Category: News

Adnan Adams Mohammed The government has given resounding assurance that, before Parliament goes on recession this year, the Petroleum Agreements (PAs) for the two companies that won oil blocks through the competitive bidding process which started some three years ago, in 2018 would be ready. In July 2019, the government announced First Exploration and Petroleum Development Company partnered by Elandel Energy Ghana Limited and Eni Ghana Exploration and Production Limited partnered by Vitol Upstream Tano Limited as the winners of the GH-WB-02 and GH-WB-03 oil blocks offshore Western Ghana. Although the government has continued negotiations with the bid winners for the award of petroleum agreements in respect of the respective blocks won, supply side accountability on the negotiation processes as well as on other evolving licensing and contracting issues has been weak at best, due partly to COVID-19 and related reasons. With new developments around upstream oil licensing, such as, the Ghana National Petroleum Corporations (GNPC) proposal to purchase additional stakes in some oil blocks, and the COVID-19 situation gradually easing, demand side accountability on the licensing/contracting and negotiation processes is increasingly on the radar of both civil society and government actors. It is in this light that, the Alliance of CSOs Working on Extractives, Anti-Corruption and Good Governance considers it expedient to convene a roundtable to review the licensing round processes, examine the findings of the country’s First Oil Licensing Round Monitoring Report and update stakeholders on the negotiation and other outstanding processes. “As it is now, everything has been concluded technically but we yet to sign the Petroleum Agreements (PAs) that we have all agreed. Take to cabinet for approval, then take to parliament for ratification to the make document legal and binding”, Benjamin K. Asante, Director of Petroleum at the Ministry of Energy said, last week, during the roundtable discussion in Accra. “We hope before parliament goes on recession in December, the PAs would have been ratified.” He explained that, “Delays in the negotiation and award of blocks stage have been surmounted. Due to COVID-19 we couldn’t continue meeting the companies . Companies were not allowed to travel and also virtual meetings were not too effective. But now we have come back. We have concluded all the issues in the negotiation and I can tell you, we are now turning leaves, page by page, to see if everything is intact.” Ghana’s upstream oil and gas sector plays an important role in the national development agenda and as part of measures to improve good governance in the upstream oil and gas sector, Ghana enacted the Petroleum (Exploration and Production) Act, 2016 (Act 919) to replace Petroleum (Exploration and production) Act, 1984 (PNDCL 84) which had been in operation for over three decades. An important progressive governance provision introduced by Act 919 is the default requirement for a competitive oil bid and licensing round comparative to the sole requirement of direct negotiation contained in PNDCL 84. To give meaning to this new requirement, the Government of Ghana (GoG) successfully launched the country’s first ever oil bid and licensing round in 2018 through 2019, leading to the award of blocks and commencement of negotiations for the grant of petroleum agreements to successful bidders in 2019/2020. To support government efforts and enhance transparency in the competitive licensing process, the Natural Resource Governance Institute (NRGI) in 2018 convened and coordinated a group of national civil society organizations, the Civil Society Bid and Licensing Round Monitoring Group, to monitor and evaluate the country’s first competitive oil licensing process. The resultant report published in 2020 highlights the successes, challenges and recommendations for improving competitive licensing round and contract negotiation processes in the future. Meanwhile, a key figure on the Bidding Committee representing the CSOs, Benjamin Boakye, Executive Director of ACEP in his concluding remarks at roundtable discussion noted that, the CSOs hope to enhance their influence and demand side accountability generally in future licensing processes. The roundtable brought together members of the Alliance of CSOs working on Extractives, AntiCorruption and Good Governance, government actors and other oil governance stakeholders in Ghana, including the petroleum upstream chamber, policy think tanks, development partners, donor agencies and the media.

By Elorm Desewu The cost of credit to the private sector and public institutions from commercial banks in the country is to be expensive in the wake of Monetary Policy Committee, (MPC) decision to hike the policy rate by 100 basis points to settle at 14.5 percent from 13.5 percent. This also means the government is unlikely to achieve its end of year Gross Domestic Product, (GDP) growth of 5 percent. The policy rate is the at which banks borrow from the central bank as their last resort and also serves as benchmark for setting the Ghana Reference Rate for the banks in the country. Headline inflation has risen consistently from the low of 7.5 percent in May 2021 to 11.0 percent in October driven by both food and non-food price increases. In addition, all the Bank’s core measures of inflation have increased, indicating broad-based underlying inflation pressures, with the potential of de-anchoring inflation expectations. Currently, headline inflation is above the upper limit of the medium-term target band and the Bank of Ghana, (BoG), noted significant risks to the inflation outlook. These risks include rising global inflation, high energy prices, uncertainties surrounding food prices and investor behaviour. BoG further noted that these elevated inflationary risks, require prompt policy action to re-anchor inflation expectations to safeguard the central bank’s price stability objective. Recent price developments show elevated pressures on headline inflation in the second half of 2021. The two readings since the last MPC meeting pointed to a sharp increase in headline inflation from 9.7 percent in August 2021 to 10.6 percent in September and further up to 11.0 percent in October. This indicates that currently inflation is out of the medium-term target band of 8±2 percent by 1 percent. The rise in inflation for October 2021 was largely driven by non-food prices, which increased from 9.9 percent in September to 11.0 percent in October 2021, while food inflation dipped from 11.5 percent in September to 11.0 percent in October 2021. Similar to the trends in headline inflation, underlying inflation pressures are also increasing. All the Bank’s core measures of inflation increased over the period. The main core inflation measure, which excludes energy and utility, increased from 9.5 percent in August 2021 to 10.0 percent in September and further up to 10.4 percent in October 2021. In addition, the weighted inflation expectations index, which captures inflation sentiments of consumers, businesses and the financial sector, also picked up significantly in October 2021. On the money market, interest rates generally trended downwards over the review period. The 91-day and 182-day Treasury bill rates declined to 12.5 percent and 13.2 percent respectively in October 2021, from 14.05 percent and 14.11 percent, respectively in October 2020. Similarly, the rate on the 364-day instrument decreased to 16.2 percent from 17.0 percent over the period. Except for rates on the 3-year, 15- year and 20-year bonds which remained unchanged at 19.0 percent, 19.8 percent and 20.2 percent respectively, rates on the other medium to long-term instruments generally declined during the period. On the secondary market, however, rates have started increasing across the spectrum of the yield curve. On the interbank market, the weighted average rate declined to 12.7 percent from 13.6 percent, largely reflecting improved liquidity conditions, which transmitted to lending rates. Average lending rates of banks declined to 20.3 percent in October 2021 from 21.3 percent in October 2020, consistent with developments in the interbank market.

Adnan Adams Mohammed Contrary to widespread information that, the 2022 budget statement has been rejected by Parliament, there are others saying it is not constitutional. A veteran Parliamentarian from the majority side or ruling government has diffused the public information of he budget rejection. Parliament has not constitutionally rejected the budget, the Member of Parliament for Adansi-Asokwa said in an interview shortly after the Speaker of Parliament declared the 2022 budget rejected. “Read my lips, Parliament has not constitutionally rejected our budget, we shall return to the House on Tuesday, November 30”, Hon K.T. Hammond roared. Parliament, last week, voted against the 2022 Budget Statement and Economic Policy for the government. This was after the House concluded a debate on the Budget on Friday evening [Nov 26, 2021] and the Majority side walked out of the Chamber. Through the voice vote, the House rejected the Budget when the Speaker asked the question, a few minutes to 8pm on Friday. The Majority side had walked out of the Chamber and so when the Speaker put the question for those in favour or against, the “No” voice votes had it and there was no “YES” voice vote. This is the first time in the fourth Republic that a budget has been rejected. Even though the Majority were not present to participate in the exercise, the Speaker said their absence could not prevent the House from proceeding with the business of the day. Since the presentation of the budget by Ken Ofori-Atta, the Minority have vowed to oppose it, saying that its approval will impose hardship on Ghanaians. After a head-count which saw all Minority MPs on their feat in opposition to a motion for the Finance Minister to have a further engagement with the leadership of Parliament, the Speaker ruled that the budget had been rejected. “The No’s have it. The motion is accordingly lost,” Alban Bagbin declared after the headcount. Prior to the vote, the Finance Minister had appealed to the Speaker to allow him to further engage the leadership of Parliament over the budget. But the appeal was turned down by the MPs through a voice note. The Deputy Majority Leader, Alexander Afenyo-Markin, then challenged the Speaker’s ruling and called for a division. A division is a form of voting from MPs whilst ensuring that all non-MPs are cleared from the lobby. In view of that, the Speaker directed that all non-MPs will have to vacate parliament for that form of voting to take place. At this time, the Finance Minister was in the chamber, yet was not a Member of Parliament. His presence was opposed by the Majority MPs. They contended that Ken Ofori-Atta was a Minister, hence, his ineligibility to be in the chamber. After noticing that the General Secretary of the National Democratic Congress was in the public gallery, the Majority also demanded the removal of Asiedu Nketia from Parliament. Whilst the NDC MPs remained calm, their colleagues on the other side created a chaotic scene, banging on the table and accusing the Speaker of bias. Minutes later, the leadership of the Majority side staged a walkout. The Speaker then suspended the proceedings. Several minutes later, the Speaker returned and asked if there was a quorum for business to continue. After establishing that proceedings could continue, he put out the question again – whether the appeal from the Finance Minister should be considered. After the Minority had their way through a voice note, he proceeded to the main agenda of the day; the approval of the budget. Alban Bagbin subjected the approval of the budget to a voice vote and the Minority had their way. Since the presentation of the budget by the Finance Minister on November 17, 2021, the NDC MPs have vowed to kick against it. They have said that the approval of the budget will impose further hardship on Ghanaians. One of the policies in the budget that the NDC MPs have kicked against is the introduction of a 1.75% electronic levy. Minority Leader, Haruna Iddrisu, communicating his side’s position to the government, said the e-levy proposal will further marginalize the poor and will defeat efforts at financial inclusion. He added that the levy possesses all the elements of double taxation “and even the projection, 1.75% may as well work out to be 3.75%.” “Mr Speaker, our concern is whether the e-levy itself is not and would not be a disincentive to the growth of a digital economy in our country; and we are convinced that the e-levy may be as well be a disincentive to investment and a disincentive to private sector development in our country.” “We in the Minority may not and will not support the government with the introduction of that particular e-levy. We are unable to build a national consensus on that particular matter,” he revealed. The Speaker then during before the proceedings for the remarked that there was no majority side in Parliament and reiterated his willingness to serve the interest of Ghanaians. “Honourable members, early in the days after my election as the Speaker, I did pledge to the good people of this country, truly that I will do everything within my power not to obstruct government business.” “I did so expecting reciprocity that government will also do everything not to frustrate or obstruct the business of Parliament. As your Speaker, I will do all I can, not to allow government to obstruct or frustrate Parliament…” “That is a pledge to the good people of Ghana and there is a reason why the good people of Ghana elected this Parliament, a hang Parliament, those who prefer to say a near hang, it is a hang Parliament of 137, 137. The Independent who decided to do business with one side, gives them a majority group, there is no majority party in this House.” Mr Bagbin said it was a new beginning where “for the first time a majority has walked out from its own business.”

A former lecturer at the University of Ghana, Legon, is being terrorised by hooligans (landguards) in attempt to takeover his property at Mempeasem at East Legon in the Greater Accra Region. A known landguard, Daniel Larbi and his men, have been using all sort of hooliganism to chase the 70 year old Dr John Williams Oteng from his one and half plot of land legally acquired. The notorious land guard who has been terrorizing residence of Mempeasem was said to have boasted of using his powers to grab any land he wants and that of the old man’s pieces land. Our checks reveals that Daniel Laryea and his accomplice Eng. Samuel Larbi Darko, a former employee of Lands Commission in Accra and currently the Chief Executive Officer of Losa Mills Consult Ltd have been accused of numerous land theft by the residents of Mempeasem. Daniel Laryea using some hard core land guards popularly known as Mboma Rasta and his boys to invade a private land in a ‘show of force’ trying to take the parcel of land from its’ owners. Even though, Dr. Williams had put up a five bedroom apartment on the land, this could not deter them from backing off the pieces of land but trying to use violence tactics to steal the old man’s property. Further checks reveals that Dr. Williams has been occupying the land for the past 30 years. Residents accused the East Legon police station of been brain behind Daniel Laryea’ protection. And the reason for that act of using force is that he is interested in the land, and that the value of the has changed over the years. Daniel Laryea is said to have also shown airs indicating that if the owner tries to make any attempt on land then he will release his attack dogs on him. Thealhajj.com has gathered that Daniel Laryea and his accomplish, the CEO of Losa Mills have been boosting of using the police to execute their nefarious activities within the East Legon and its environs. According to the facts of the matter, the land in question was sold to Dr. John Williams Oteng by the chief of Mempeasem, Nii Sodjah Obodai some 30 years ago. However, the land that has five bed rooms built on it by the owner catches the eye Danieal Laryea and his chief surveyor. No amount of plea from the old man could keep these land guards off the land.

Adnan Adams Mohammed Civil Society Organisations (CSOs) in the country have called on the government to consider rethinking through the Road Fund instrument which they believe the sources are spread on too many government revenue elements. They CSOs believe the Road Fund levies can be reconstituted and charged against one revenue element to ensure proper tracking, accountability and transparency. They also want the government to reconsider its decision to introduce the Electronic Transactions Levy (E-levy) of which a part will be used to support the Road Fund in place of the road tolls which it proposes to be abolished. Already, there are component of the Road Fund Levy on fuel prices, Driver and Vehicle License fees, the newly proposed E-levy and parts of the Annual Budget Funding Amount which goes to road infrastructure development as well as cocoa roads fund. All these are geared towards roads infrastructure development and maintenance. Despite all these sources of funds, the citizens do not see value for their money as most of the roads are in deplorable states including major trunk roads and highways and feeder roads. “The E-levy is receiving backlash because there are too many other levies and taxes that are intended to service the roads and we are not seeing accountability for those roads”, Dennis Gegyir , NRGI African Policy Advisor said during CSOs post-budget reaction on yesterday in Accra. “Talk about the 48pesewas levy on fuel prices, ABFA allocation to the road sector mostly used to settle road arrears payment among others.” “So what we are calling for is a recaliberation. What we mean is for government to sit back and indicate the financial needs for the road sector. That should be done comprehensively. We should know how many kilometers of roads we have and what we need more. What are the funding requirement. Then we come back to discuss how to raise funding for that with timelines for execution. That will be understood and citizens will be able to monitor how implementation is done”, he noted. Mr Gegyir speaking to the media after the CSOs engagement with the media retorted that, “Now the problem is, if you have an already mess up system where many of the road cost goes to interest on arrears for not paying interim payment certificates raised by contractors, cost demobilization and remobilization of contractors from and back to site which are avoidable with proper management and funding system in place, then citizens will not be willing to pay more to such funds.” Dr Alex Ampaabeng, Fiscal Policy Specialist at Oxfam, also speaking at the event on the fiscal policies in the 2022 budget reiterated that, the road tolls abolishment and the E-levy need critical rethinking and reformulation of those policies for better results in terms of revenue generations. In a recent research work by Richard Ofori, a Master of Business Administration candidate at the University of Ghana on the topic: “Financial Effects of Ghana Road Fund Misappropriation: A Case Study on the Ghana Highway Authority”, it indicated that, the “..causes of the misappropriation of road funds include the delays in monthly payment of vital projects, Inflation rates, Project disputes/project litigation, schedule completion slippage and government interference. In comparing developmental projects to rehabilitation road projects respondents indicated that the later was less expensive- over GHS 99,135,117.27 was lost through developmental projects alone. Also government role in misappropriating road funds can lead to corruption.” The Road Fund is a statutory fund dedicated to financing the routine and periodic maintenance of the nation’s road network, including road safety activities and selected projects. Sources of revenue for the fund are the fuel levy, road tolls, vehicle and licence inspection fees and levies from international transit vehicles. The board was established in 1985 to secure sources of funding for the preservation of the roads. Some provisions in the Road Fund Act, 1997 (Act 536) mandate the board to ensure that the nation’s trunk, feeder and urban roads are regularly maintained. The fund was initially managed collectively by the ministries of Finance and Roads and Highways and the Controller and Accountant General’s Department. But, following some administrative problems, the fund was restructured through the Road Fund Act, 1997(Act 536), leading to the setting up of a 13-member board with five representatives from the private sector and eight from the public sector. The current board is chaired by Mr. Alexander Afenyo-Markin, the Deputy Majority Leader in Parliament. The Minister of Roads and Highways, Mr. Kwasi Amoako-Atta, at the inauguration of the current board, charged the members to be innovative and work hard to turn around the fortunes of the fund, said to have been saddled with debts since 2016. “You need to continue to work hard and put yourself together to be creative and innovative to raise new funds. You have the support of government because the government itself is initiating a lot of activities to revamp the fund, but you still have to generate more money into the Fund to meet the payment schedule of our hardworking contractors”, the Minister told the Board members. This therefore supports the CSOs call for the government to be innovative and reconstitue the road fund instrument to ensure efficiency, enough accountability and value for money.

Author: Neenyi Ayirebi-Acquah, Economic Policy Analyst, Ghana Growth and Development Platform (GGDP) The Ghanaian economy has been reeling from the devastating effects of COVID since it hit in March 2020. Admittedly, prior to this, the economy had vulnerabilities, but COVID certainly tipped things over. Government had to resort to aggressive fiscal spending against the backdrop of the collapse of its export revenues and a hit to our growth projections which has adversely impacted domestic revenue mobilization. To compensate for the shock, government had to rely on fiscal support from the IMF, World Bank, AfDB, drawdowns on our Petroleum funds and BoG financing. Despite this, the economy recorded a fiscal deficit of 15.2% at the end of 2020. Even though the economy has began recovering from 2020, the challenges remain, which is principally driven by the lack of fiscal space due to the high interest obligations and the public wage bill which absorbs all our domestic tax revenue making borrowing a necessity to forestall an economic collapse. Despite the best efforts of economic managers, the economy is yet to recover, in any significant way, to give any respite. The harsh reality is that Ghana’s economy finds itself in a debt trap, a reality we are yet to publicly admit. A consequence of this is that we do not have enough resources to invest in our economy in the way we need to drive the levels of growth we need to get out of this debt trap, in the medium term, and to invest in our own development. In the 2022 budget which was read yesterday on the 17th of November the Minister states that government’s goals are to rebuild investor confidence in the economy (an admission that investors have lost confidence in our economic management and our ability to service our debts) and to facilitate growth through entrepreneurship. However, the reality is that the 2022 budget is geared more at regaining access to the Eurobond markets on favourable terms down the line since the economy cannot operate without borrowing. The goal to get growth through youth entrepreneurship, welcome as it is, remains to be seen as there has not been any demonstrated impact on growth from previous similarly structured interventions or programs. For me, the key questions are: (1)Are the measures in the 2022 budget enough to assure the Eurobond market that we have a clear path out of our quagmire? And even if we succeed in this, our ability to borrow is severely constrained given elevated default risks increasing premiums on our debt and constrained growth post COVID. (2)What does (1) mean for our own economic development in terms of job creation for our citizens, especially the youth, infrastructure, and social spending? If a significant amount of our domestic revenue is servicing debts with principal payments kicking in in 2023, there isn’t enough left for critical capital spending needed to expand the economy and drive growth. Where does this leave the millions of unemployed youths and middle-aged persons who need a regular income? This is even more dire because Ghana has a very high dependency ratio putting a lot of pressure on the few who are working. Given that we spend all our domestic revenue on only interest payments with the remainder taken up by our public wage bill, and that we need to borrow to finance the rest of our expenditure, Ghana can be said to have found itself in a debt trap. A debt trap is defined as “a situation in which a debt is difficult or impossible to repay, typically because high interest payments prevent repayment of the principal.” And given our already high interest payments, going forward, we are constrained in our ability to borrow so where does that leave us? This is the question that I was hoping the 2022 budget would answer credibly but didn’t. All that it offered was to increase taxes and socio-economic hardship in the process to be able to regain access to the Eurobond market and a flawed growth strategy of youth entrepreneurship whose contribution to GDP in past iterations remain to be seen. The additional increase in GDP over the next three years is projected to be GHS 60bn. This makes government’s projection of catalyzing GHS 20bn in funding towards youth entrepreneurship in this same period for growth very ambitious. So, what is the wany forward then? In my view, the starting point on the way out of this rut we find ourselves in is for economic managers to admit the stark reality that we are in a debt trap and have a major re-think of economic policy going forward. Tinkering with youth employment under the guise of promoting entrepreneurship won’t cut it. Most businesses take about five years to achieve steady state and to survive to that point requires more capital than what is being bandied about. Our dire situation requires a major rethink of economic policy principally aimed at growing out of our debt situation. To achieve this, we must identify and invest strategically in the key sectors of the economy of Agriculture and Manufacturing that will deliver growth, jobs and attract the capital we need to grow out of our debt. What the Honorable Minister for Finance offered fell short of that in a big way.

Adnan Adams Mohammed A financial analyst has alarmed that, Fixed Income Market has reacted negatively to the projected macroeconomic indicators presented in the 2022 budget statement. They indicated that, the projections are incredibly unrealistic as compared to the projections of the Breton Woods institutions. A statement issued by the analyst narrated that, he was out of town when the budget was presented last week to Parliament, but he quickly tasked his colleagues who are Sovereign and Fixed Income Researchers in Europe to assist him with the market investors reaction upon the reading of the Ghanaian government budget since the country heavily depends on Fixed Income Market for bond roll-out. He noted, the results shocked him. “I was shocked!! The report received contained negative reaction from the market. This is as a result of credibility gap in the budget”, Dr. Jerry Monfant retorted in his post-budget statement. “The Finance Minister presented different financial projections in the budget which contradicts financial information relay to the investors by the IMF. This caused uneasy calm as bond yield fall up to 6 points at the short end and 3-4 points at long end, on the 17th November when the budget was table in Parliament”, he alarmed. Read full statement below: GHANA IN TROUBLE AS SOVEREIGN FIXED INCOME MARKETS DEEMED 2022 BUDGET STATEMENTS TO BE DUBIOUS From DR. JERRY MONFANT’s DESK On the 17th of November 2021, the Finance Minister presented 2022 budget to the Ghanaian Parliament. I was out of town, but I quickly tasked my colleagues who are Sovereign and Fixed Income Researchers in Europe to assist me with the market investors reaction upon the reading of the Ghanaian government budget since the country heavily depends on Fixed Income Market for bond roll-out. This was also key to me, because I am billed to speak at the annual conference of the Fiancial and Investment Analysts in Ghana in the coming days. I was shocked!! The report received contained negative reaction from the market. This is as a result of credibility gap in the budget. The Finance Minister presented different financial projections in the budget which contradicts financial information relay to the investors by the IMF. This caused uneasy calm as bond yield fall up to 6 points at the short end and 3-4 points at long end, on the 17th November when the budget was table in Parliament. The case in point was that; the overall fiscal deficit is seen as narrowing from 9.4% of GDP in 2021 to 6.4% of GDP in 2022 per the budget presented to Parliament. This was seen as a strong and front-loaded reduction which relies on unrealistic revenue projections from the government. Another shocking scenario is where the 2022 budget project the overall deficit ( which includes financial and energy sector restructuring costs) to narrow from -12.1% of GDP to -7.4% of GDP in 2022. This was absurdity!! It takes a magic to be able to significantly reduced such deficit to -4.7 percentage points within a year! Any good economists can detect inaccuracies and untruthful in such projections. Another shocking scenario is the projection of revenue growth of 43 % for year 2022 through tax compliance and administration. The question we debated among ourselves was, which type of economic theory could jump revenue up to almost half the previous years budget? While I am writing, this information is public within the International Capital Markets, and Ghana’s credibility is as stake! However, we note that, under either measure, the government’s deficit projections for 2022 is very different from what the IMF made available to the Capital Markets! The government position was too optimistic than those presented by IMF, and this raises very serious credibility gaps. In 2022, the government projected overall fiscal balance including restructuring energy sector debt cost to -7.4 % of GDP, while IMF recorded -10.5 % for the same year. In 2023, the government projected fiscal deficit of -5.5 % of GDP while IMF projects -9.5% of GDP. In 2024 government projected fiscal deficit -4.5 % of GDP, and IMF recorded -9.3% of GDP. Such a budget has failed to convince investors that envisaged fiscal path is achievable. Question about debt sustainability will remain, putting bond yield under pressure, threatening markets access and ultimately increasing the chances of financial crisis! The legislature should redirect their efforts towards the budget statement credibility which is becoming a serious dent on our sovereign credibility and imminent financial crisis rather than reducing their argument on momo tax!! If the entire document is not credible, why waste your time on taxes captured in it! Stay safe, don’t be accomplices. Good morning 🙏

 E-Levy: No stakeholders consultation yet

 

Adnan Adams Mohammed

Stakeholders in the electronic transactions space have hit at the government for not consulting them throughout the process of the Electronic Levy proposal as announced as one of government’s economic policies in the 2022 budget statement. 

Unofficial information picked as at press time was that the finance ministry, after presenting the proposal was now preparing to meet selected stakeholders from the regulattory bodies, telecommunication companies, banks and the fintech operators on Friday, November 19, 2021 to now discuss what exactly the tax entails, how it should be calculated and implemented.

Already, the Ghana Chamber of Telecommunications has said that the introduction of the 1.75% levy on electronic financial transactions is ill-timed. It added that, the chamber was not consulted by the government on the proposal before the announcement was made in Parliament last week.

“When we got this information, it was surprising because there had not been any prior engagement to discuss this e-levy. The timing of taxing this nascent industry is not now, and we needed to let it [the industry] grow, defeat cash before we attempt any form of taxation,” Ken Ashigbey, Chief Executive Officer of the Ghana Chamber of Telecommunications has said. 

These act of negligence for not consulting key stakeholders in the policy formulation process have been criticised by other many industry experts. 

Finance Minister Ken Ofori-Atta announced a 1.75 per cent E-Levy on all electronic transactions, including mobile money, beginning January 2022, saying that Covid-19 and government’s digitalization program have boosted digital finance transactions exponentially, and it has now become necessary to tax those transactions.

The Minister said the plan is to rope in the informal sector into the tax net because a lot of financial transactions in that sector now take place on digital platforms via mobile money and other electronic wallets.

Meanwhile, Mr Ashigbey noted that, the chamber is looking forward to engaging the government and other stakeholders on the tax.

“The Minister of Finance made mention of the fact that in the deliberation on this tax, they sought to protect the government’s financial inclusion agenda as well as the vulnerable in society. He also added the fact that there would be engagement with industry, so we hope that this engagement with the Ministry and the GRA and other regulators will determine how this tax will be implemented,” he said.

Mr. Ashigbey further noted that there is a potential for “double taxation and also making the electronic purchase of goods and services very expensive,” which may encourage people to reverse to using cash.

It is still not clear how the 1.75% e-levy will be implemented. Already there is a 1% service fee on all mobile money and several other electronic transactions. The question still remains whether the 1.75% will be an addition to make the fee 2.75% or it will be calculated on the just the 1% fee.

 

Adnan Adams Mohammed

Several Ghanaians have registered their displeasure at the government tax policies on electronic transactions basically on Mobile Money, Fintechs, bank transfers  transactions christened as E-levy. 

The majority of Ghanaians are particularly against the inclusion of mobile money transactions which has currently made movement of money very fast, reliable and common to the ordinary Ghanaians in every part of the country. These momo services, financial experts have touted as the most the effective and efficient was to achieve the cashless economy efforts of government.

Government in its 2022 budget statement and economic policy decided to impose a 1.75 percent levy on all electronic transactions. The Finance Minister, Ken Ofori-Atta, who disclosed this during the presentation of the 2021 Budget Statement, said the levy is aimed at enhancing financial inclusion and protecting the vulnerable. However, the Minority in Parliament has vowed to join the several Ghanaians opposing the ‘MoMo’ tax to stop its implementation. 

“The new levy will only increase hardship and compromise inward remittance”, the Ranking Member on the Finance Committee of Parliament,  Cassiel Ato Forson posited. “The Minority will thus stand by Ghanaians in opposing the momo tax.”

 

The government expects to mobilise about GH¢6.5 billion from the newly introduced E-Levy next year, the Minister of State at the Ministry of Finance, Charles Adu Boahen noted. 

The levy imposes a 1.75 per cent tax on mobile money and other electronic (E) transactions that exceed GH¢100 per customer per day. 

Mr Boahen said that the GH¢100 limit exempted about 40 per cent of patrons of electronic transactions, particularly MOMO.

 

He said data on E-transactions showed that about 40 per cent of patrons either sent or receive less than GH¢100 per day.

Majority of these are the economically disadvantaged, hence the reason to exempt them from the tax, the minister said.

At GH¢6.5 billion, the target could prove crucial for the government’s revenue projections next year.

Faced by dwindling revenues, strong debt build up and waning investor confidence, the government said in the 2022 Budget that it aimed to grow domestic revenue by 44 per cent next year, the highest annual growth rate in recent times.

Mr Ofori-Atta said the E-Levy was one of the strategies by the government to mobilise revenue for development as part of a burden sharing strategy.

MOMO transactions have been enjoying tremendous growth in recent times, with their vending points eclipsing bank branches.

Mr Ofori-Atta said MOMO transactions hit GH¢500 billion last year, up from GH¢257 billion in 2019 and GH¢78 billion in 2016.

“Mr Speaker, following this observation, there exists significant potential to increase tax revenues by bringing into the tax bracket, transactions that could be best defined as being undertaken in the “shadow economy,’” Mr Ofori-Atta told Parliament.

The government says portions of revenue collected from the levy w
ill be used to support entrepreneurship, youth employment, cybersecurity, digital, and road infrastructure among others.

It is the expectation of the government, that the implementation of the new policy will come into force effective January 1, 2022, if the appropriation is passed.

“Government will work with all industry partners to ensure that their systems and payment platforms are configured to implement the policy”, the Finance Minister said.

He said the total value of transactions for 2020 was estimated to be over GHS 500 billion as compared to GH¢78 billion in 2016, while total mobile money subscribers and active mobile money users have grown by an average rate of 18% and 16% respectively between 2016 and 2019.

Apparently, in August 2020, Vice-President Dr. Mahamudu Bawumia granted an interview to Accra-based Peace FM’s morning show Kokrokoo where he disagreed with the suggestion that mobile money transactions should be taxed.

He told show host Kwame Sefa Kayi: “I don’t think Mobile Money should be taxed because most of the people who use the service are poor people so if you put more taxes on it they will suffer”.

This follows government’s recent introduction of a tax on MoMo transactions.

The situation has caused some Ghanaians on social media to remind the Vice-President of his own words.

 Editorial

The government has announced it has put together a framework to provide direct support for young entrepreneurs to enable them create new businesses and expand existing ones.

The programme known as YouthStart, will direct financial and technical support toward young entrepreneurs in the country to develop commercially viable businesses and create jobs for the youth. 

Ken Ofori–Atta, the Minister of Finance in his presentation of the 2022 budget statement and economic policy to parliament, last week, noted that, the intervention will help address the challenges young entrepreneurs currently face in the country. 

“The awareness of the youth employment challenge, as well as extensive consultations with stakeholders including youth associations and educational institutions across the country, have led to the development of the YouStart initiative which proposes to use GH¢1 billion to create 1 million jobs and in partnership with the Finance Institutions and Development Partners”.

In addition to the government effort, local Banks have also agreed to a package that will result in increasing their SME portfolio up to about GHC 5 billion over the next 3 years.

YouStart is a vehicle for supporting young entrepreneurs to gain access to capital, training, technical skills and mentoring to enable them launch and operate their own businesses. The Ghana Enterprises Agency (GEA), the National Entrepreneurship and Innovation Programme (NEIP), and partner financial institutions, will serve as the implementing arms of YouStart.

The initiative when successfully implemented, young entrepreneurs will be able to apply for support through a dedicated YouStart online portal. NEIP will also engage our Faith-Based Organisations as partners for the delivery of essential artisanal skills.

It is believed that, the YouStart initiative is designed to instill proper commercial orientation in the beneficiaries. This will include financial institutions determining the credit metrics and GEA and NEIP providing training support especially for the standardized SME loans noting that the initiative will be operational by March 2022.

Apparently, the government in the past has created numerous initiatives to address the spate of youth unemployment in the country. Programmes such as the Ghana CARES ‘Obaatanpa’ and programmes pursued by the NBSSI now GEA and NEIP are designed to make access to finance and skills in entrepreneurship, agriculture, small-scale industry, tourism, and trade, easier for the youth. Yet, the desired results were not met. 

But, as optimistic as we are, we hope that, this new initiative together with other government interventions as captured in the 2022 budget, the youth who are toiling to establish their personal business will have abundant opportunities to nurture and grow their businesses.