizing longterm implications of decisions and actions • Having fun • Being ethical • Leaving a lasting impact on individuals, organizations and communities
World-Class Grads
1(25)
1 out of every 25 graduates have started businesses across several industries
graduates touching millions of lives
Set Priorities Take a Systems View • Make important trade-offs given limited resources. Do a few things very well • Basic, Secondary, Technical, Higher Education are all important • Pay attention to character development
THE AUDACITY TO TRANSFORM THE ECONOMY OF GHANA
Leveraging Government’s Transformational Agenda to Accelerate Private Investments
Mrs. Mawuena Trebarh, CEO Ghana Investment Promotion Centre
Presentation Outline FDI and Economic Growth
Role of the GIPC Benefits of Private Investments Private Investments and National Development
Government’s Transformational Agenda Key Elements of Transformation Leveraging Government’s Transformational Agenda
The Audacity to Transform the Economy of Ghana Conclusion
FDIs and Economic Growth 8000
14 FDI (US$) GDP Grwoth Rate
7000
12
6000
There is a positive relations between Private Investments and Interest Rates Periods of high GDP growth characterized by high FDI Inflows.
10 5000
8 4000 6
3000 4 2000
2
1000
0
0 2005
2010
2011
2012
2013
2014
FDI serves as a catalyst for Economic Growth. In Transforming the Economy, Private Investments will play a critical role.
Role of the GIPC
• Promotion: inward flow of FDI, building domestic partnerships, matchmaking domestic businessmen to foreign counterparts. • Facilitation: establishment of businesses, partnerships as well as mergers & acquisitions. • Advocacy: dialogue with relevant MDAs on impact of policy e.g. taxation and its effects on FDI promotion. The Centre bridges the gap between the investor community and the local economy
Benefits of Private Investments Private Investments come in the form of FDI and Local Domestic Investments. Benefits Includes: Job creation: providing jobs to local population and protecting the environment. Skills Development: developing the right business mindsets and capacity in local labour. Technology Transfer: employing innovation and developing new technology and business ideas Partnerships: creating a win-win situation where the local economy also benefits. Local Development: serving as a catalyst and having multiplier effect on the local economy.
Private Investments & National Development • Government cannot solve all the developmental challenges with its limited public finances. • There is a need to attract private investment towards achieving sustainable economic development. • Private Sector Growth develops a healthier local economy which can accommodate foreign participation through partnerships, both private and public • FDIs, most often, introduce world-level technology and technical knowhow and processes into the recipient country. • Increased productivity and local producers gain access to a wider global market. • Local labour are exposed to new and globally valued skills which improve their professional status.
Government’s Transformational Agenda • In December 2014, H.E President John Dramani Mahama delivered a paper to the 6th parliament of the 4th Republic. • The Paper was titled “A Coordinated Programme of Economic and Social Development Policies 20142020, An Agenda for Transformation. • This document lays the foundation of the government’s Transformational Agenda
Government’s Transformational Agenda The hallmark of transformation, as defined by the government is based on eight pillars:
• A modernized and highly productive Agriculture sector. • A dynamic, efficient and competitive private sector. • Well-developed infrastructure. • A proactive government-private sector relationships.
• A high degree of industrial Growth. • A resilient light manufacturing Sector • A knowledgeable highly skilled work force. • A responsible citizenry.
Key Elements of Transformation The Centre seeks to leverage the Government Transformational Agenda primarily through the following sectors • Agriculture and Agroprocessing • Infrastructure • Manufacturing
Proactive Involvement of the Private Sector is the game changer
Leveraging Gov’t Transformational Agenda AGRICULTURE & AGRO-PROCESSING Specific activities the Centre has undertaken include: • Project specific investments targeted to bring in big players in agriculture to help our local farmers to transition from small holder farms to commercial farms and agricultural estates • Advocacy in the structuring of the Land Ternure System. Coordination with the Ministry of Chieftaincy, Lands Commission and the Local Authorities to structure the existing system to make it Investor friendly.
Leveraging Gov’t Transformational Agenda AGRICULTURE & AGRO-PROCESSING
• Using the Nationwide Regional Sensitization Tour as a tool to groom local entrepreneurs into national and sub-regional giants. • Matching specific agriculture & agro-processing companies to direct buyers in Manufacturing and Tourism. • Encouraging FDI into agric insurance.
Niche Cocoa Processing Facility
Leveraging Gov’t Transformational Agenda
MANUFACTURING
1,600
• Using legislation to scrap the minimum equity requirement on manufacturing whilst simultaneously increasing same on trading.
1,400
• Strong institutional collaboration such as those with the NBSSI, AGI and GNCC to advocate for both policy and actual growth of manufacturing companies. • Advocating the establishment of Light Manufacturing Zones in Ghana.
1,200 1,000 800
2013 2014
600 400 200 0 Manufacturing
Trading
FDI in Manufacturing & Trading in US$M after Act 865
Leveraging Gov’t Transformational Agenda
MANUFACTURING • Continuous dialogue with VRA, GRIDCo and ECG on the their needs to match them with appropriate investors. • GE has an agreement to build 1,000 MW power plant in Ghana with 360MW expected to be in place by September 2016.
• Domino effect: attracting lead Industry players which initiates further investments within the sector.
Leveraging Gov’t Transformational Agenda INFRASTRUCTURE
• Promoting Government’s major infrastructure projects to run on PPP basis. • Other large projects to be executed on other arrangements such as BOT, BOO. • Advocating for new and improved policies regulating infrastructure especially in the housing sector. The Tema Harbour Port Expansion Project is on PPP basis
The Audacity to Transform The Economy
Ghana’s Current Challenges include: • Inadequate Power Supply • Unstable Local Currency • High Cost of Borrowing (Interest Rates)
These Challenges would potentially slow down economic growth. Do we have the Audacity to Transform the Economy then? YES WE DO
The Audacity to Transform The Economy Enough local capacity exist to transform the local economy. From a Government perspective, there is the need for: • Clarity of Strategic Direction • Macro Stability • Adequate and Consistent Supply of Electricity • Evolving legal and tax regime • Provision of Enhanced Infrastructure • Policy Consistency and Alignment There is the need for active participation of the private sector and CSOs in order to achieve this
The Audacity to Transform The Economy From an Investment Promotions Perspective, the actions taken to Help Align the Country on a sustained growth path include: The launch of the “Think Ghana, Make it Happen” Campaign. Refocus attention on the many Investment Opportunities in Ghana Highlight success stories in the mist of present Economic Challenges Highlighting some of the difficulties as opportunities for Investment.
Launch of the “Made in Ghana” campaign. To boost consumption of Made in Ghana Goods and Services This will reduce imports and improve on Government’s Balance Of Payment position.
Programs to Grow Local Entrepreneurs Increased coordination with National Board of Small Scale Industries (NBSSI) Regional Sensitization Tour as a means of Growing local Companies.
•
Conclusion • Many opportunities exist • Active involvement of for the country to transform the youth in the the economy. transformational process will ensure sustainability • Private investments will of the process. accelerate if the enabling environment is created. • Agriculture, Manufacturing and Infrastructure development can be used as a catalyst for transformation. • We must seek long term solutions to the country’s current challenges.
Thank you Ghana Investment Promotion Centre, Public Services Commission Building, Ministries P.O. Box M193 Accra, Ghana T +233 302 66 5125 – 9 F +233 302 66 3801 E
[email protected] W www.gipcghana.com
Thank You The Audacity to Transform the Economy of Ghana Plenary Slides
