News Guide Africa

Category: Economy and Finance

  • Inflation returns to target band in March 2023

    Inflation returns to target band in March 2023

    By Elorm Desewu

    Inflation is likely to return to the target band of 8+/-2 percent in March 2023, according to the Bank of Ghana, (BoG). The risks in the outlook for inflation are on the upside and include petroleum price adjustments and transportation costs, and exchange rate depreciation.

    The Bank of Ghana’s latest forecast still depicts an elevated inflation profile in the near term, with inflation falling within the medium-term target band within a year.

    Notwithstanding the sustained growth momentum, rising food prices, upward adjustments in petroleum prices and its effect on transport fares, and exchange rate depreciation pass-through have pushed up inflation to 15.7 percent at the end of February 2022, 5.7 percentage points outside the medium-term target band. Food inflation jumped sharply from 12.8 percent in December 2021 to 17.4 percent in February 2022, while non-food inflation jumped from 12.5 percent to 14.5 percent over the same period.

    According to the BoG, the combination of tighter global financing conditions, sharp pressures on the exchange rate, and elevated inflation pose some policy challenges. Headline inflation has risen sharply to 15.7 percent in February 2022, and both headline and core inflation are significantly above the upper limit of medium-term target band. The uncertainty surrounding price developments and its impact on economic activity is weighing down business and consumer confidence.

    Also, underlying inflationary pressures have increased, signalling broad-based price pressures. The Bank’s core inflation measure defined to exclude energy and utility prices, increased from 11.8 percent in December 2021 to 13.6 percent in January 2022 and further up to 15.4 percent in February 2022. Similarly, weighted inflation expectations comprising consumers, businesses, and financial sector, also picked up significantly over the period.

    Fiscal policy implementation has come under strain, reflecting embedded rigidities in the fiscal framework which requires extensive structural reforms to free fiscal space to restore both fiscal and debt sustainability. Revenue performance has been slow to align with projections, while expenditure remains rigid downwards despite the strong efforts to cut expenditure by 20 percent as announced by the Government.

  • Implementation of E-levy: List of transactions to be affected

    Implementation of E-levy: List of transactions to be affected

    As part of efforts to expand the country’s tax base, raise Ghana’s tax to GDP ratio and support government’s efforts at building an entrepreneurial country, government in the 2022 Budget, announced the introduction of the Electronic Transfer Levy (E-levy).

    The E-levy is a tax imposed on electronic transfers charged at the time of transfer.

    The levy, which was amended from 1.75 percent to 1.5 percent, will be a tax on electronic transactions, which includes mobile-money payments.

    The charge will apply to electronic transactions that are more than GH¢100 on a daily basis.

    Though the introduction of the Levy has received a lot of controversies, Parliament on March 29, 2022, passed the Electronic Transfer Levy Bill.

    Below are a number of electronic transactions that will be affected and those that will be exempted when the implementation kicks in later in May 2022.

    Transactions to be covered by E-Levy

    According to the Finance Ministry, E-Levy transactions will cover:

    Mobile money transfers between accounts on the same electronic money issuer (EMI),

    Mobile money transfers from an account on one EMI to a recipient on another EMI,

    Transfers from bank accounts to mobile money accounts,

    Transfer from mobile money accounts to bank accounts,

    Bank transfers on a digital platform which originate from a bank account belonging to an individual to another individual.

    Transactions to be exempted:

    The Ministry noted that the E-Levy will not apply to:

    Cumulative transfers of GHC100 per day made by the same person,

    Transfers between accounts owned by the same person

    Transfers for the payment of taxes, fees and charges on the Ghana.gov platform,

    Electronic clearing of cheques and Specified merchant payments (that is, payments to commercial establishments registered with the GRA for income tax and VAT purposes).

     ATM withdrawals are also excluded from the E-levy tax.

    The levy shall be administered by the Ghana Revenue Authority, GRA in accordance with the Revenue Administration Act 2016 (ACT 915).

    The levy shall be collected by the Ghana Revenue Authority, GRA through licensed Banks, Specialised Deposit-Taking Institutions, Payment Service Providers (PSPS), and Electronic Money Issuers (EMIS).

    After collection, the Commissioner-General of the Authority shall pay all amounts collected into the Consolidated Fund.

    According to the Ministry of Finance, Government is projecting to get about ¢6.9 billion from the tax on electronic transactions by the end of 2022.

  • Ghana losses US$923mn investment expenditure to inactive oil blocks awarded – ACEP

    Ghana losses US$923mn investment expenditure to inactive oil blocks awarded – ACEP

    Adnan Adams Mohammed

    The African Center for Energy Policy (ACEP) has reported that, inactive oil blocks which numbers more than 10 have denied Ghana of about US$923 million as at 2019.

    Ghana since 2007 has awarded 18 oil blocks to various oil exploration and production companies. Out this, only three blocks have been developed and producing, that include the Jubilee field, TEN fields and the SGN field.

    Although, according a report from the Petroleum Commission has indicated that, four inactive oil blocks have been canceled so far, which includes the Shallow Water Cape Three Point, Onshore/Offshore Keta Delta blocks among others.

    “Inactivity by oil block holders is causing the country to losses huge revenues as well as denying the country of potential investors”, Samuel Bokoe, an energy consultant has said during a training session organised for media persons and CSOs in Accra, last week. “The Petroleum Commission and relevant stakeholders must up their game to cancel all inactive oil block contracts so they can be available for the next bid rounds.”

    The training organised by the Natural Resorce Governance Institute (NRGI) to help enhance the capacity of CSOs and media to use publicly available contracts in the Petroleum Register to demand accountability brought together officials from the Petroleum Commission, selected media persons anti-corruption and energy focused CSOs for a day training.  

    The training sought to create awareness about the petroleum register and, provide skills required for CSOs and journalists to understand how to navigate the petroleum register.

    Some participants who spoke to the Economy Times after the training testified that, they have acquired skills needed to analyze and understand petroleum contracts including other publicly disclosed contracts to complement the efforts of oversight actors and regulators in monitoring these contracts.

  • Mobile Money Industry processes record $1 trillion in 2021

    Mobile Money Industry processes record $1 trillion in 2021

    The GSMA has today published its 10th annual ‘State of the Industry Report on Mobile Money’. It reveals that mobile money adoption and use saw continued growth in 2021, processing a record $1 trillion annually.

    The industry enjoyed a substantial increase in the number of registered accounts, up 18% since 2020 reaching 1.35 billion globally. The volume of person-to-person transactions were up to more than 1.5 million every hour.

    The report reveals that one of the most significant drivers of growth was merchant payments, which almost doubled year on year.

    It also highlights how mobile money continues to act as a core pillar of financial and economic inclusion, particularly for women.

    Mobile money diversified its value proposition beyond person-to-persontransfers and cash-in/cash-out transactions in 2021.

    It is now playing an important role in the daily lives of people and businesses, especially in low and middle-income countries (LMICs).

    The growth of ecosystem transactions such as merchant payments, international remittances, bill payments and bulk disbursements, together with interoperable transactions, are accounting for a more significant share of the global mobile money transaction mix.

    Merchant payments were instrumental in the growth of the mobile money industry in 2021. The value of merchant payments almost doubled, reaching an average of $5.5 billion in transactions per month.

    Providers are demonstrating that they can attract businesses to their platform with better incentives, such as efficient remote onboarding processes.

    For example, since Safaricom’s M-PESA began allowing companies to register for an account online in Kenya, more than 18% of new merchants are self-onboarding.

    “2021 was the year mobile money started to really diversify to B2B services. Beyond traditional person-to-person transactions, such as transferring money to family or friends, the industry is now central in helping small businesses operate more efficiently, and serve their customers better” said Max Cuvellier, Head of Mobile for Development, GSMA.

    Mobile money has also been a driving force for financial inclusion for the world’s most vulnerable, particularly women. Mobile money is empowering women to take more control over their finances and purchase goods that they urgently need.

    Additionally, 44% of providers responding to the GSMA Global Adoption Survey now offer credit, savings or insurance products, creating opportunities for underserved individuals to invest in their livelihoods and futures.

    With the gender gap in mobile money account ownership raging from 7% in Kenya to 71% in Pakistan – there remain some barriers to vulnerable people benefitting from mobile money.

    Owning a mobile phone is an obvious prerequisite to using mobile money, and women across LMIC’s are 7% less likely than men to own a mobile phone.

    Overall, 143 million fewer women own a mobile than men. Additional barriers to mobile money access include a lack of awareness of mobile money and a deficit in perceived relevance, knowledge and skills.

    While some progress has been made, the report makes clear that more must be done to address the mobile money gender gap across LMICs.

    Concerted action is required from policymakers, the private sector, donors and other stakeholders to learn from success stories, address the issue and ensure that existing gender inequalities are not further entrenched, especially in light of the COVID-19 pandemic.

    As highlighted in the report, in 2022, the number of people needing humanitarian assistance is predicted to soar to 274 million.

    Mobile money is expected to play an increasingly important role in both donations – where it makes delivery systems more efficient and transparent for humanitarian actors and donors – and the receipt of aid.

    The UN Refugee Agency sent $700 million in cash and value assistance (CVA) to 8.5 million recipients in 100 countries in 2020.

    They have set up digital payment programmes in 47 countries,15 of which use mobile money. In many humanitarian settings, the digitisation of CVA via mobile money has the potential to promote agency and dignity and foster financial inclusion.

    Mobile money also helps to enable access to basic utility services and agricultural solutions in LMICs. And to ensure this work continues, the mobile industry and humanitarian sector must keep working together to advance inclusive digital and financial inclusion even further for those who need it most.

  • Ghana’s bonds rally as investors react positively to passage of E-Levy

    Ghana’s bonds rally as investors react positively to passage of E-Levy

    Government’s tight fiscal measures targeted at closing the budget-deficit to 7.4% of Gross Domestic Product (GDP) by the end of 2022 is fuelling the longest bond rally in two months.

    According to Bloomberg, the yield on the country’s $1 billion bond maturing in 2026 declined for the sixth consecutive day, as President Nana Akufo-Addo reiterated government’s commitment to get the economy back on track.

    Previously, investors were concerned about the credibility of the country meeting its fiscal targets. They therefore demanded more interest for the nation’s dollar bonds, as a result of the country’s rising debt.

    However, the austerity measures announced by the Finance Minister, Ken Ofori-Atta, coupled with the Electronic Transaction Levy (E-Levy) have reassured investors that the government is bent on reviving the fiscal economy.

    Investors believe the recent bond rally may reflect some of the measures the government has recently put in place.

    In actual fact, Ghana’s dollar bonds sold-off from 85-90 cents on the dollar to around 60 cents.

    Kevin Daly, an investment director at Aberdeen Standard said, “the recent Ghana bond rally may reflect some of the measures the government put in place recently but Ghana risk premiums are also benefiting from the broader risk rally on the back of better headlines on the Russia-Ukraine conflict”.

    The E-Levy is projected to boost revenue to about 15.4% of GDP by the end of 2022, from a forecast of about 13% last year.

    Importantly, the reduction in the yield of the country’s international bonds is a good omen for the Ghanaian economy.

    The foreign exchange market is also expected to benefit immensely, as investors will hold firmly onto their investments.

    This will help reduce the pressure on the cedi as its rate of depreciation continues to slow.

  • BoG surveys reveal business confidence declining

    BoG surveys reveal business confidence declining

    By Elorm Desewu

    The Bank of Ghana’s (BoG) business and consumer confidence surveys, conducted in February 2022, revealed a softening of sentiments with business confidence declining by a greater extent.

    While consumer confidence dipped by 0.7 percentage points, business confidence declined by 9.6 percentage points. Consumers were mainly concerned about the persistent increases in fuel prices, increases in transportation fares and rising inflation. Businesses, in addition to these factors, were also concerned about the impact of these on macroeconomic conditions and on their short-term targets and profitability for 2022.

    These survey findings were broadly in line with observed trends in the February 2022 Ghana Purchasing Managers Index (PMI). The Ghana PMI, which is a measure of the rate of inventory accumulation by managers of private sector companies, declined below the 50.0 benchmark on the back of weak output and purchasing activity amidst rising inflation.

    The rebound in economic activity continued, as reflected in some improvements in the Bank’s updated Composite Index of Economic Activity (CIEA), although at a slower pace than in 2021.

    The index recorded an annual growth of 4.2 percent in January 2022 compared to 13.9 and 3.4 percent in the corresponding periods of 2021 and 2020. The key drivers of the index during the period were industrial production, exports, credit to the private sector and airpassenger arrivals.

    Consumption of goods and services, and construction activity, however, slowed down, acting as a drag on the index.

  • Banks record GHC1.3b profit…for 1st two months of 2022

    Banks record GHC1.3b profit…for 1st two months of 2022

    By Elorm Desewu

    Banks’ profitability has improved slightly over the first two months of 2022, recording a profit before tax of GH¢1.3 billion, compared to GH¢1.1 billion during the same period last year.

    The growth in net interest income dropped marginally recording 10.3 percent to GH¢2.2 billion, compared to 10.9 percent a year ago. Net fees and commissions grew by 11.8 percent to GH¢486.8 million, lower than the growth of 13.7 percent registered during the same period last year.

    Other income of the banks stood at GH¢383.2 million, representing 95.5 percent growth, compared with a contraction of 16.5 percent in the same period last year. These developments resulted in a 16.9 percent growth in operating income to GH¢3.1 billion, compared with a growth of 8.7 percent in the corresponding year. However, operating expenses went up by 21.3 percent on account of higher administrative costs and emoluments, relative to a contraction of 0.3 percent in the same period last year.

    Developments in the banking sector over the first two months of 2022 show continued strong asset growth. Total assets stood at GH¢187.8 billion in February 2022, representing 23.5 percent annual growth, compared with 18.5 percent growth in the previous year.

    The growth in assets was on the back of increased deposits and borrowing. Total deposits recorded a year-on-year growth of 18.2 percent to GH¢123.0 billion. Borrowing increased significantly by 78.8 percent to GH¢25.5 billion, relative to the contraction of 23.4 percent in the previous year.

    The rebound in credit growth continued in the first two months of 2022, with a 70.7 percent increase in New Advances to GH¢8.0 billion, compared with 24.6 percent growth in the same period last year. 15. Trends in the financial soundness indicators remained positive, underpinned by strong solvency, liquidity, and profitability.

    The Capital Adequacy Ratio of the Industry was 19.6 percent at end-February 2022, well above the current 11.5 percent regulatory minimum threshold. Core liquid assets to short-term liabilities was 24.2 percent in February 2022, compared with 26.5 percent in the previous year.

    Improvements in asset quality continued into 2022, with the Non-Performing Loans (NPL) ratio declining to 14.4 percent on average, at end-February 2022, compared with the NPL ratio of 15.3 percent in February 2021.

    Credit to the private sector continued to recover, consistent with the rebound in economic activities. In nominal terms, annual growth in private sector credit increased significantly to 17.1 percent in February 2022 compared with 7.4 percent in the same period of 2021.

    In real terms, private sector credit grew by 1.2 percent relative to a contraction of 2.7 percent, over the same comparative period. The latest credit conditions survey revealed tightened credit stance on loans to enterprises. However, demand for credit by households and small and medium sized enterprises are projected to increase in the near to medium-term.

  • Economists, MoMo vendors and users respond negatively to E-Levy passage

    Economists, MoMo vendors and users respond negatively to E-Levy passage

    Adnan Adams Mohammed

    Senior economists including a former finance minister, Mobile Money vendors and users have reacted negatively to the passage of the Electronic Transactions Levy bill into law by the current government.

    The bill was passed into law last week by one-sided parliament due to a walkout staged by minority NDC members of parliament and subsequently filing court action at the Supreme Court for stay of execution to challenge the ‘lack of quorum’ in the House at the time of passage of the bill into law.

    Mobile Money (MoMo) vendors across the country complained that, there were madrush withdrawals at their various mobile money vending outlets causing them to run out of cash which has tendency to collapse their petty business in the circumstances of the current economic hardship. However, it took the president, Nana Akufo Addo two working days to assent to the E-Levy law despite majority of Ghanaians haven openly kicked against the levy, especially taxing MoMo. An economics professor at the University of Ghana Business School shared his disappointment at the government for ignoring a better and progressive tax alternatives to push through the regressive E-Levy.

    “There are more efficient, progressive, fairer and equitable means of generating more tax revenue by improving efficiency along with existing tax handles. How much this e-levy can raise is far lower than what we could have gained if we had passed the exemption bill in 2019”, Prof. Godfred Bokpin intuited. “During the 2019 SONA, the President told us that the biggest threat to Ghana’s revenue base is an exemption and told us that in 2018 alone, Ghana lost GHS4.66 billion and assured us that the new bill is being sent to Parliament. After all these years, nothing has been done. But look at the urgency with which we want to pass the e-levy. When you do that, you’re creating some sort of imbalance that says that the economy is set up to favour foreign capital against domestic capital formation and that is unfortunate.”

    Also, Dr. Kwabena Duffuor, a former Finance Minister, reacted sadly to the news of the passage. He described the President Nana Akufo-Addo’s administration and the NPP MPs as not a ‘listening government’.

    Lamenting on his Facebook wall the morning after the e-levy was passed, Dr. Duffuor said, “The NPP has progressed in their passage of the unpopular e-levy bill. May it be on record that despite the hardship of the Ghanaian people and disaffection for the e-levy, the NPP ignored these concerns and added to our tax burden.”

    Just like many well-meaning and experienced economic specialists, Dr. Kwabena Duffuor has, in the past, offered several suggestions on alternatives to the E-levy.

    Dr. Duffuor, in an interview he granted on Starr FM in February this year, had said; “Currently in Ghana, foreign interests are largely the main beneficiaries of our extractive sector at the expense of Ghanaians who benefit from very little revenue from our natural resources”.

    “We must start looking at the sector we have ignored over the years – the extractive sector. A well-managed natural resources centre has emerged as the safest route to prosperity in many developed countries such as the USA, UK, and Germany. We must go back and renegotiate our mining agreements for higher revenues rather than stick to colonial agreements to the detriment of our people”.

    The levy rate was amended from 1.75 percent to 1.5 percent and will apply to electronic transactions that are more than GH¢100 daily.

    Critics of the proposal have warned that this new levy will negatively impact the Fintech space, as well as hurt low-income people and those outside the formal banking sector.

    The levy has been the source of tension in Parliament since it was introduced in the 2022 budget. The tensions culminated in a scuffle between lawmakers in Parliament in December 2021.

    The government has, however, argued the levy would widen the tax net and that could raise an extra GH¢6.9 billion in 2022.

    There are also concerns that the government may securitize proceeds from the e-levy to raise extra revenue.

  • Natural Gas could position Ghana as a powerful country – Energy Communicator

    Fiifi Abdul Malik

    Energy sector communicator has reiterated the call on government to take a critical look at Ghana’s gas industry, saying the country needs to “plan properly” to attract more investors for it.

    The energy communication expert believes the country will be better-off if it should develop a proper system to manage it’s gas sector.

    Speaking at national dialogue organized by the Natural Resource Governance Institute (NRGI) and the Africa Centre for Energy Policy (ACEP) on Ghana’s gas, the communication expert called on stakeholders to keep brainstorming in support of government to manage the sector. Themed “National Dialogue on the future of Ghana’s Gas Sector”,  the dialogue held in Accra brought some energy expect and industry players to  brainstorm on ways to develop the country’s “transition fuel”.

    “We are talking about a cleaner fossil fuel here, cleaner than oil and people call it the transitional fuel,” Chief Executive Officer of Ghana Upstream Petroleum Chamber, David Ampofo, has said. “Look at how it is used in geopolitics, it is a big thing. There are issues of Europe trying to wean itself from Russian natural gas, that should tell you something.

    “It provides power and allows you to industrialise that is the way you develop. So natural gas is critical,  the crude is important.”

    Mr Ampofo admitted that programs like that will be helpful to government in it’s policy direction for the industry

    “It is good to share opinion, take a view of what is to come,” he said.

    “Natural gas is becoming increasingly important to us. I am glad we are talking about natural gas now, giving that there is energy transition underway.

    “These things are things that we need to take a view on, plan properly, have good policy, attract investors and work together for the benefit of the country.”

    A pool of experts from both the Natural Resource Governance Institute (NRGI) and the Africa Centre for Energy Policy (ACEP) spoke at the program on Tuesday.

    This dialogue sought to discuss critical issues related to the gas sector and explore the current and future investments in the sector to ensure adequate and sustainable supply of domestic gas within the context of the energy transition and Ghana’s net-zero ambitions.

  • E-Levy Walkout: Minority Smartness Pushed Majority To Make Unconstitutional Approval

    The ‘supposed’ passage of the controversial Electronic Transfer Levy (E-Levy) by a one-sided Majority side was an illegality, per the rules on voting in Parliament, the Minority has pointed out.

    In the hung Parliament of 137 MPs apiece for the Majority New Patriotic Party (NPP) side and the Minority National Democratic Congress (NDC) side a required quorum for the vote would have been 138 MPs, the Minority has explained.

    A quorum is the minimum number of MPs that must be available in parliament for a vote to legally carry and in the hung Parliament it is at least 138 MPs.

    However, the NPP Majority was critically bereft of one MP, Sarah Adwoa Sarfo of Dome-Kwabenya, who continued with her crippling hiatus from Parliament.

    And so, even with the independent MP for Fomena, Andrew Amoako Asiamah, voting along with the Majority, the NPP could not marshal the needed 138 MPs to form a quorum. However, the Majority side went ahead with the vote anyway.

    The tactic that the crippled NPP Majority side was looking to put into effect to pass the thievish e-levy was quite a convoluted one that started from the Supreme Court where the Akufo-Addo government had secured an injunction against the NDC’s MP for Assin North, Hon. Gyekye Quayson.

    It would be recalled that the Supreme Court had in its umpteenth controversial ruling that only favored the NPP Government of Akufo-Addo, upheld a controversial injunction against Hon. Quayson by a Cape Coast High Court which ruled that je had no right to present himself as MP because he had run for elections while bearing dual citizenship.

    Because of the injunction, Hon. Quayson would have been acting illegally if he had entered Parliament to vote on the e-levy.

    The NPP Majority’s hope was that in the NDC Minority’s passionate opposition to the e-levy and the controversial nature of the injunction against him, they would have allowed Hon. Gyekye Quayson to join them in Parliament to vote against the thievish levy.

    If the Minority had done that, the Majority would have then run to the Supreme Court which is super friendly to the NPP Government and filed a case of contempt against Hon. Gyekye Quayson and gotten his vote nullified by the court.

    This would have then meant that in the e-levy vote, 136 Majority MPs together with Fomena’s independent MP, voted in favor of the levy while 136 of the 137 votes cast by the Minority MPs was legal.

    By this technicality, the e-levy would have been duly passed.

    However, the Minority MPs were smarter – led by Minority Leader, Haruna Iddrissu, they boycotted the vote leaving only 136 Majority MPs and the independent candidate to vote.

    This meant that, the at least 138 MPs that they need to form a quorum to vote was not available.

    Even so, they massively voted for the thievish levy which gives government the right to enter into people’s mobile wallets and bank accounts to deduct money immediately they transfer money.

    But then, the constitutional implication is that the supposed passage of the e-levy was by a Parliament that could not form the quorum of at least 138 MPs as required by article 104(1) of the 1992 constitution.

    The Minority MPs decision to walk out of Parliament during the vote therefore was a masterstroke that made it impossible to form a quorum. And so, after the supposed passage of the e-levy Bill into law, the Minority has been indicating intent to challenge it in court.

    Already, Minority Leader, Haruna Iddrisu, has called the supposed passage a charade.

    “The Majority of less than 137 conducting businesses only proceeded on illegal and unconstitutional business. Parliament did not have the numbers to take any decision that should be binding Parliament and Ghanaians,” the Minority Leader said.

    Hon. Idrissu, together with two of his lieutenants – North Tongu MP, Samuel Okudzeto Ablakwa and BAWKU Central MP, Mahama Ayariga, have filed for a stay of execution at the Supreme Court to prevent President Akufo-Addo from assenting the law.