News Guide Africa

Category: Economy and Finance

  • Food crisis looming… WB warns amidst Ghana’s rising food inflation

    Food crisis looming… WB warns amidst Ghana’s rising food inflation

    Adnan Adams Mohammed

    Ghanaians are already feeling the heat of food insecurity as World Bank Group warns of imminent food shortage.

    World Bank has indicated that, the world faces a “human catastrophe” from a food crisis arising from Russia’s invasion of Ukraine. The Bank is worried at the rate in which food prices are rising, saying it would push hundreds of millions of people into poverty and lower nutrition, if the crisis continues.

    The World Bank calculates there could be a “huge” 37% jump in food prices (inflation). Already, Ghanaians are witnessing a record high inflation spurred by leapfrogging food inflation. According to the Ghana Statistical Service (GSS) reported that, March 2022 inflation hit the highest in nearly 13 years to record 19.4%.

    “The higher inflation was pushed largely by food prices”, the Government Statistician announced fortnight ago.

    According to the figures, food inflation recorded a rate of 22.4% in March 2022, compared to 17.4% in February 2022. Stapple (commonly consumed)0 foodstuffs such as: Oil and Fats (28.2%), Water (27.1%), Cereal Products (25.0%), Vegetables (23.8%), Fish and Other Seafood (23.7%), Fruits and Nuts (22.1%), Soft Drinks (20.5%), Live Animals, and Meat (20.2%) recorded inflation rate, higher than the national average.

    Consequently, the Brtton Wood institution  has shared that, the trend would hit the poor hardest, who will “eat less and have less money for anything else such as schooling”.

    In an interview with BBC economics editor Faisal Islam, World Bank president, David Malpass, who leads the institution charged with global alleviation of poverty, said the impact on the poor made it “an unfair kind of crisis… that was true also of COVID”.

    “It’s a human catastrophe, meaning nutrition goes down. But then it also becomes a political challenge for governments who can’t do anything about it, they didn’t cause it and they see the prices going up,” he said on the sidelines of the IMF-World Bank meetings in Washington.

    The price rises are broad and deep, he said: “It’s affecting food of all different kinds oils, grains, and then it gets into other crops, corn crops, because they go up when wheat goes up”.

    There was enough food in the world to feed everybody, he said, and global stockpiles are large by historical standards, but there will have to be a sharing or sales process to get the food to where it is needed.

    Mr Malpass also discouraged countries from subsidising production or capping prices.

    Instead, he said, the focus needed to be on increasing supplies across the world of fertilisers and food, alongside targeted assistance for the very poorest people.

    The World Bank chief also warned of a knock on “crisis within a crisis” arising from the inability of developing countries to service their large pandemic debts, amid rising food and energy prices.

    “This is a very real prospect. It’s happening for some countries, we don’t know how far it’ll go. As many as 60% of the poorest countries right now are either in debt distress or at high risk of being in debt distress,” he said.

    “We have to be worried about a debt crisis, the best thing to do is to start early to act early on finding ways to reduce the debt burden for countries that are on have unsustainable debt, the longer you put it off, the worse it is,” he added.

  • Tax-to-GDP to peak at 16.5%; inflation of 16.3% in 2022 – IMF

    Tax-to-GDP to peak at 16.5%; inflation of 16.3% in 2022 – IMF

    Adnan Adams Mohammed

    The International Monetary Fund (IMF) in it’s revised forecast, has projected Ghana’s economy to record an end year tax revenue to Gross Domestic Product ratio of 16.5 percent, the highest growth in the last 10 years.

    The ratio would be an improvement from 14.7% recorded in 2021. the Fund is anticipating that, in 2023 and 2024, the country’s tax-to-GDP ratio will fall to 16% and 16.2% respectively.

    IMF’s April 2022 Fiscal Monitor also revised its forecast of an end year inflation of 16.3% from an initial forecast of 8.8%. This means the country will miss the Bank of Ghana target of 8%+\-2. It indicated that, the rising inflation has been triggered by higher commodity prices such as crude oil and cereals as a result of the Russia/Ukraine conflict.

    “Inflation is expected to remain elevated for longer than in the previous forecast, driven by war-induced commodity price increases and broadening price pressures”, IMF’s April 2022 World Economic Outlook Report said. “For 2022, inflation is projected at 5.7% in advanced economies and 8.7% in emerging market and developing economies —1.8 and 2.8 percentage points higher than projected in January.”

    It expatiated that, “The ongoing war in Ukraine, associated sanctions, market participants’ actions in response to the global outcry, and rising counterparty risk have caused severe disruptions in commodity markets and supply chains across the globe. Amid sharply rising volatility, prices have skyrocketed across the commodity complex, causing severe pressures in commodity financing and derivatives markets. Shipping costs of commodities have increased, and higher commodity prices have raised the financing needs of commodity traders and those involved along the supply chain”.

     Although a gradual resolution of supply-demand imbalances and a modest pickup in labor supply are expected in the baseline, easing price inflation eventually, the IMF said uncertainty again surrounds the forecast.

    Ghana Statistical Service (GSS) reported that, March 2022 inflation hit the highest in nearly 13 years to record 19.4%. The higher inflation was pushed largely by food prices.

    The Fund’s further details on the tax to GDP ratio projection explained that, the expected revenue growth due to a number of measures announced by the government will shore up revenue this year.

    These include the implementation and collection of the revised Property Rate and the implementation of the E-VAT/E-Commerce/E-Gaming initiatives by the end of April 2022.

    Others are the prioritisation the Revenue Assurance, Compliance, and Enforcement (RACE) Programme to plug revenue leakages especially at the ports and the infamous fuel bunkering and small scale mining exporters cabal.

    The Electronic Transaction Levy (E-levy) is also expected to generate some revenue for the country.  

    Meanwhile, the IMF said government expenditure to GDP will reduce marginally in 2022, despite the drastic cut in spending.

    According to the Fund, 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 ratio of 25.2% and 23.9% respectively.

    In the last eight years, the year with the lowest government expenditure-to-GDP ratio was 17.6% in 2017.

    From 2015 to 2020, the country’s expenditure to GDP ratios were 18.6% (2015), 19.9% (2016), 17.6% (2017), 20.9% (2018), 21.1% (2019) and 29.0% (2020) respectively.

  • Fitch projects Ghana’s fiscal deficit to GDP to end 2022 at 9.8%

    Fitch projects Ghana’s fiscal deficit to GDP to end 2022 at 9.8%

    Fitch Solutions is forecasting Ghana’s fiscal deficit to Gross Domestic Product (GDP) ratio in 2022 at 9.8%.

    This is in line with the IMF forecast of 9.8% for this year, but far wider than the government’s target of 7.4% of GDP.

    Speaking at the recent Sub Saharan African Update, Country Risk Analyst at Fitch Solutions, Ben Weaver, said the high financing gap will constrain growth.

    “Looking into Ghana’s fiscal position following increased spending on health and household support due to COVID-19 pandemic, Ghana’s fiscal deficit would widen to an estimated 11.3% in 2021. This is well above historical level”.

    “Despite the fiscal consolidation efforts, we forecast that the country will record a fiscal deficit of 9.8% of GDP in 2022, which is well above the government’s target of 7.4%.”

    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 ratio of 25.2% and 23.9% respectively.

  • BoG prepares to export Doré gold next month

    BoG prepares to export Doré gold next month

    By Elorm Desewu

    The Bank of Ghana would in the next month begin to export the 600 kilograms of Doré gold that the central bank has acquired which would become part of the country’s Gross International Reserves.

    “So far, we have bought over 600 kilograms of Doré gold but this gold has to be refined to a very high standard before it can qualify as reserve assets and the Bank is in the process of fulfilling all the due diligence requirements that the certified refineries in the world look out for.

    We are quite sure that, in the next month or two, we would be able to export the Doré gold that we have acquired and once that is refined, it could become part of our gross reserves”, disclosed by the Governor of the BoG, Dr Ernest Addison.

    “We have to export the Doré gold to be refined because the refinery in Ghana is not LBMA certified and so would not qualify the gold as a central bank reserve asset. This is the only reason why we, for now, have to export the gold in that form and refine it outside. I know that the Ministry of Lands and the Ministry of Finance are working at getting this LBMA certification for the refineries in Ghana”, he said.

    The Gross International Reserves at the end of February 2022 was US$9,547.96 million, providing cover for 4.3 months of imports. The reserve level compares with the end-December 2021 position of US$9,695.22 million, equivalent to 4.4 months of import cover.

    The trade account continued to remain in a surplus, albeit declining. For the first two months of 2022, the trade surplus amounted to US$404.9 million, lower than a surplus of US$432.69 million for the corresponding period of 2021.

    The decline in the trade balance was mainly due to a higher import growth relative to exports growth. Imports grew by 7.9 percent year on year to US$2.3 billion. The increase in imports was driven mainly by oil imports that rose by 80.1 percent with non-oil imports decreasing by 5.53 percent. With regard to exports, earnings grew by 5.5 percent to US$2.7 billion. Improved earnings from crude oil, aluminium alloys and other exports, including non-traditional exports, boosted exports performance notwithstanding some decline in gold and cocoa receipts.

  • GDP growth to pick up…records 5.4% in 2021

    GDP growth to pick up…records 5.4% in 2021

    By Elorm Desewu

    Ghana’s Gross Domestic Product, (GDP) growth is expected to strengthen in 2022, before slowing in 2023-24, then pick up again in 2025-26, according to the Economic Intelligence Unit report.

    Investment in new oilfields will be slow, delaying a resurgence of real GDP growth to pre-coronavirus levels, despite efforts by the government to facilitate industrialisation under the Covid-19 Alleviation and Revitalisation of Enterprises Support programme, says EIU. 

    Ghana’s economy grew 5.4 per cent in 2021 compared with 0.5 per cent in 2020, the Ghana Statistical Service said last week.

    Professor Samuel Annim, the Government Statistician, said the quarterly GDP growth rate, including oil and gas, was 7.0 per cent (year-on-year) in the fourth quarter of 2021 compared to 4.3 per cent in the same period of 2020.

    He said the GDP growth rate without oil and gas (Non-Oil GDP) for the fourth quarter of 2021 was 7.6 per cent which compares to the same period in 2020 with a growth rate of 5.7 per cent.

     The GDP estimate (including oil) for 2021 was GH₵175,057.3 million, while the estimate for 2020 was GH₵166,157.2 million, meanwhile GDP estimate (excluding oil) for 2021 was GH₵163,430.4 million.

    The value recorded for 2020 was GH₵152,869.2 million.

    He said the real GDP in volume terms was estimated to have increased by 7.0 per cent in the fourth quarter (October to December) of 2021 compared to the same period in 2020.

    The Government Statistician said when seasonally adjusted, the real GDP increased by 1.8 per cent in the fourth quarter (October to December) of 2021; 0.3 percentage point higher than what was recorded in the third quarter (July to September) of the same year.

    The Information & Communication, Manufacturing, and Crops sub-sectors were the main drivers of GDP growth for the fourth quarter of 2021.

    The fourth quarter of 2021 GDP at current prices was estimated at GH₵ 128,623.4 million with a corresponding value recorded for the same period of 2020 was GH₵ 106,536.2 million.

    On the sectors contributions to GDP, the services sector recorded the highest growth of 50 per cent for the quarter at basic prices followed by Industry and Agriculture, which were 29 percent and 21 per cent respectively.

    Growth momentum is expected to moderate in the first half of 2022 due to the rising input costs triggered by the upward adjustments in petroleum prices. Also, the latest Bank of Ghana surveys results indicated softened consumer and business confidence, which may affect private sector production plans and investments. This notwithstanding, the gradual rebound in private sector credit will continue to drive the growth process in the near term.

  • Debt burden of SOEs…GNPC most indebted

    Debt burden of SOEs…GNPC most indebted

    Adnan Adams Mohammed

    A former Chief Executive Officer of a State Owned Enterprise, Ghana National Petroleum Corporation, has painstakingly shown keen interest in the SIGA 2020 Report focusing on the liabilities of the SOEs. 

    The finance and energy expert, Alex Mould, has, thus, summarised the liabilities of the major SOEs in the country to help in critical scrutiny of the performance of the SOEs. In the summary, it was clear that, most of the SOEs more than doubled their arrears payments or liabilities. 

    The heavily indebted were GNPC, Ghana Cocoa Board (COCOBOD) and Electricity Company of Ghana (ECG). These companies have their liabilities exceeding GHC10.0 billion within a period of four years from 2016 to 2020. Consequently, some critics of the performance of GNPC are surprised why the corporation recorded a net loss of GHC1.6 billion in 2020 after recording a net profit of GHC204 million in 2019. Also, its direct cost, which was GHC2.4 billion in 2019 surged to GHC4.3 billion in 2020, a whopping 78% increase. 

    “GNPC must explain this financial performance at a time when it also spent GH₵200 million on ‘Corporate Social Responsibility’”, Bright Kwashie Dzokoto, a tax expert and a member of Tx Justice Coalition demanded. “This accountability-free regime must end.

    Mr Dzokoto demanded for convincing explanation from GNPC on its performance over the years.

    Below are the highlights of the liabilities as prepared by Mr Mould: 

    1. ECG

    Moved from GHC6.0 billion to GHC15.0 billion in 2016 to 2020. ECG’s liabilities are mainly trade creditors payable to Independent Power Producers (IPPs).

    2.  GACL 

    Moved from GHC740 million to GHC2.0 billion in 2016 to2020. These arrears are mainly to banks. 

    3.  COCOBOD 

    Here, the liabilities which are mainly bank loans, moved from GHC295 million to GHC10 billion within same period (2016-2020).

    4. GRIDCO

    Liabilities mainly owed to VRA/IPPs and PURC, moved from GHC485 million to GHC1.33 billion.

    5. Ghana Gas

    These liabilities mainly trade payables owed to GNPC, moved from GHC4.8 billion to GHC9.7 billion in 2016 to 2020.

    6.  GNPC

    Their liabilities were mainly in three folds; moved from GHC3.5 billion to GHC11.4 billion. The folds were: mainly trade creditors which moved from GHC237 million to GHC5.5 billion; loans of  GHC1.3 billion to GHC3.0 billion; and advance payment by GoG to Eni for unpaid gas amounting to GHC2.3 billion.

    7. Ghana Water 

    The liabilities mainly made up of trade creditors and loans of GHC4.2 billion; jumped from GHC745 million to GHC6.2 billion.

    8.  TOR

    The arrears of TOR increased from GHC3.7 billion to GHC4.6 billion. These was made of mainly Trade Creditors of GHC3.0 billion and loans plus ESLA amounted to GHC1.6 billion.

    9. VRA

    The total liabilities moved from GHC7.5 billion to GHC9.7 billion. These were mainly trade payables which grew from GHC4.2 billion to GHC6.8 billion while its borrowings dropped from GHC3.1 billion to GHC1.0 billion.

  • Standard Bank predicts economic growth of 6.2% in 2022 amidst low Eurobond market access

    Standard Bank predicts economic growth of 6.2% in 2022 amidst low Eurobond market access

    Adnan Adams Mohammed

    The parent company of Stanbic Bank, Standard Bank, has predicted an economic growth of about  6.2% in 2022 and subsequently grow by 6.8% in 2023 amidst tough times for the Ghanaian economy.

    The prediction, in the latest report of the Bank, is in line with the forecast by International Monetary Fund which also pegs the growth rate of the country at 6.2% in 2022. It said the government has made significant progress in vaccinations and the further easing of COVID-19 restrictions will stimulate demand and supply within the economy.

    But, it pointed out that the country’s ability to tap the Eurobond market may further diminish, whilst the foreign exchange reserves could remain under pressure unless the government acquires alternative sources of external financing. 

    “As global risk may worsen further in the first-half of 2022, and Ghana’s ability to tap the Eurobond market may further wane. Foreign exchange reserves could remain under pressure in 2022 — unless the government acquires alternative sources of external bilateral and multilateral funding.”

    Reporting on the performance of past year’s performance, the Bank estimated that, on a quarter-on-quarter basis, the mining and quarrying sub-sector grew by 16.9% in 2021, from an average contraction of 10.7% in the 6 months to June 2021, implying that growth momentum may be recovering.

    “On a quarter-on-quarter basis, the mining and quarrying sub-sector grew by 16.9%, from an average contraction of 10.7% in the 6-m to Jun 21, implying that growth momentum may be recovering. Gold production from underground ore sources should commence from January 22, 2022 at the Obuasi mine. New contracts to conduct mining activities at the Bibiani mine have already been awarded, which should boost investment in the sector over the next few years.”

    “However, ongoing global supply chain challenges could restrain growth in the cocoa and industrial sub-sectors in 2022″, it added.

     Balance of payments – imports likely to be higher

    The report said the Current Account deficit is likely to widen to 5.0% of Gross Domestic Product (GDP) in 2022, from an expected 3.9% for 2021.

    “Whereas we expect a recovery in gold production and exports over the coming year, we simultaneously also see a notable rise in the imports of goods. As the economy continues to recover from the pandemic, non-oil imports may increase further. Also, given the government’s expansionary fiscal policy stance, capital goods imports will likely remain elevated over the next two year. Higher international oil prices too could continue to widen the trade balance.”

    Furthermore, “cocoa production and exports could still be dragged lower due to fertiliser shortages. As of Q2:21, cocoa and gold exports combined accounted for around 55.3% of total merchandise exports.”

  • Govt to borrow GHC24.6b for 2nd quarter

    Govt to borrow GHC24.6b for 2nd quarter

    By Elorm Desewu

    The government plans to borrow a gross amount of GH¢24.696 billion for the second quarter of 2022, through the issuance of Treasury Bills, Notes and Bonds from the domestic money market.

    Of the GH¢24.696 billion, GHȼ20.102 billion would be used to rollover maturities, while the remaining GH¢4.593 billion which is fresh issuance, would be used to meet Government’s financing requirements.

    According to the Bank of Ghana, the debt calendar also takes into consideration the government’s liability management programme, market developments both domestic and international and the Treasury & Debt Management objective of lengthening the maturity profile of the public debt. 

    Per the calendar, Government aims to build benchmark bonds through the issuance of instruments as follows: the 91-day and 182-day will be issued weekly; the 364-day bill will be issued bi-weekly also through the primary auction with settlement being the transaction date plus one working day; securities of 2-year up to 6-year will be issued through the book-building method by the Bond Market Specialists (BMS); and consistent with the MTDS, Government may announce tap-ins/reopening of other existing instruments depending on market conditions.

    Ghana’s total public debt has continued to climb up, recording GHC351.8 billion or US$58.6 billion representing 80.1 percent of Gross Domestic Product, (GDP), at the end of December 2021 compare with GHC341.8 billion recorded at the end of September, 2021.

    The external component of the debt portfolio was US$28.3 billion or GHC170 billion representing 38.7 percent of GDP.

    Of the total debt stock, the domestic debt was GHC181.8billion representing 41.4 percent of GDP.

    The government’s Medium-Term Debt Management Strategy proposes appropriate financing for the period 2022 – 2025 which sets out to achieve the following objectives:  meet Government’s funding needs on a timely basis and at a relatively lower cost subject to prudent levels of risk;  promote the development of efficient primary and secondary markets; and  pursue any other action considered to impact positively on the public debt stock. 

    The financing for 2022 seeks to further develop the domestic market by proposing new instruments to diversify the debt portfolio and increase the debt financing capacity of the domestic market. 

  • Energy Transition: NRGI Regional Manager Writes on How Ghana Can Map Its Journey

    Energy Transition: NRGI Regional Manager Writes on How Ghana Can Map Its Journey

    Author: Nafi Chinery

    All countries have a vital role and interest in avoiding catastrophic climate impacts and safeguarding a livable planet. Like the citizens of most developing countries, Ghanaians are increasingly affected by climate change, despite bearing little responsibility for the emissions that have caused it.

    At the COP26 climate conference last year, governments reaffirmed their commitment to the goal of limiting global warming to 1.5°C. Achieving this will require a colossal and unprecedented shift away from fossil fuels to renewable energy sources like wind and solar—as well as provision of clean, affordable and reliable energy for the nearly one billion people currently living without it.

    The wealthiest countries that have polluted the most should hold the primary responsibility for tackling climate change, both in cutting their emissions first and fastest, and in providing climate finance and support to countries like Ghana. Ghana’s President Nana Akufo-Addo emphasized this responsibility during COP26 when he called for a fair and equitable solution that “recognizes the historical imbalances between the high emitters and low emitters.”

    To date, however, wealthy countries have under-promised and underdelivered. They have yet to reduce emissions to the extent necessary to avoid warming beyond 2°C, let alone 1.5°C. And, as President Akufo-Addo also mentioned, they have failed to honor their 2010 promise of USD100 billion per year to support developing countries’ responses to climate change. Tragically, the consequences will be felt by all for decades to come.

    Ghana’s agency in the energy transition

    Despite this compound injustice and these broken promises, Ghana’s future ultimately depends on its own leadership and effective planning. Ghana is still a resource-dependent country, with more than a quarter of its export earnings coming from oil and gas alone. Over the past decade, the oil sector has contributed around $6.5 billion of direct revenue to Ghana’s budget. Without a plan to respond to the global energy transition, a significant decline in oil revenues could plunge Ghana into a deep crisis.

    At a minimum, the government should avoid making bad decisions—those that threaten the country’s economic and fiscal outlook. But Ghana’s record does not inspire confidence. In the last decade, the government has allocated $2 billion to the Ghana National Petroleum Corporation (GNPC). These investments have financed equity stakes in exploration, development and general operations in oil-producing fields. NRGI’s Risky Bet report shows that, globally, oil and gas projects currently in the pipeline worth an estimated $400 billion run the risk of not breaking even. Against the backdrop of the global energy transition, GNPC’s ambitions of becoming an operator are risky.

    In July 2021, Ghana’s Ministry of Energy and GNPC declared their intention to sink an additional $1.65 billion of public money into shares of Aker Energy’s oil project—yet another “risky bet” given the increasing pace of the global energy transition, which would result in poor returns on such a large-scale investment. Furthermore, such a decision would divert precious capital that the government could invest in more socially beneficial programs such as education or cheaper and more diverse energy sources that could power development in Ghana. Thankfully, after severe criticism from civil society organizations, the public and industry oversight bodies in Ghana, the government paused its investment plans in the Aker shares.

    No doubt, Ghana’s economic and fiscal outlook is uncertain. The 2018/19 oil licensing round remains unconcluded and oil production is projected to decline. International companies are redirecting their investments, and projects have been delayed. State oil revenues peaked in 2018, at 10 percent of total government revenue, and dropped to seven percent in 2020 due to the coronavirus pandemic. The ongoing war between Russia and Ukraine and the related global energy crisis now present huge uncertainties for the oil sector, including the prospect of a global recession.

    The good news is that Ghana now has a golden opportunity to develop a comprehensive and context-specific plan for navigating the global energy transition. In response to COP26 and Ghanaian CSOs’ demands for a national energy transition policy, the government launched the National Energy Transition Committee (NETC) in December 2021. The committee is tasked with developing a national policy document on steps the country can take to successfully navigate global energy transition. The NETC is also tasked with conducting a nationwide consultation on Ghana’s energy transition. At the first regional forum organized by the Ministry of Energy on behalf of the NETC, Vice President Dr. Mahamudu Bawumia said the NETC’s nationwide consultations are key to success: “We need to develop plans and implement options that people can relate to.” He also stressed the importance of equal opportunities for all citizens to enjoy the benefits of the energy transition and ensure social justice in the process.

    Essential elements for Ghana’s approach

    The establishment of the NETC is an important and valuable first step. The following recommendations, if adopted, would put the committee on track to deliver a successful energy transition plan:

    Include all voices. Ghana’s plan should be inclusive and leave no citizen behind. The plan should address how government will support local economies with relevant training, technology and finances to take advantage of the new opportunities in the transition.

    Enlist experts. The NETC should engage sector experts working on the energy transition to help ensure that the plan is informed by data and technical analysis.

    Promote open dialogue. Open and honest engagement between all relevant stakeholders will help build consensus and ownership around a transition pathway that is widely considered by citizens as viable and necessary. A shared understanding of the risks and opportunities of the energy transition is critical to agree on a shared strategy.

    Plan in harmony and coordination with existing policies. The energy transition plan should harmonize existing policy objectives and remedy the systemic inefficiencies in existing policy implementation.

    Improve governance of climate finance. The Ministry of Finance should spell out the role of international climate finance in energy transition planning and interrelate the energy transition plan with Ghana’s (conditional) nationally determined contributions under the Paris Agreement. Across the board, this requires building the state’s capacity to receive and deploy international climate finance.

    Take a critical and dynamic approach to energy options. The transition plans must address Ghana’s growing energy needs. Decisions about energy sources and related services should be based on analyzing different solutions over the long term, mindful of the likelihood that many factors (such as the competitiveness of renewables and gas) may change quickly over the coming decade. Accordingly, the NETC should review the role of fossil gas over the course of the transition—not assume from the outset that gas will be a constant.

    Assess implications for existing institutions. Ghana’s energy transition plan should consider the role of existing institutions such as GNPC in light of the long-term, macro pathway, rather than starting with assumptions about their purpose and role. Making the right investment decisions will require transparency and robust risk assessment.

    Nafi Chinery is the West Africa (Anglophone) regional manager at the Natural Resource Governance Institute (NRGI).

  • BOST’s “deferred tax obligation” claim beats financial knowledge – finance expert

    BOST’s “deferred tax obligation” claim beats financial knowledge – finance expert

    Adnan Adams Mohammed

    A finance expert has critiqued the press release by the management of the Bulk Oil Storage and Transportation Company Limited  (BOST) to correct a misinformation captured in the SIGA State Owned Enterprises 2020 Report.

    In the said press release, BOST challenged that, the SIGA Report claiming that BOST recorded a loss of GHC400 million was not accurate.  The company claim it rather recorded an operating profit before tax of GHC30million.

    The release issued last week and signed by the Managing Director, Edwin Provencal, indicated that, “the revaluation which was a deliberate decision to enhance the reporting of the company led to a deferred tax obligation of GHC292,935,973 compared to the net loss of GHC291,017,758, a difference of GHC1,918,215 (Appendix 1). The increase in the value of the revalued assets also resulted in increased depreciation charges which further reduced the bottom-line or the profit for the year. But, the ‘deferred tax obligation’ aspect beats the financial reporting knowledge of the finance expert. This led him to ask questions in awe.

    “I don’t understand this analysis, especially, on the unpaid taxes obligation. Is that not illegal?”, the Former Executive Director at Standard Chartered Bank, Alex Mould quizzed in reaction to a part of the press statement of BOST quoted above. “Unless he is talking about timing differences between financial reporting and tax reporting, that is, defered tax liabilities; which I do not think he was.” 

    Mr Mould, also a former CEO of National Petroleum Authority and GNPC further quizzed that, “Investment mark-to-market losses will reflect in impairments. How will you be taxed, that is, asked to make a tax payment for a unrealized gain in any asset revaluation?.”

    Below is the full press statement:

    FOR IMMEDIATE RELEASE

    RE: BOST Records GHC400 Million in Losses-SIGA Report

    April 10, 2022, Accra:

    The management of the Bulk Oil Storage and Transportation Company Limited has taken notice of a series of publications making the rounds on several online portals suggesting that contrary to an announcement by the MD, Edwin Provencal, that BOST has made an operating profit before tax of GHC30million, a report from SIGA indicates BOST has incurred losses to the tune of GHC400 Million.

    We, by this publication seek to correct the erroneous impressions created by the publication and

    wish to set the record straight as follows:

    1. Underlying Business of your company, BOST is PROFITABLE – The report of the GHC400

    million losses made by BOST is not accurate. To measure the profitability and operational

    efficiency of a Business one must determine whether the underlying operations (core business) of the company are profitable.

    The Managing Director in his submission at SIGA was emphatic that the company achieved a

    profit before tax of GHS9,844,673 versus an estimated GHC30million in year 2020 as against

    a loss of GHS158,478,676 in 2019. The positive net profit before tax attained in 2020 implies

    a massive turnaround of the operational fortunes of the company (Appendix 3). This was the

    basis of the MDs assertion at the SIGA engagement buttressed by publications from media

    houses like the Daily Graphic and GNA1. He was however quick to add that, unpaid tax

    obligations over the five-year period to date, the reduction in the value investment in GOIL

    and forex difference on dollar denominated loans MAY turn the profit before tax into a net

    loss for the period.

    This enhanced performance was driven by extensive operational efficiency initiatives

    including, but not limited to massive repair works of our storage tanks, pipelines and marine

    1 https://ghana-news.net2tvgh.com/bost-sets-aside-gh200-million-to-transform-petroleum-sector/assets, replacement of outmoded parts across the facilities of the company in the last two

    years supported by improved marketing and customer service. In the past two years, our

    income-earning assets has improved from 18% to 91%.

    2. Net Loss after Tax – There were several events outside management’s control that impacted

    the overall business negatively thus posting a loss for the year 2020 in the statement of

    comprehensive income (Appendix 1).

    Firstly, BOST as part of its drive towards operational excellence undertook a revaluation of

    its assets in the 2020 financial year. This had become necessary as most of the assets still in

    operation had been written down to near-zero levels whilst still useful in the operations of

    the company. As required by the International Financial Reporting Standards, IFRS, when

    assets are revalued, the increase in their values is taxed resulting in larger tax obligations.

    The revaluation which was a deliberate decision to enhance the reporting of the company led

    to a deferred tax obligation of GHC292,935,973 compared to the net loss of GHC291,017,758,

    a difference of GHC1,918,215 (Appendix 1). The increase in the value of the revalued assets

    also resulted in increased depreciation charges which further reduced the bottom-line or the

    profit for the year. (Appendix 2 – 12d).

    Secondly, BOST owns a 20% stake in GOIL. In any financial year, any loss in the market value

    of shares of GOIL is computed and that reduces the income of BOST to arrive at its net profit

    or loss for the year. In the year 2019 to 2020, our investment in GOIL saw a reduction of

    GHS15,674,525 its market value of. (Appendix 2 – Note 15). Respectfully, this event is

    external to BOST operations and therefore to gauge the performance of BOST management

    and staff by this loss in investment will not be fair. This is the reason why we should rely on

    the profit before tax rather than all these uncontrollable factors which have been factored in

    to arrive at the net profit or loss for the year.

    The recorded net losses for the years 2019 and 2020 per the income statement (Appendix 1)

    attached were therefore GHS101,411,781 and GHS291,017,758.

    3. Your Company, BOST has been turned around – Any comprehensive and objective analysis

    of the audited statements for the past five years (Appendix 3 – 2016-2020 profit before tax

    trend) will show a company on track to higher performance through enhanced efficiency and

    we look forward to capitalizing on these modest improvements to make BOST an example of

    a World-Class State-Owned Enterprise.

    It remains uncontested that the debt to suppliers and related parties of $623 million has been

    paid down to $39 million, the debts owed the local banks of about GHS273 million has been

    fully cleared and our pipelines which were procured in 2011 and left to the mercy of the

    weather in the United States under the AT & V contract have arrived safely on our shores and

    we expect to complete the installation of the additional 12 inch pipeline between the Accra

    Plains and Akosombo depots.

    The cashflow position of the company is enhanced and the repair of the company’s

    infrastructure continues despite the reduction in our BOST Margin.

    In conclusion, we reiterate the fact that your company BOST is on its way to becoming a

    PROFITABLE STATE-OWNED ENTERPRISE and nothing will derail the resolve of

    management and staff to achieve this.

    God Bless Our Homeland Ghana and make us GREAT and STRONG.

    …END…