Manufacturing subsector records more investment

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The Chief Executive Officer of the Ghana Investment Promotion Center(GIPC), Yofi Grant has disclosed that the manufacturing sub-sector has recorded some increase in investment in the third quarter of the year.

The GIPC is targeting five billion dollars of Foreign Direct Investment by end of 2017.

Speaking on the Citi Breakfast Show to discuss the 2018 budget, Mr. Grant maintained that the center is poised to attract more investors into the manufacturing subsector of the country.

“For the third quarter of 2017 manufacturing has raked in the most FDI into Ghana. For example I can see China gradually exporting its manufacturing capability into Ghana because maybe they’re seeing that this is a country that works, we’re seeing India also coming, and we’re seeing the UK accelerate its program with Ghana in many ways,” he said.

Mr. Grant explained that the center is urging some of the companies to begin operations on a micro level to expand with time.

He added that the center is also working to create an avenue for local companies to partner foreign investors.

“We’re seeing manufacturers coming in. Some of them are starting small to grow big. What we encourage at GIPC is that any of these that are coming with FDI should partner indigenous human capital or indigenous business people such that our people can also be elevated alongside, and we’re seeing that. So there is a tendency of us to look at manufacturing in a more serious way than we have in the past,” he said.


Average base rate reduces by 1.9% in 10months …deposits drop by 1.5%

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The latest figures from the Bank of Ghana shows that banks’ base rates have dropped by 0.3 percent, bringing the year-to-date drop to 1.9 percent.

The monthly Annual Percentage Rates (APR) of interest charged on loans and credit advances and the Average Interest (AI) paid on deposits by banks show that the industry average base rate, as at October 31, was 25.7percent – a marginal decrease of 0.3 percent compared to 26 percent at the end of September.

At the start of the year (end-January), the industry average base rate was 27.6 percent, giving a year-to-date drop of 1.9 percent.

The average deposit rate as at October 31 was 10.4 percent, the same rate as at the end of September. At the start of the year (end-January), the average deposit rate was 11.9 percent; giving a year- to- date decrease of 1.5 percent.

The APR, according to the central bank, is the true interest rate banks and non-bank financial institutions charge the public on loans and advances.  It reflects the true cost of borrowing, and includes charges and commissions levied by banks.

“Average interest paid on deposits is the average interest paid by banks on deposits over the period. Base rate reflects the minimum interest rate that can be charged on loans and advances.  The publication of these rates is to promote transparency in the pricing and provision of banking services,” the statement added.

Source: BFTonl

Ghana’s exports rise to $ 8.9 billion

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Ghana is benefitting from increased revenue from her exports which is ultimately expected to reduce the country’s burden on imports and correct the Balance of Trade (B0T).

The latest figures by the Bank of Ghana indicate that the country received 8.95 billion dollars from her exports in August 2017 compared to the estimated 7 billion dollars it spent on importing goods for the same period in 2017.

While the total exports represent a growth of 27.8% between August 2016 and the same period in 2017, total imports represents a drop of 12.27% within the one year period.

The Bank of Ghana (BoG)’s summary of economic and financial data indicates that Ghana started recording positive balance of trade at least within the first quarter of 2017.

The country in August 2017, made 8.95 billion dollars in export revenue from cocoa, oil and gold altogether.

This represents 1.95 billion dollars more compared to the 7 billion dollars the country earned for the same period in 2016.

Of the amount, revenue from oil exports went up by over 140 percent between August 2016 and the same period in 2017.

The country, in August 2017, raked in 1.68 billion dollars up from the 683 million dollars recorded in the same period last year.

Meanwhile, gold recorded the second highest growth of about 25 percent.

Export revenue from the mineral went up from 3 to 3.79 billion dollars within the one year period.

However cocoa recorded the least growth in export revenue of about 16 percent.

The cash crop raked in 1.99 billion dollars in August 20177, from the 1.72 billion dollars recorded in August 2016.

On imports, Ghana’s oil imports witnessed the highest drop of about 28 percent; from 1.2 billion dollars to 900 million dollars.

But non-oil imports such as food and other consumables amounted to 6.86 billion dollars, down from the 7.6 billion dollars between August 2016 and August this year.


UK Ghana Chamber of Commerce teams up with Oxford Business Group for 2018 report

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 The significant contribution that trading partners, including the UK, could make in helping Ghana to reach its infrastructure goals will be explored in a forthcoming report by the global publishing firm Oxford Business Group (OBG).

The Report: Ghana 2018  will highlight the country’s efforts to boost foreign investment and strengthen trade relations with key markets around the globe as part of a bid to stem slower growth. OBG’s report will also consider the part that international knowledge-transfer and collaboration could play in helping Ghana to build on the pro-business stance adopted by the new government under President Nana Akufo- Addo.

The UK Ghana Chamber of Commerce (UKGCC) has signed a first-time memorandum of understanding (MOU) with OBG. The chamber was set up in 2016 to facilitate and promote collaboration between businesses operating in the UK and Ghana. Under the MOU, the UKGCC will contribute to OBG’s research for The Report: Ghana 2018.

Adam Afriyie, UK Trade Envoy to Ghana, highlighted the west-African country’s advantages in an interview published in OBG’s most recent report on the economy. “There are great opportunities of UK investment in Ghana, which is an enormously rich country, not only in terms of the natural resources it possesses but in its people, who are very entrepreneurial,” he said.

Commenting after the MOU signing, Tony Burkson, CEO of the UKGCC, echoed Afriye’s comments. He added that with efforts to increase bilateral trade gaining pace, OBG’s report would be a welcome tool for business leaders looking to connect and tap new development opportunities.

“Ghana is currently the UK’s fifth-largest trade partner in sub-Saharan Africa, with trade between the two countries having now passed the £1.3bn mark,” he said. “Given Ghana’s current drive to strengthen collaborative ventures and partnerships, I’m confident that Oxford Business Group’s analysis will prove pivotal in assisting investors when they come to make their decisions.”

Shadeh Olivia Van Esch, OBG’s country director agreed that the global business community would be keen to learn more about the new government’s commitment to harnessing Ghana’s entrepreneurial spirit.

“As Ghana prepares to mark 60 years of independence, it faces several significant challenges. However, investors will be aware that its fundamentals remain strong,” she said. “With business development a priority for the government, we look forward to documenting the new openings and opportunities that are expected to follow.”

The Report: Ghana 2018 will be a vital guide to the many facets of the country, including its macroeconomics, infrastructure, banking and other sectoral developments. The publication will also contain contributions from leading representatives. It will be available in print and online.




Minister Reiterates Government’s Commitment to Building Friendly Business Environment

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Mr. Yaw Osafo-Maafo, the Senior Minister, has reiterated government’s commitment to creating the most friendly business environment that would result in mutually rewarding economic returns for investors.

Delivering the keynote address at the Ghana Investment Summit 2017, in Accra, Mr. Osafo-Maafo said Government’s proposed initiatives to strengthen the economy and deliver good paying jobs would create an environment that would attract investors.

“Yes, we strongly believe Ghana is positioned to be an investment hub for the West Africa Region in particular and Africa as a whole,” he said.

“An investment hub means if we get it right Ghana will not only be prosperous but can provide economic access for our entire continent,” he added.

Ghana’s strategic and central location within West Africa provides access to the ECOWAS market with an estimated population of 350 million people.

Mr. Osafo-Maafo said the country did not only have an excellent geographic location, but also enjoyed geo-political stability, rule of law, economic steadiness and highly educated population.

The Investment Summit 2017, being hosted by the Ghana Investment Promotion Centre (GIPC), aims, among other things, to attract strategic and development funding for key government projects, match growth-oriented businesses with international partners and investors and showcase the country as the premier investment destination in Africa.

The summit participants would hold high-level discussions on investment opportunities in key sectors including financial services, technology, consumer goods and services, energy and agribusiness.

Mr. Osafo-Maafo said Ghana was in the early stages of an industrial transformation and private sector investment was a significant part of the plan.

He said Government intended to deliver its development agenda in partnership with the private sector, both local corporate bodies and multinationals.

“Ghana is on the way up and as principal players in the global financial market, we invite you to come and partner us so that we can surge forward together,” he said.

He said Government’s bold initiatives were opening new and innovative spaces for investment, including railway development, an integrated aluminum industry and establishment of industrial parks.

Mr. Yofi Grant, the Chief Executive Officer of the GIPC, said summits like that would play a vital role in bringing together investors, entrepreneurs, and policy makers to help Ghana in her leap to become the investment hub in Africa.

“We must use this opportunity to have the conversations and make the concrete connections that will help build a stronger, more robust economy.”



Tax Exemptions Policy Reversed – Huge Relief For Businesses

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The Ministry of Finance has reversed the tax exemption policy that required exempted companies to pay import duties and later request a refund.

This action follows persistent backlash from members of the business community who described the earlier action of the ministry as disturbing.

The ministry had explained that the policy, which was introduced in April 2017, was to help check abuses in the tax exemption system and sanitise it.

However, five months after its introduction, the ministry has reversed it after concerns of its illegality and the strains that it put on the working capital of the exempted companies.

The Deputy Minister of Finance, Mr Kwaku Kwarteng, at a press conference in Accra said the ministry was conscious of the fact that many genuine exemption holders had very legitimate concerns about being asked to provisionally pay import duties and taxes for which they are exempted as it posed avoidable cash flow burdens on their finances.

“In our recent consultations with stakeholders, we have better understood the weaknesses in our exemptions regime and we are in a better position to deal with the shortcomings in ways that pose less cost to genuine businesses and exemption holders,” he stated.

“As such, government has decided to discontinue the requirement for exemption holders to provisionally pay the import duty and taxes upfront and apply for a refund later,” he added.

Per the status quo, he said the following documentation should be attached to the application for the exemption: The basis for the exemption (that is by which law, or by which parliamentary resolution?), recommendation letter from the relevant sector ministry or agency, Customs Classification and Valuation Report (CCVR) or Customs

Declaration Form, Import Declaration Form/eMDA, Tax Clearance Certificate (bearing the Tax Identification Number) and Bill of Lading or Airway Bills.

Others include commercial invoices, packing list, tax exemption assessment report (where required) and other supporting documents for special cases.

Increased revenue

Despite the reversal of the policy, Mr Kwaku Kwarteng said the policy had yielded positive results, with revenue from import duties rising steadily.

Reports from the Ghana Revenue Authority (GRA) said for instance that GH¢7.22 million was received as import duty in the first eight months of the year, an increase over the GH¢5.95 million recorded during the same period in 2016.

Total tax exemption recorded in the first eight months of 2017 also amounted to GH¢1.22 million, representing 11 per cent of the total import duty collected within the period.

New measures

The deputy minister, however, pointed out that the government now appreciated the weaknesses in the tax exemption regime and had introduced new measures that would better deal with the shortcomings.

He said exemption status would now not be transferrable and under no circumstance should any person or business be exempted from the payment of any import duty or import tax by virtue of its association or relationship with an exemption holder.

He added that no imported goods would also be exempted from the payment of import duties and taxes unless the original importer of the goods, as stated on the bill of lading or customs declaration, was an exemption holder or the goods were generally exempted from import duties and taxes by law.

He stated that “these and many other measures that are all geared towards strengthening the country’s tax exemption regime will take effect from October 1, this year.”


In the 2017 Budget Statement and Economic Policy, the government committed to a comprehensive review and reform of the import duty exemptions regime and tax reliefs, with a view to eliminating abuses and improving efficiency in the application of those incentives.

As an interim arrangement, and to facilitate the reforms, the Ministry of Finance instituted an administrative measure that required exemption holders to pay in advance all applicable import duties and taxes and apply for a refund with supporting evidence.

This administrative measure took effect from April 1, 2017. However, some tax experts and industry players raised concerns about the illegality of the policy as they said it was an affront to Article 174 of the 1992 constitution and also posed cash flow challenges to exempted companies.


Ghana steps up infrastructure drive with new funding from China

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Efforts to ramp up infrastructure development in Ghana received a boost in June and July with news that China will channel $19bn of financial support into the country’s project pipeline.

The funds will help Ghana – which recently requested an eight-month extension to a $918m credit facility with the IMF, following a higher-than-expected 2016 budget deficit – sustain spending on key capital projects in the industrial and transport sectors.

Government signs billion-dollar deals during official visit

Some $15bn of the total amount was secured during an official visit to China in late June by Mahamudu Bawumia, Ghana’s vice-president, during which the government signed several memoranda of understanding (MoUs) worth billions of dollars.

That portion of financing was agreed under a commodity-swap arrangement whereby Ghana will give a portion of its bauxite reserves – 5% or less, according to Bawumia – in exchange for $15bn in funding from China. Ghana’s bauxite resources total some 960m tonnes and are worth $460bn.

This total was raised by another $4bn on July 13, when the government signed a deal with state-owned Sinohydro Corporation to develop energy and infrastructure projects, including a multipurpose hydroelectricity project at Pwalugu and several solar power plants.

Investment channelled towards industry and supporting infrastructure

The biggest proportion of Chinese funding will be directed towards an integrated aluminium refinery project that will include the development of infrastructure for transportation of the metal.

“To develop the bauxite project with its railway and convert bauxite into aluminum we will need about $10bn,” Yaw Osafo-Maafo, senior minister, told media following the MoU signing.

Under the agreement, funding will be made available through the Chinese Development Bank and will support the building of a 1400-km railway network to connect Ghana’s Nyinahin and Kyebi bauxite mines to the new aluminium refinery, along with country-wide rail links.

In a separate development, the Association of Ghana Industries signed a $2bn MoU with China National Building Material Equipment Import and Export Corporation that will support private projects in agriculture and industry under the government’s “One District, One Factory” policy, which was launched this month. Funds will be disbursed through several lenders, including GCB Bank, Universal Merchant Bank and Access Bank.

Ghana also secured $1bn in investment from the China Exim Bank and the release of the remaining $2bn of a $3bn loan facility negotiated by the previous administration with the Chinese Development Bank.

Investors pursue other international deals

The new deals are part of a push by the government to diversify its sources of funding, particularly for capital projects and in light of the country’s infrastructure deficit.

The efforts have yielded some fruits, with the country having recently landed new financing from Russia. In July the Ghana Railway Development Authority signed an MoU with Russian railway company Geoservice to build a 947-km line from Accra to Paga, among other routes, on a build-operate-transfer basis.

Other support has come from farther east: late last year the Japan International Cooperation Agency extended a $100m development loan to Ghana to build a 520-metre bridge over the Volta River at Dofor Adidome, the first such agreement signed between the two countries in 17 years.

The bridge is part of the government-backed Eastern Corridor Project aimed at boosting transport capacity along the route connecting the country’s largest port, the Port of Tema, to four regions – Greater Accra, Volta, Northern and Upper East – as well as its neighbour Burkina Faso.

Outside support key to balancing the books

The outside financing is crucial given Ghana’s efforts to reduce the budget deficit and increase inflows.

In mid-April the IMF – which has been working with the country since 2015 on a debt support agreement – released a statement praising government measures to control tax evasion, limit exemptions and improve fiscal discipline. However, it also warned that government revenue projections were “optimistic”.

“The sizable fiscal slippage in 2016 (a budget deficit of 8.7% of GDP, more than 3% of GDP above target) has further undermined debt sustainability and increased Ghana’s reliance on foreign investors to fund its large gross financing needs, with possible pressures on the exchange rate if financing conditions deteriorate,” the fund said in a recent update on Ghana.

Ghana is hoping to meet the targets set under its current IMF deal to tame its budget deficit to 6.5% this year and 3-4% next, down from 8.7% in 2016.

Source: OBG


Improvements to Ghana’s investment environment under way

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Ghana’s 2017 budget contains a range of incentives and reforms – including the removal of value-added tax (VAT) on financial services and property sales – that aim to bolster the private sector and sustain a recovery in foreign investment.

The spending plan, released on March 2 by Ken Ofori-Atta, minister of finance, contains a number of articles that look to increase fixed capital formation and investment inflows from overseas.

One of the most noticeable reforms in the budget is the abolition of the 17.5% VAT on financial services. The removal of the tax should provide a healthy fillip to the sector, in addition to lowering transaction costs and paving the way for private sector credit growth.

Tax cuts to spur business

A number of other tax reforms have been announced for implementation in the short to medium term as part of moves to reenergise the private sector and provide relief for businesses, according to the language of the budget.

In construction, for example, stakeholders will be encouraged by the fact that import duties on raw materials are set to be lifted, while a similar removal of levies on the import of machinery and raw materials for production could support growth in manufacturing.

In the real estate sector, the decision to remove the 5% VAT on property transactions outlined in this year’s spending plan should also help reduce the cost of both residential development and home sales.

With Ghana currently facing a significant housing shortage of roughly 1.7m units, according to various industry estimates – projected to rise to 2m by 2018 – the potential benefits of the tax reform could be sizeable.

Strengthening the economy

The tax cuts formed a central part of President Nana Akufo-Addo’s campaign platform during the 2016 election, as the country looked to increase growth from 3.6% last year. That figure is a significant drop from a high of nearly 15% in 2011, and from the more recent 4% growth of 2014 and 2015.

The new administration is also looking to rebound from a drop in foreign investment inflows last year:foreign direct investment (FDI) saw a decrease of just over 11% in 2016 to $2.4bn, according to data from the Ghana Investment Promotion Centre (GIPC).

This figure is down from a peak of $6.3bn, or 15.9% of GDP, in 2011, with the government looking to channel greater capital into manufacturing and tourism in the future.

Among the major projects in those sectors are the recent commissioning of a $75m cement plant by Ciments de l’Afrique Ghana – a subsidiary of Morocco’s Addoha Group – and a $60m Hilton Garden Inn in Accra.

GIPC has set an FDI target of $5bn this year and plans to redouble its efforts to attract investors. New promotional and rebranding campaigns should go some way towards achieving this by raising Ghana’s profile as an international investment destination, Yoofi Grant, newly appointed CEO of GIPC, told local media in mid-February.

IMF swings and roundabouts

The tax cuts come as the country looks to reduce a debt burden equivalent to 74% of GDP and bridge a fiscal shortfall that widened to 9% of GDP last year, according to the IMF.

Ghana’s budget deficit worsened in 2016 on the back of lower-than-expected tax revenue, equal to just over 15% of GDP against a target of 17%.

While the gap has been financed through a combination of non-tax revenue, a $750m eurobond issue in September and domestic financing, it has been a focal point of the IMF’s three-year, $918m assistance programme, which came into force in April 2015. The programme is intended to stabilise government finances and allow for structural fiscal reforms to be put in place.

In mid-February the IMF flagged the possibility of the fund extending its fiscal support programme, which is due to conclude in April next year – a measure that is likely to bolster investor sentiment further.

Source: OBG


Ghana contemplates ending IMF credit agreement as scheduled amid improving fiscal balance

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Lower inflation figures and higher growth forecasts in Ghana are raising the prospects for a stronger economic recovery over the coming year, prompting the government to reiterate its commitment to deficit reduction targets – although much work remains to be done.

Following a macroeconomic slowdown and a weakened balance sheet, a number of the country’s key indicators are showing signs of improvement. The most recent inflation data from the Ghana Statistics Service show the consumer price index eased in March to 12.8%, the lowest since the end of 2013.

Tamer inflation is supported by improved performance of the cedi, which has recently stabilised, coming off record lows of GHS4.7:$1 in March to trade at GHS4.2:$1 in mid-April. A stronger currency could help reduce import costs and put downward pressure on prices of foreign goods and services, potentially fuelling private sector consumption.

Another positive came from the IMF, which – in its latest World Economic Outlook, released last month – forecast that GDP would rebound further, from 4% last year to 5.8% this year and 9.2% next, on the back of increased oil production and despite government belt-tightening. The 4% growth figure for 2016 represented an upward revision from 3.6%, which already had surpassed the IMF’s earlier forecast of 3.3%.

Curbing the deficit

The more robust outlook has a beneficial impact on the state balance sheet, which has suffered in recent years to the point where the country has sought assistance from the IMF. An increase in revenue from the improving economy, along with fiscal reforms, could allow Ghana to end its credit agreement with the IMF as scheduled in the second quarter of next year.

In mid-April Ken Ofori-Atta, minister of finance, said Ghana might not seek an extension to its $918m extended credit facility with the IMF, a three-year package agreed in April 2015 under the previous government.

“We are committed to ending it when it should have ended,” he told press during a review of the IMF’s programme. “The government is working assiduously to increase revenue by 34% and will achieve that by sealing revenue leakages.”

Through tax reform and spending cuts, he said, Ghana could achieve the targets set under the IMF deal to tame its budget deficit to 6.5% this year and 3-4% next, down from 8.7% in 2016.

Closing the book on the IMF credit facility would likely boost investor sentiment, signalling the government’s confidence in its ability to improve state finances, implement reforms and support growth without further assistance from the fund.

However, there are still plenty of external pressures – including low oil prices – that Ghana must navigate, and which prompted the head of the IMF mission, Annalisa Fedelino, to note that an extension would be “quite normal” and that “the road to economic reform is bumpy”. Ofori-Atta similarly hinted at challenges, adding that terminating the deal would “lead to some very tough decisions” in the next budget. An extension could ease fiscal pressure from high levels of state debt and weak commodity prices.

Public sector overhaul

A cornerstone of the government’s plan to meet IMF targets is to curb corruption and reduce unnecessary spending, the finance minister said.

The administration is, among other things, focusing on increasing transparency in state procurement and ending the practice of payroll “padding”, whereby government salaries were given to people not employed by the state. In recent years, reforms have also included merging public sector wage rolls into a single pay schedule and centralising financial management systems.

“The measures we are taking are necessary,” he said, “We feel the economy will respond strongly to them, and therefore maybe against all the odds, we will be able to meet the targets.”

In a mid-April statement, the IMF praised government efforts to rein in the deficit and increase budget inflows, including measures to control tax evasion, limit exemptions and improve fiscal discipline. However, Fedelino also warned that government revenue projections were “optimistic”.

“The sizable fiscal slippage in 2016 (a budget deficit of 8.7% of GDP, more than 3% of GDP above target) has further undermined debt sustainability and increased Ghana’s reliance on foreign investors to fund its large gross financing needs, with possible pressures on the exchange rate if financing conditions deteriorate,” the fund said in a recent update on Ghana.

In response to these pressures, it said the immediate priority was to anchor confidence and mitigate risk by entrenching fiscal discipline throughout the public sector.

Source: OBG


Domestic air travel shoots up by 26%

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Deputy Finance Minister, Kwaku Kwarteng has disclosed that there has been a 26 percent increase in patronage of domestic airlines since the abolition of the VAT on domestic air fares.

The 2017 budget heralded the abolition and review of some 12 key taxes.

They included the 17.5% VAT on domestic air fares, the 17.5% VAT on financial services as well as the 5% on real estate.

According to the government, the move is aimed at providing a friendly environment for businesses in the country.

The motion to remove the 17.5% VAT on domestic airfares was moved in Parliament in April 2017.

Speaking on the floor of parliament, Kwaku Kwarteng also stated that government will soon report on the outcome of all reforms so far undertaken by the government.

“In fact we are going to come to this House as Ministry of Finance to present the 2018 budget statement and there would be some reports on the outcomes of the policies we have implemented so far; at least with what we have seen so far is that the outcomes are favorable.”

The Deputy Aviation Minister, Kwabena Okyere Darko in August 2017 disclosed that the removal of the 17.5% VAT on domestic air travel had increased Ghana’s domestic air passenger volume by 24 percent as at May 2017.

The passenger volume at the time witnessed an increase from 163,322 to 201, 851 between May 2016 and the same period in 2017.

According to him, the other expansion works at the various airports are expected to increase domestic travels by the end of year.

“The Ministry remains committed to government’s pledge to encourage and support local airlines and entrepreneurs to set up strong private airlines that can fully utilize the nation’s route rights. In line with this, the Ministry has obtained approval from the Nigerian Ministry of Aviation for Africa World Airlines to commence operations to Abuja in addition to its Lagos route.”