News Guide Africa

Category: Economy and Finance

  • List on local stock exchanges – mining coys told

    List on local stock exchanges – mining coys told

    Vice-President Mahamudu Bawumia has challenged mining companies operating in Ghana and the entire West African sub-region to work with governments and regulatory bodies to establish a mining index on local stock exchanges to allow both the owners and investors in the minerals to benefit from its exploitation.

    The benefits of a mining index on the local bourse are enormous, enabling both the State, Mining Companies, beneficiary communities and investors to attract the necessary capital and built-in incentives for all involved, Dr Bawumia indicated.

    Speaking at the opening session of the three-day West African Mining and Power Exhibition and Conference (WAMPOC/WAMPEX) in Accra, last week, Dr Bawumia urged African countries to hasten the development of the capacity to interact with the world’s natural resources banks, fund managers and the leading stock exchanges in the world to allow locals to benefit more from the minerals bequeathed to them by nature.

    “In this regard, let me sound a clarion call on the big mining companies operating here in Ghana and indeed, the West African sub-region, to work towards the emergence of a mining index on our Stock Exchanges and thereby accelerate their growth and significance in African mining.

    “This will require deep collaboration among the local stock exchanges, their regulators, as well as mining firms to incentivize Ghanaians to own listed greenfield exploration projects as the upside on such investments tend to be higher”, he noted.

    While acknowledging the enormous resources found on the African continent, the Vice President called for a careful balance between the profit-seeking needs of investors, and the sustainable living needs of the communities within which the minerals are found.

    “Yes, Africa is endowed with many mineral resources but while the availability of the resources is important, the over-riding aim for all parties should be the evolution of a carefully balanced mechanism to ensure that the resources of the state benefit the owners of the resource and at the same time extend benefits to investors to ensure that the State is able to sustainably attract the needed capital, investment and technical know-how from a world which has come to the realisation that Africa is the continent of the future.

    “Significantly, the African Union has been reassessing critically the real significance of mining to host country economies over the years. As a result of these efforts, the African Mining Vision (AMV) emerged as far back as 2009. In essence, the African Mining Vision seeks to ensure the transparent, responsible, equitable and optimal exploitation of Africa’s Mineral resources for broad-based sustainable socio-economic development for the host Governments and its citizenry,” he disclosed.

    He challenged African countries and mining companies to collaborate on a sub-regional and even regional basis to derive the most benefit from the exploitation of Africa’s mineral resources.

    “We need a strategy to enable us to pool the mineral resource-rich countries in West Africa and beyond together to assume the mantle in the transformation of our economies with a greater awareness of mining as a more comprehensive and transformational economic activity and as a key backbone for our country.

    “Given the paucity of the size of stand-alone countries, it is only proper that we consider regional dimensions to local content since individual African Country Markets may be too small to elicit the much-needed investments. Investors desire economies of scale to justify such investments and it is necessary that we consider the regional economic blocs in Africa as sub-markets which can then collectively constitute the building blocks of the African Continental Free Trade Area (AfCFTA).”

  • Fiscal deficit to widen further.. as gov’t plans to pay COLA to teachers 

    Fiscal deficit to widen further.. as gov’t plans to pay COLA to teachers 

    Adnan Adams Mohammed

    The government through the Fair Wages and Salaries Commission has planned to meet all stakeholders entitled to the 20 percent Cost of Living Allowance (COLA) demanded by teachers to determine the payment terms.

    Teacher unions including NAGRAT, GNAT, and others have given a June 30th deadline for the government to pay the allowance or face a series of industrial actions.

    According to NAGRAT, the current economic hardship has made teachers worse off, hence the demand for allowances to be paid. But the Fair Wages and Salaries Commission maintains that all relevant stakeholders must come on board for a final determination of the payment. If the government pays the 20% demanded by the teachers, it is likely to widen the fiscal deficit further and also miss the fiscal deficit target of 7.4 percent of Gross Domestic Product, (GDP) end year. But the government has banked it hopes on the collection of the Electronic Transaction Levy (E-Levy) which is estimated to rake in close to GHC5billion at the end of 2022.

    “It’s fair that stakeholders are able to propose the payment of COLA or any other allowance, but at the end of the day, we have to get to the table with organized labor, government and all other parties to determine whether COLA will be paid”, said Earl Ankrah, Head of Public Affairs at the Commission. “We are also yet to negotiate the base pay for 2023 so that it is factored into the budget. That is yet to be done to determine the minimum daily wage.”

    Already, Fitch Solutions is forecasting the country’s fiscal deficit to GDP ratio in 2022 at 9.8%. This is in line with the International Monetary Fund (IMF) forecast of 9.8% for this year, but far wider than the government’s target of 7.4% of GDP.

    “Looking into Ghana’s fiscal position following increased spending on health and household support due to COVID-19 pandemic, Ghana’s fiscal deficit widen to an estimated to 11.3% in 2021. This is well above historical level” said the Risk Analyst at Fitch Solutions, Ben Weaver.

    The International Monetary Fund in its April 2022 Fiscal Monitor Report, projected Ghana’s tax revenue to GDP ratio to increase in 2022 to 16.5%, from 14.7% in 2021. This will be a vast improvement compared to the rates registered during the last 10 years.  

    In 2023 and 2024, the country’s tax-to-GDP ratio will however fall to 16% and 16.2% respectively, it added.

    The Fund also said government expenditure will decline to 25.2% of GDP in 2022, from 26.3% recorded in 2021. This is expected to put the fiscal deficit to GDP ratio at 9.8%.

    However, in 2023 and 2024, the Fund is forecasting expenditure-to-GDP ratios of 25.2% and 23.9% respectively.

    Meanwhile, Vice President of NAGRAT, Jacob Annaba, explains that the ultimatum comes on the back of current economic conditions and the worsening plight of teachers, as well as the government’s failure to negotiate.

    “The President had earlier said, and I quote, “we (government) know how to bring the economy back to life. What we do not know is how to bring people back to life”. The question is what has changed? Mr. President, your people (workers) are dying; please attend to them now and do not prioritize the economy over the human resources. The worker can no longer bear the economic hardship.”

    The leadership of NAGRAT noted they would be pushed to embark on an industrial action if their demands are not met.

    “We, therefore, demand that, as a matter of urgency, the Government must grant workers a Cost Of Living Allowance (COLA) of 20% at the end of June 2022. Leadership would be left with no option than to declare a strike by the end of July 2022, if all the requests made are not adhered to. Leadership hereby yields to the demand of members for positive action, beginning with the wearing of red bands by the end of June 2022, if the demands made are not met”, he added.

  • Using monetary policy to control inflation: Economists look elsewhere for solution

    Using monetary policy to control inflation: Economists look elsewhere for solution

    Adnan Adams Mohammed

    Two renowned economists from the country’s leading universities have all flagged down the potency of using the monetary policies to control the recent leapfrogging inflation rate.

    They believe the Bank of Ghana’s measures put in place to curb the consistent rise in inflation are either not working or the situation is not being diagnosed properly. Both, are thereby calling on the government through the finance ministry to consider other factors such as the fiscal space.

    The Ghana Statistical Service last week announced that, increment in transport fares and unbearable food prices pushed  May inflation rate to 27.6%. This is against 23.6% recorded in April which was about 4% jump from March inflation of 19.4%. The inflationary trend pushed the Monetary Policy Committee (MPC) of the BoG to tighten the policy rate by 200 basis points from 17% in April to 19% in May. Yet, the according to Professor of Finance and Economics at University of Ghana, the monetary policy has proven to be inefficient and has therefore asked the government to adopt a fiscal policy approach toward mitigating inflation in the country.

    “If you look at the disparity between the inflation and the policy rate and the Treasury bill rate, it tells you there’s a lot more work to be done and we cannot look to the monetary policy because the problem is from the fiscal side”, Prof. Godfred Alufar Bokpin of the UG Business School. “The monetary policy is constrained in terms of how we can deploy that effectively to contain inflation and engineer growth.”

    Also, an economist at the University of Cape Coast has opined that the Central Bank maybe misdiagnosing the problem. He said, the increase in the BoG policy rate by 200 basis points to 19% is in response to risk to the economy; high inflation, weak financial inter-mediation and fiscal stress, which is expected to trigger lending rate hike.

    “The measures taken in an environment of volatile depreciation promises rather further inflation”, Professor John Gatsi, Dean of School of Business and Finance at UCC said in reaction to the MPC’s announcement, last week. “High inflation and upward lending rate will undermine government contracts execution and create new levels of arears due to cost implications for procurement of materials.”

    Prof Gatsi expatiated that, a number of projects maybe abandoned due to inflation, depreciation and cost of borrowing and warned that there maybe too much pressure on the banks as cost of mobilizing funds continue to increase with the possibility of distorted returns on placement of funds with the banks.

    According to the Government Statistician, Professor Kobina Annim, the rate of inflation for Transport (39.0%), Household Equipment and Maintenance (33.8%), Housing, Water, Gas and Electricity (32.3%) and Food and Non-Alcoholic Beverages (30.1.6%) were higher than the national average (27.6%).

    In May, 2022, 12 of the 13 divisions recorded inflation rates higher than the rolling average from June, 2021 to May, 2022.

    The data showed that Food inflation in May, 2022 was 30.1%, compared with 26.6% in April 2022. Non-food Inflation was however 25.7% in May, 2022, as against 21.3% the previous month.

    Meanwhile, Prof Bopkin has posited that, we cannot look to monetary policy to tackle this.

    “We must shift our attention to the fiscal side so that the fiscal side will respond appropriately with the discipline that it requires,” he stressed.

    “Once the source of the inflation is largely fiscal, then there’s a limit to how far you can deploy the monetary policy to bring down inflation and then engineer growth.

    “More so, because of the monetary policy framework that we are using under inflation targeting, because for one key requirement for inflation targeting to be effective, it is fiscal discipline. Once you deny the monetary side the fiscal discipline, then there’s no way they can use the monetary policy effectively to bring down inflation and engineer growth.

    At a press briefing, fortnight ago, the central bank said the growth prospects in the domestic economy remain positive and the Bank’s high-frequency indicators point to continued and increased momentum in economic activities with private sector credit showing some improvement in real terms, despite the increased price pressures.

    “All these are resulting in a closure of the negative output gap. The banking sector remains robust, with sustained growth in total assets, investments and deposits. However, business and consumer confidence have dipped, reflecting the sharp depreciation of the currency and the general high inflationary environment, which has resulted in higher input costs for businesses. A quick turnaround, with more confidence-building measures to counter these conditions, would provide further boost to the real economy”, it added.

    On fiscal policy implementation, the Committee observed that execution of the budget for the first quarter was broadly in line with targets although there was a minor deviation in the deficit target, stemming largely from low revenue receipts.

    It is the expectation of the Committee that fiscal consolidation will take hold gradually and the mid-year budget review will provide further fiscal fine-tuning to ensure that the fiscal consolidation efforts stay on track.

    The MPC said despite the improvement in the trade balance due to favourable commodity prices, the external sector has weakened somewhat due to developments in the capital and financial account.

  • PURC shot-down the rate of increment proposed by ECG and GWCL

    PURC shot-down the rate of increment proposed by ECG and GWCL

    Adnan Adams Mohammed

    The Public Utilities Regulatory Commission (PURC), has indicated that utility service providers won’t get anything close to their huge tariff demands.

    This latest pronouncement is a reveler to many as the Commission is yet to complete its ongoing nationwide public hearing on the proposed tariff reviews.

    The Electricity Company of Ghana (ECG) has proposed an increment in tariffs by 148% while the Ghana Water Company Limited is asking for its tariffs to go up by 343%. This ignited a heated debate with majority of consumers opposing the proposed increment.

    “Though PURC is still considering a number of things, the utility firms will not get the huge margins they had proposed”, the Technical Committee Chairman of PURC, Ishmael Edjekumhene, has said when speaking at the Takoradi Public Hearing on the proposed tariff review for 2022-2027.

    “We are now beginning the detailed analysis of the proposals to see how prudent their (utilities) cost are to see the extent to which they’ve complied with the guidelines that we provided to them and then ultimately, once we’ve looked at all the numbers provided, we will take a decision. That decision can either go up, stay the same or come down because in 2018 the commission looked at all the numbers and was able to tell Ghanaians or tell the utilities that even though you are asking for an increment we think that the tariff should come down.”

    “So once we are satisfied with the analysis, what Ghanaians should expect is an announcement. If you go and compare the history of tariffs setting in Ghana and you compare the proposals as submitted by the utilities to what is ultimately approved, you will see that there’s a vast difference. It is not going to be a straightforward matter in the sense that we are coming to look at the numbers and what I’m certain of is that there is nowhere some of the things they are talking about are going to end up being the cost that consumers are going to pay”, he said.

    The Executive Secretary of the PURC, Dr. Ishmael Ackah also speaking at the Takoradi organized public hearing on the tariff proposals said the utility companies could have done themselves good if their service provision had been better all this while and could have helped them from the resistance by consumers to pay more.

    “47% of about 851 respondents in a survey we conducted indicated that they are willing to expect some adjustments on the condition that services will improve. So this year, in September, PURC is launching a customer service clinic so that utilities will tell customers that you can apply for a meter even if you don’t know any big man and that it will take you three days for you to get the meter even if you don’t know any honourable member. If we are able to do these things, I think it will reduce the number of PowerPoint slides you present at these forums just to make a case for the increment to consumers”, he said.

    The Public Utilities Regulatory Commission’s Takoradi Public Hearing on the proposed Tariff Review for 2022-2027 is the third after Accra and Ho in series of nationwide public hearings to enable utilities explain to consumers the rationale for their huge tariffs increment proposals.

    Meanwhile, majority of consumers who spoke at the Takoradi hearing shot down the tariff increment proposal.

  • Ghana’s balance of payment deficit widens

    Ghana’s balance of payment deficit widens

    By Elorm Desewu

    Ghana’s balance of payment deficit has more than doubled for the first quarter of 2022, according to the Bank of Ghana, (BoG).

    This was due to the capital and financial account recording some significant outflows from net portfolio reversals and net private capital outflows, which resulted in an overall balance of payments deficit of US$934.46 million for the first quarter of 2022, compared with a deficit of US$429.93 million, same time last year.

    However, the trade surplus improved significantly recording US$1.3 billion in the first four months of the year, compared with a trade surplus of US$778.00 million in the same period of last year.

    The trade surplus was offset by investment income outflows and net services payments, resulting in a current account deficit of US$128.15 million (0.2 percent of GDP) for the first quarter of the year, representing a marginal improvement from the current account deficit of US$197.0 million (0.2 percent of GDP) recorded in the first quarter of 2021.

    Commodity prices have remained volatile due to the on-going geopolitical tensions. Average crude oil prices gained 42.0 percent on a year-to-date basis to settle at US$106.2 per barrel in April 2022, supported by supply constraints arising from the geopolitical tensions between Russia and Ukraine.

    Gold prices also gained 8.1 percent to settle at US$1,935.89 per fine ounce, on the back of increased safe-haven demand amid global inflation concerns. Similarly, cocoa prices went up by 4.4 percent to settle at US$2,591.06 per tonne in April 2022, compared to the US$2,481.95 per tonne in December 2021, due to unfavourable weather conditions across West Africa.

    The improvement in export earnings was attributed to crude oil and non-traditional exports. Crude oil export receipts recorded significant growth of 61.0 percent to US$1.9 billion, due to price effects, while gold exports improved by 3.6 percent, also supported by price effects.

    Non-traditional export receipts crossed the US$1.0 billion mark in the review period and contributed significantly to the trade surplus. These developments far outweighed the 7.7 percent growth in total oil imports in the review period, on the back of compressed non-oil imports.

    Gross International Reserves (GIR), at the end of April 2022, stood at US$8.34 billion, equivalent to 3.7 months of import cover.

    This compares with US$9.70 billion, equivalent to 4.3 months of import cover at end-December 2021. 21. In the foreign exchange market, the Ghana Cedi depreciated by 15.6 percent against the US dollar, 13.1 percent against the Pound Sterling, and 13.6 percent against the Euro, during the first quarter of 2022.

    From the beginning of April through 18th May 2022, there has been some moderation in the rate of depreciation. The Ghana Cedi depreciated by 0.2 percent against the US dollar, but appreciated by 5.7 percent against the Pound Sterling and 5.4 percent against the Euro, bringing the year-to-date depreciation against these currencies to 15.8 percent against the US dollar, 8.2 percent against the Pound Sterling, and 8.9 percent against the Euro.

  • Ghana signs $69.88m renewable energy deal to enhance electricity access

    Ghana signs $69.88m renewable energy deal to enhance electricity access

    Ghana has signed a $69.88 million renewable energy agreement to enhance electricity access in the next four years.

    Under the agreement, about 6,890 households, 6,001 Small and Medium-sized Enterprises (SMEs), and 6,890 public buildings will be connected to electricity.

    About 1,350 schools and 500 health centres would also benefit from the project, which would include the design, engineering, supply, construction, installation, testing, and commissioning of mini-grids and standalone systems.

    Seventy communities across nine Island districts through mini-grids, 505 communities in 11 districts through standalone solar photovoltaic (PV) systems in the country.

    The “Scaling-up renewable energy Programme (SREP),” is to close Ghana’s 12.8 per cent electricity reach deficit by increasing access to clean and reliable energy and support socio-economic development.

    It is to also help reduce public sector electricity debt as well as bills for SMEs and households while supporting the implementation of environmental, climate, and social management plans in the country.

    Mr. Ken Ofori-Atta, Minister of Finance signed the protocol agreement with Dr Akinwumi Akin Adesina, President of the African Development Bank (AfDB) Group.

    He also signed the financial agreement of the project with Mr. Dominique Paravicini, AfDB’s Governor for Switzerland.

    Speaking at the signing of the agreement, Mr. Ofori-Atta, said the project: “Dovetails fittingly into an urgent global agenda and demonstrates our country’s commitment to enhance the economic and social viability of low carbon investments.

    It is also in support of the country’s commitment to creating new energy-efficient markets and stave-off a future energy crisis by achieving energy sufficiency.

    The project also: “Fully align with the Government’s overarching ambition of increasing the contribution of Renewable Energy in the generation mix to 10 per cent by 2030 while achieving our emission reduction targets,” he added.

    Mr. Ofori-Atta indicated that the project would provide stable and cheaper electricity to hundreds of people across the country and usher in new economic opportunities, particularly for women in rural areas.

    On his part, Dr. Adesina noted that the project would support Ghana in meeting its renewable energy requirement on the Sustainable Development Goals (SDGs) and build a resilient economy.

    “This project will increase access to clean and reliable electricity services and support low carbon socio-economic development of Ghana. It will directly support Ghana’s efforts in building resilience to the socio-economic impact of the COVID-19 pandemic.”

    This would be done through the provision of electricity to healthcare centres, Island communities, enabling the refrigeration of vaccines and testing facilities for COVID-19.

    “The project will facilitate the self-sufficiency of Ministries, Departments, and Agencies (MDAs), through rooftop solar power generation and storage under the net metering component,” he added.

    Mr. Paravicini, said that the signing of the agreement showed Switzerland’s continuous support to bring sustainable and affordable electricity to households and businesses.

    SREP would be implemented between 2022 and 2025, under three components; the first would comprise of the development of 38 mini-grids and standalone solar PV systems for 2,000 SMEs, 1,350 schools, 500 health centres, and 400 communities.

    The second component, which is net metering, aims at up-scaling existing projects to about 12,000 units of roof-mounted net-metered solar PV systems to reduce public sector electricity debt and bills for SMEs and households.

    The final component would be the supervision of works including operating costs for the SREP Project Implementation Unit, Distribution Utility, and the implementation of environmental, climate, and social management plans.

    Source: GNA

  • Utility tariffs increment: Make your voices heard – Chief of Staff to stakeholders

    Chief of Staff Frema Osei-Opare has said all the stakeholders must make their voices heard in the process of announcing new utility tariffs by the Public Utilities Regulatory Commission (PURC).

    “It is my fervent hope that all stakeholders will engage actively in this review process and make their voices heard so that the final outcome will benefit the generality of all stakeholders,” she at the inauguration of an office complex for the PURC in Koforidua.

    The Head of Public Relations and External Affairs of the PURC said the Commission will also consider the interest of the investor community and the interest of the utility companies before announcing the new tariffs.

    The PURC had earlier noted that this year’s approved tariffs for utility service providers will be announced on July 1, 2022.

    According to the PURC, the tariffs could be increased or decreased.

    Dr Eric Kofi Obutey, the Director of Research at PURC made this known on Accra 100.5 FM’s evening news on Thursday, May 12, 2022.

    He said, for now, the Commission is engaging all the stakeholders to arrive at tariffs that will serve the need of Ghanaians as well as the service providers.

    Dr Obutey mentioned some of the stakeholders as the Parliamentary Select Committee on Mines and Energy; Association of Ghana Industries (AGI), and Ghana Employers Association among others.

    He explained that the stakeholder engagement before the announcement of the approved tariffs is mandated by law.

    Dr Obutey was hopeful that all the engagements will end by June for a decision to be taken by July.

    The Electricity Company of Ghana (ECG) and Ghana Water Company Limited have proposed 148 per cent and 334 per cent hikes, respectively, in tariffs.

  • High volatility of Cedi to discourage investment in Ghana’s infrastructure – Fitch

    High volatility of Cedi to discourage investment in Ghana’s infrastructure – Fitch

    Adnan Adams Mohammed

    Fitch Solutions forecasts Ghana’s construction industry to grow by 4.1% year-on-year in 2022, a slowdown compared to the estimated growth of 5.7% year-on-year in 2021.

    The rating agency notes that, despite the market’s strong fundamentals, including a track record of private investment in energy infrastructure, comparatively high political stability and security, and a relatively diverse competitive landscape, it expects that a substantial depreciation of the cedi against the US Dollar in 2022 will, in the near term, make private investors more reluctant to invest in Ghana’s infrastructure sector.

    Further indicating that, it do not expect that private investment will meaningfully cushion the negative impact of subdued public infrastructure spending on the market’s construction industry growth, the agency said.

    “We forecast that in 2022, the Ghana cedi will depreciate by 22.7% against the USD, significantly increasing revenue risks for the foreign investors that rely on expatriation of revenues”, Fitch Solutions, thus, said. “We forecast government capital expenditure to shrink to 3.3% year-on-year of GDP in 2022 and 2.9% year-on-year of GDP in 2023, down from 3.7% year-on-year in 2021”.

    “While this puts capital expenditure levels above those in 2018-2020 when Ghana’s construction industry growth averaged -0.1% per year, it remains below the comparatively high annual average levels of 4% of GDP between 2010 and 2017.”

    During the period between 2010 and 2017, the construction industry growth average of 8.1% per year.

    But the Governor of Bank of Ghana, Ernest Addison, said developments in the global capital markets, combined with internal challenges that resulted in the rating downgrade of Ghana’s economy, have played out to exacerbate price and exchange rate pressures in the domestic economy.

    The Ghana cedi, he noted, came “under severe pressure in the first quarter of 2022 as offshore investors exited positions in domestic securities at a time when domestic demand for forex had increased”.

    Speaking at the 6th CEO Summit in Accra, last week, Dr Addison said: “The FX pressures, coupled with tight forex liquidity due to absence from the international capital markets, contributed to the significant currency depreciation”.

    Cumulatively, he said the Ghana cedi depreciated by 15.8 per cent against the US dollar in the year to 18th May 2022, compared with an appreciation of 0.5 per cent in the same period of 2021.

    “To ease off increased volatility in the foreign exchange (FX) market, the Bank extended the forward auctions to include the Bulk Oil Distributing Companies”.

    “This formed part of the measures taken by the Bank to address the FX liquidity constraints within the local petroleum sector and aid price discovery, especially for the general pricing window within the downstream sector”, he noted.

    Also, Dr Addison said recent price developments indicate elevated pressures from both domestic and external sources.

    These include the global energy and food price shock, and its consequential upward adjustments on domestic ex-pump petroleum prices and transportation costs, domestic food prices, as well as the passthrough effects of the recent exchange rate depreciation.

  • Ghana ranks best investment hub in the Sub-region and Africa

    Ghana ranks best investment hub in the Sub-region and Africa

    Adnan Adams Mohammed

    Ghana has been ranked the best nation among it peers in Sub-Saharan region for trading and investment, Fitch Solutions Operational Risk Index has indicated.

    Ghana’s Trade and Investment Risk assessment scored of 50.9 out of 100 to outperform the West Africa average of 36.4. The score also was the second best on the continent while ranking 88th out of 201 markets globally.

    Despite the global challenges facing the economy, the report pointed out that Ghana’s markets have strong fundamentals, including a track record of private investment in energy infrastructure, comparatively high political stability and security, and a relatively diverse competitive landscape. It however expressed worry about the depreciation of the cedi which it said will in the near term make private investors more reluctant to invest in Ghana’s infrastructure sector.

    It therefore does not expect private investments to meaningfully cushion the negative impact of subdued public infrastructure spending on the market’s construction industry growth.

    “We expect that a substantial depreciation of the cedi against the US dollar in 2022 will in the near term make private investors more reluctant to invest in Ghana’s infrastructure sector”, Fitch Solutions, the research arm of rating agency Fitch, has noted in the report released last week. “We thus do not expect that private investment will meaningfully cushion the negative impact of subdued public infrastructure spending on the market’s construction industry growth.”

    The index reported also concluded that, Ghana scored 51 out of 100 in the Crime and Security Risk parameters to outperforms the West Africa average of 33.3 and also ranked first place in Africa.

    Below is the full report from Fitch:    

    Lower Public Investment To Slow Down Ghana Construction Industry Growth

    Key View

    •       We forecast Ghana’s construction industry to grow by 4.1% y-o-y in 2022, a slowdown compared to the estimated growth of 5.7% y-o-y in 2021. Ghana’s infrastructure construction industry is unlikely to benefit from higher oil and gold prices, as we expect that increased public revenues will be channelled towards debt servicing and Ghana’s high public wage bill rather than capital projects.

    •       We expect that a substantial depreciation of the cedi against the US dollar in 2022 will, in the near term, make private sector investors more reluctant to invest in Ghana’s infrastructure and construction sector and offset the adverse impact of subdued public infrastructure spending on the market’s construction industry growth.

    We forecast Ghana’s construction industry to grow by 4.1% y-o-y in 2022, a slowdown compared to the estimated growth of 5.7% y-o-y in 2021. Unlike in other markets, Ghana’s infrastructure construction industry is unlikely to benefit from higher oil and gold prices, as we expect that increased public revenues will be channelled towards debt servicing and Ghana’s high public wage bill rather than capital projects, as Ghana’s access to international capital markets will be constrained in the near term.

    Accordingly, we forecast government capital expenditure to shrink to 3.3% y-o-y of GDP in 2022 and 2.9% y-o-y of GDP in 2023, down from 3.7% y-o-y in 2021. While this puts capital expenditure levels above those in 2018-2020, when Ghana’s construction industry growth averaged -0.1% per year, it remains below the comparatively high annual average levels of 4% of GDP between 2010 and 2017, which enabled the construction industry growth rates averaging 8.1% per year.

    In 2023, we forecast Ghana’s construction industry growth to accelerate slightly as we forecast the depreciation of the Cedi against the USD to slow down to 4.6% y-o-y.

    Generally, this will reduce revenue risks for foreign investors, while lower inflation will improve demand for residential and non-residential construction.

    However, Ghana’s access to international capital markets will remain constrained and will continue to weigh on public infrastructure spending as well as the market’s construction industry growth.

    Muted Public Spending Limits Construction Growth

    Ghana – Government Capital Expenditure, % of GDP; Construction Industry Value, real growth, % y-o-y

    Despite the market’s strong fundamentals, including a track record of private investment in energy infrastructure, comparatively high political stability and security, and a relatively diverse competitive landscape, we expect that a substantial depreciation of the cedi against the USD in 2022 will, in the near term, make private investors more reluctant to invest in Ghana’s infrastructure sector.

    We, thus, do not expect that private investment will meaningfully cushion the negative impact of subdued public infrastructure spending on the market’s construction industry growth. We forecast that in 2022, the Ghana cedi will depreciate by 22.7% against the USD, significantly increasing revenue risks for the foreign investors that rely on expatriation of revenues.

    Economic Openness Boosts Operating Environment In Ghana

    Ghana & Regional Average – Trade & Investment Risk

    Note: Scores out of 100; higher score = more attractive market. Source: Fitch Solutions Trade and Investment Risk Index

    At the same time, Ghana ranks in first place out of the 16 West African markets included in our proprietary Fitch Solutions Operational Risk Index.

    With a Trade and Investment Risk score of 50.9 out of 100, Ghana outperforms the West Africa average of 36.4 and ranks in a competitive 2nd position regionally, and in 88th place out of 201 markets globally.

    Similarly, with a Crime and Security Risk score of 51 out of 100 Ghana outperforms the West Africa average of 33.3 and ranks in 1st place regionally and in 90th place out of 201 markets globally.

  • E-cedi now accepted for transactions in Sefwi Asafo

    E-cedi now accepted for transactions in Sefwi Asafo

    Adnan Adams Mohammed

    The long awaited implementation of E-cedi is now accepted for daily transactions in Sefwi Asafo, a town in the Western North Region, on a pilot basis, the Bank of Ghana (BoG) has disclosed.

    The pilot is the offline version of the e-cedi which are used for buying daily necessities such as food, clothes etc.

    The e-cedi is a digital replica of the Cedi notes and coins which can be redeemed for physical cash and used for varied payments.

    “So far, the usage and uptake of the offline version of the e-cedi is being piloted in a small town called Sefwi Asafo, in the Western North Region”,  the Governor of the central bank, Dr Ernest Addison, last week, at the Ghana CEOs Summit in Accra.

    “Selected users in that community have been using the e-cedi for daily purchases such as food, groceries and drinks”.

    “The BoG will continue to work with these users to obtain the critical usage data that will inform the decision about the e-cedi’s future after the pilot.”

    He added, “these are clearly landmark events in providing digital leadership with the payment systems to lead to a digitalised economy in the near future.”