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Ghana: The model colony; What happened?

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A t independence, Ghana was one of the countries that was regarded to as a “Model Colony”. After sixty years, does that statement still holds water? After being a sovereign nation for 60years, the everyday Ghanaian expects to have a portable and constant flow of water; constant electricity supply, available healthcare centre etc., which constitute the basic amenities needed for everyday living.

This should not become a political campaign message as we experience in this modern age politics neither should governments’ be priding themselves in the asphalting of residential roads. But that is the reality Ghana faces after six decades of self-rule.

Unfortunately, national campaign messages that take leaders to the Flagstaff House– the seat of government– are drawn along lines that should be reserved for district assembly elections where assemblymen and, in the future, district chief executives are elected.

The building of schools, hospitals and feeder roads should be campaign promises reserved for the local level but in Ghana, such promises are the regulars at national rallies.

While other countries prioritize the overall economic transformation of the nation; in Ghana, we prefer to talk about building boreholes and mini irrigation dams for farming communities in remote areas of the country.

Meanwhile, for the everyday hopeful Ghanaian; noting, there are millions of hopefuls including me, you and the next person; all that is craved is a well functioning economic, social, cultural, religious and civil system.

A system where every citizen has equal access to basic amenities including clean water, uninterrupted supply of electricity, good roads and transportation system and above all a cheaper cost of living that guarantees a good standard of living irrespective of where the person is located, social status, or financial strength. The basics must be covered.

The above are necessities taken for granted in the developed economies in Europe, North America, and parts of Asia, but in this part of the world, Ghana, West Africa and Africa, in general, they have become luxury to the everyday man.

In the cities of Accra, Tema, Kumasi, Takoradi, and Tamale, one is very lucky to drive on a completely tarred road from work to home or to school or church on Sundays.

You thank the electricity provider if one has uninterrupted electricity in a month, same applies to the supply of water. If you go to the market or shopping mall, you automatically expect prices to inch up, even if marginally.

The model colony

But how did we get here? When Ghana achieved independence in 1957, the nation was described as the model colony: it was a colony that was left with a substantial foreign exchange reserve, about £200million at that time, equivalent to about three years of import cover, according to some “economic historians”.

That was not all: it had a well functioning system where gold, cocoa and timber were raking in the best of foreign exchange, quality human capital to take over from the colonial masters and a civil service structure that was comparable to none in sub Saharan Africa, apart from apartheid South Africa. Topping all the gold and cocoa was a visionary leader, Dr. Kwame Nkrumah whose vision was not just to develop Ghana but see Africa grow in tandem.

He made no secret of seeing a united Africa that needed to attain its independence just like Ghana and develop alongside.

The radical change and its repercussions

A few years after independence, historians and economic analysts noted that Dr. Kwame Nkrumah, despite his grandiose ideas of developing the nation, followed the cautious approach of the colonial government by relying on export of raw materials whiles waiting for the rest of the continent to attain freedom but by 1961, he put into action his plan for aggressive industrialisation.

He established factories all over the country to take advantage of the raw materials we produce in immeasurable quantities and export in that raw form.

His vision was to build these factories to empower the Ghanaian that what he enjoys everyday from the West can easily be made here. There were factories for cocoa, sugar, coffee, jute, tomatoes production. His vision was to place the factories right where the raw materials were.

That is why we had sugar processing plants in, for example, Asutuare in the Eastern Region, because of the high production of sugarcane in that region. Despite his good intentions, most of these institutions did not survive due to several factors.

Some included mismanagement, lack of quality human capital to manage them, over-capitalisation, and excessive political interference which forced those who had the expertise to move away. Today, remnants of these decayed factories can be seen in parts of the country including the warehouses built to store the products.

Even though successive governments, including the military governments, tried to revive some of them, they still failed.

Some historians and economic analysts accused Nkrumah and his colleagues of rent-seeking and thievery which led to the collapse of these factories and institutions and played a key part in the collapse of the economy.

Dr. Kwesi Botchwey’s views

But Dr. Kwesi Botchwey, the longest serving finance minister Ghana has ever had, delivering an address as the guest speaker at the launch of the Economic Club of Ghana (ECoG), noted that despite the aggressive change in plan by Dr. Nkrumah, it was not for purposes of rent-seeking or thievery, as noted by some historians.

He explained that Nkrumah’s idea was to change the future of the country from an over-reliance on export of raw materials to an industrialised one with manufacturing at its core which will create the jobs that matter, and produce goods locally.

He explained that the reasons the factories and companies that were established from 1961 to 1965 couldn’t survive were due to a lack of proper human capital simply because the ruling party, the Convention People’s Party (CPP) was a nationalist independence party and “hadn’t quite yet re-engineered itself into a party of cadres capable of leading that kind of revolution,” he revealed.

Despite criticising the lack of human resource and mismanagement of these institutions, about 55 in total, Dr. Botchwey noted that the remnants of those revolutionary ideas are still found dotted around the country today with some of them still as relevant as they were in the 1960s especially in the financial services industry with GCB Bank and SIC Insurance Company, being two of the biggest financial service players.

After Dr. Kwame Nkrumah’s overthrow, the economy saw major upheavals. When many thought Nkrumah’s removal was the riddance of a bad leadership, they couldn’t believe what came next.

Though the second republic brought in some reforms which liberalised the economy and empowered the private sector; that was short-lived.

Then came the worse anyone can think of. Ghana fell into a state of sustained economic decline. In the 70s and 80s, there was a sharp drop in national output, real output growth over this long protracted period of national decline came to a standstill and then turned negative, meaning that virtually every year Ghana was retrogressing.

“By 1983, when I had the misfortune of being called to minister into finance, inflation had soared to 142percent– these days we fret when inflation hit 25percent– output growth turned negative, and per capita income collapsed.

There were such widespread shortages. We travelled to Lome to buy basic things such as milk or sugar. We were not surprised when almost 10percent of the country’s population, over a 1million people, at the time, fled to neighbouring countries and beyond in search of greener pastures.

The nation was just on the brink of total disintegration and collapse but we managed to dig ourselves out of this hole,” Dr. Botchwey pointed out.

The return to normalcy

Dr. Botchwey, in his address, explained that once the government did away with control prices, it quickly realigned relative prices, especially foreign exchange prices, to restore incentives for production, savings and investment.

This saw a slow devaluation of the currency but was called “the re-pricing of the cedi” to assuage the fears of Ghanaians who felt devaluation would make the currency worthless. Gradually, through economic mechanisms, he noted, brought the value of the local currency to where it should be– almost the level of the black market.

Then came the forex bureaux, which businessmen and women thought was a means to arrest black market operators.

“But after sometime, when market operators realised there were no arrest made it saw a boom and monies easily changed hands and these bureaux accounted for a substantial amount of forex changing hands,” he said.

The structural adjustment programme, according to Dr. Botchwey, was successful in restoring financial stability, bringing down inflation to 20percent, external reserve position improved tremendously, cocoa production improved because the farmers were now being paid production prices that covered more than the cost of production and all that set a tone for economic recovery.

“The pathways to self destruction are many and easy to find but those for corrective action are few and painful. As a nation, when we decide to live beyond our means, borrow, print more money and render our currency worthless, or set in motion a bout of fiscal instability, that is easy and might even win you an election but then the chicken will come home to roost and then another painful correction will start.

Fast forward: Ghana has enjoyed relative stability over the past two to three decades which culminated in the oil boom of 2010 which saw growth peak at 14.4percent in 2011.

But with the following year seeing an election, the gains chalked were eroded with a huge deficit, which was as high as 12percent of GDP and that deficit, coupled with a drop in commodity prices on the world market, and energy production challenges domestically signalled a three year economic meltdown which saw the economy growth shrink and led it to the International Monetary Fund.

“The government decided that it needed the IMF. So the extended credit facility made some sense to me. Sometimes we need that external institution when our home grown policies consistently fail us. Currently, there are hopeful signs that a recovery is underway,” Dr. Botchwey noted.

Lessons

Dr. Botchwey, in his delivery, worried if, as a nation, Ghana ever learns its lessons. As the longest serving finance minister and a very active academic and politician, he has witnessed all election from 1992 where a budget surplus, equivalent to 0.2percent of GDP in 1991, metamorphosed into a deficit, equivalent to 5percent of GDP.

“If you look at our economic history, you will find that in every election year, there is a problem. All of them; there have been problems. Slippages mount then we sweat and struggle to get back on track. Sometimes I wonder if we learn lessons.

We are going through a period of continuous fiscal consolidation to correct all the problems that we have had. One of the fundamental problems we have is that all these problems of instability and discontinuity in policy is simply the problem of fiscal discipline and that must be addressed immediately.

When we do not manage our fiscal balances well and the deficit soar and we finance it with massive bank borrowing, the results are always clear: you reap a depreciated currency, soaring inflation, rising prices, etc,” he noted.

What should be done?

In his assessment, what should be done to put Ghana on a sustained path of growth for decades like Singapore, South Korea, Japan, Malaysia and other European countries did is “to be disciplined in expenditure while increasing revenue drastically”.

To him, the practice of quoting ambitious and unachievable revenue targets and consistently missing them should stop alongside the over-reliance on aid and grants, loans, domestic and foreign, to build infrastructure and even pay for goods and services, should become a thing of the past.

He bemoaned that after six decades of independence, the nation’s budget is still significantly supported by donor funds. “Our revenue base as a nation is not growing fast enough to catch up with expenditure.

Our tax effort, what we collect as a measure of what we can collect, is not just disturbing but abysmal. When you take your wages, interest on domestic and foreign debt, and transfer to statutory funds, there is nothing left.

Happily we have passed a law to cap the transfer of funds to these statutory funds but there are vulnerabilities in the state owned enterprises, the financial sectors and those vulnerabilities must be controlled. The energy production companies including the Volta River Authority (VRA), Ghana Grid Company (GRIDCo), and the Electricity Company of Ghana (ECG) need their revenue systems restructured for efficiency.

A robust and resilient financial system is crucial for sustained economic development,” he noted.

How the club can shape the discourse in the country.

In his summary, he noted that The Economic Club of Ghana has the potential to become hugely important to help shape public discourse in the country but a great deal will depend on the expertise and professionalism the club itself will be able to mobilise.

He urged the club to stay above the partisan politician system and lead the conversation on issues that promote economic and national development.

That, to him, is the only way the club can stay relevant and attractive to members while inspiring the millions of Ghanaians to achieve more through other economic means other than politics.

“Only by doing this successfully and demonstrating the capacity for some analysis, can you lead the way while crowding in the expertise in academia and other stakeholders and make our country as great as we want it.”

Dr. Bawumia sees beyond macroeconomic stability.

Vice President, Dr Mahamudu Bawumia, who was the special guest of honour at the launch of the club, in his address, noted that macroeconomic stability alone, though difficult to practice in the country by successive governments, is not enough to change the course of this country.

“There is an understanding that every government tries to achieve macroeconomic stability but some have been more successful than others. Since 2006 every forecast for the budget deficit has been missed and this is because of very high revenue forecast that are not realistic or sometimes high expenditures.

We also should understand that while macroeconomic stability is necessary, it is not sufficient. There has to be more to transform an economy than macroeconomic stability.

What we really require is a structural transformation of the economy where you need stability that allows you to pursue policies that can structurally transform the economy from a commodity dependent one to more value addition to our natural resources and industrialisation,” he averred.

Explaining that, for the most part, leadership always live with and talk problems, but do not have definitive solutions, he noted that the agenda of this government is to get into the mould of solution oriented politics where “we can tell that in three years’ time we have 100percent electricity coverage.

That is the sort of thinking we are bringing in solving economic problem. For far too long our nation has been faced with myriads of challenges, some of them unique to our challenges and some of them not so unique to us.

For those not so unique to us, we can learn from others but for those unique we have to find our own solutions to them,” he added.

Consistent engagement with the experts

Dr. Bawumia noted that with consistent engagement in dialogue and discussion among relevant stakeholders the key to opening Ghana to a new structural transformation is here.

“As a government, we do not assume the know-it-all-philosophy but rather believe that a great rich set of ideas are inherent in people like you who have come to form The Economic Club of Ghana and we are ready to tap into this body of knowledge and expertise.

Looking at the economic history of Ghana, there have been great thinkers and stalwarts who have been part of the management of the economy. It is not really being a lack of economists that is part of the problem or it is not that we have not had good thinkers but we have had some fantastic thinkers who have preferred a lot of solutions.

What we have not really being able to do on a consistent basis is applying a lot of those solutions over the long term. You tend to have a few good years and a lot of bad years and that type of inconsistency has bedevilled us as a country,” he noted.

Gov’t ready to support the Economic Club of Ghana

He strongly believes the time has come to marshal Ghana’s intellectual capacity to work together to find solutions to the problems so that the common man or woman on the street will see the club not as an economic club but a club to enhance the public good and promote collective socio-economic goals in society.

“The timing of this launch couldn’t have been any better. Our objective as a country has been to pull Ghanaians together, build a resilient and stable economy on the strength of our own human and natural resource guided by well thought out policies and strategies,” he indicated.

In launching the club, Dr. Bawumia noted that in developed economies, cities have their own economic clubs and these clubs, some as old as 150 years, have contributed to the development of their respective cities and countries.

“They regularly invite presidents, global business leaders, scientists, and distinguished academicians to address members. And I want to see the Economic Club of Ghana host such iconic individuals, both local, continental and global.

The Club indeed comes in at an appropriate time, and I can assure you of the support and commitment of the government. We shall be open to ideas, recommendations, and suggestions in relation to the formulation and implementation of economic and social policies, to the extent that they support both the short and long term development agenda of Ghana.

I urge you to be firm and unwavering in your analyses and discourses. There should be no fear whatsoever in the presentations of your views, critical or not because that is what makes democracy, and our kind of democracy beautiful and allows for economic development to be carried out in a free and fair society,” he advised.

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Business Interview

AGI@60: A Persistent Private Sector Voice

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The AGI was established in 1958. Despite the country’s very young and unstable democracy, business leaders saw the need to have a stronger voice to represent their interest irrespective of who is in government.

As the adage goes: “Government has no business in running business”. This mean, businesses must focus on running business, creating jobs, paying taxes and sustaining economic growth. But to sustain business growth, businesses need a voice that cannot be suppressed.

Led by the iconic Dr Esther Ocloo, founder of Nkulenu Industries, the Association of Ghana Industries (AGI) was formed with only 10 local manufacturers with the initial name of Ghana Manufacturers Association. With time other manufacturers, including the multinationals, saw the essence of having a stronger production voice and within a couple of years, members soared.

In 1984, as though the membership was not enough, the association’s constitution was amended which opened to all registered companies engaged in manufacturing or the provision of services to the manufacturing sector and through associate memberships, other sectors including not-for-profit organisations have become members as well.

Such associate members include the Liquor Manufacturers’ Association of Ghana, Ghana Printers & Paper Converters’ Association, Furniture & Wood Products’ Association of Ghana, Ghana Timber Millers’ Organization, Advertising Association of Ghana, and others.

Today, the AGI now has over 1,500 members across over 20 sectors including advertising, agri-business, automotive & transportation services, beverages, business promotion & consultancy services, chemicals, construction, electricals & electronics, energy, exports, financial services, oil & gas, and food.

Others are hospitalities & tourism, information & communication technology, metals, building & construction products, pharmaceuticals & herbals, printing, stationery & packaging, rubber & plastics, toiletries & cosmetics, environmental and sanitation, garments, textiles and leather and wood processing.

With such a broad membership, the association has also increased its role in society beyond just the advocacy and advisory for policy and is now engaged in industrial sub-contracting and partnership, information gathering, analysis and dissemination, business plan preparation and development and trade promotion for members. Trade promotion, especially, has seen members, who hitherto would have struggled to enter particular markets are now operating on a global scale.

With the objective to contribute substantially to the growth and development of industries in Ghana and to create a supportive and competitive business climate, which will make Ghanaian companies internationally competitive, the AGI’s mission is to carry out proactive support services to the industrial sector with the view to contributing substantially to the growth and development of industry in Ghana.

Geographically, the AGI is physically represented all across the country with seven locations where members located in such areas report to the regional office and have their own sub groupings.

In an in-depth interview with Seth Twum-Akwaboah, Chief Executive Officer (CEO) of the AGI, issues such as relationship with government, industrial policy, local currency impact on businesses, power for operations, cost of credit, taxation, budget, trade, the AGI’s own Business Barometer and the future of the Association were extensively covered.

 

Relationship with Gov’t

Similar to any kind of relationship, Mr. Twum-Akwaboah, notes that there have been good and bad times. “The relationship with government has been good, but as every relationship it has challenges,” he says.

During the military regimes, he notes that, the AGI faced some of its most testing periods. While the AGI was pushing for and continues to push for a private sector led development, government was looking for state-led developments.

“At some point there was the tendency for the leadership of the association to be branded as anti-government. Most of the leaders of AGI were jailed or harassed by the military. Meanwhile all the AGI leaders wanted and continue to want is for the promotion of business at every point in time irrespective of who is leading the government,” he says.

Today, the AGI has become stronger for it and when it speaks through its regular statements, researches and the iconic Business Barometer, everyone listens. Since the commencement of the fourth republic, government has also recognised the significant role of the AGI in bringing in development to the country.

Significant roles played by the AGI now include making inputs in the national budget; by law and convention, the AGI is represented on several boards of public institutions, quasi government institutions and unions.

“If you want to influence policy, you do not wait till the end of year to make a statement. You need representation to influence policy at such levels. These are means of engaging. Due to our regional representatives, we engage policymakers such as regional ministers, district assemblies. There are some policies, at the local level, that have effect on businesses and industry,” he adds.

Despite the seeming strong power the AGI wields, Mr. Twum-Akwaboah, adds that not everything asked or requested of government is granted. Sometimes, he says, government blindsides the AGI with certain policies that could harm businesses especially in the areas of taxes, levies and laws.

“There are several government policies that have taken us by surprise and then we try to lobby for such policies to be reshaped to help businesses. We have such a regular working relationship with the government because it is needed to keep businesses growing,” he adds.

Budget Inputs

Touching on the AGI’s input on the annual and mid-year budget, Mr. Twum-Akwaboah, notes that the association presents inputs and afterwards holds a hearing with the finance ministry where individual AGI members speak about their views of the economy and what needs to be changed.

On the 2019 budget, the AGI presented a couple of inputs including the scrapping of the straight 5percent GETFund and NHIL on goods and services. “We thought its implementation was not the best and harmful to businesses because this is a cost happening across all levels of the value chain and has the potential to increase the cost of goods and services by as much as 20percent if the distribution chain is up to four,” he notes.

For big manufacturers with three distribution levels, he explains, the manufacturer will pass on the 5percent to the key distributor, who will now add another 5percent and move it to the wholesaler, who adds another 5percent to the retailer, who then adds 5percent to the consumer’s product.

“That is the cascading effect and will make the price of goods and services of local manufacturers very expensive,” he says, noting that for the importers, they just pay a flat rate of 3percent.

“For an agenda that seeks to promote local industries, this tax is inimical to local businesses. We engaged the minister and the tax policy unit with other stakeholders and we expected the 2019 budget to take it into consideration but it was not captured. We will continue to engage the minister,” he says.

But overall, the CEO of the AGI lauded the 2019 budget, describing it as “positive” but stressed that what matters is implementation. “A lot of the intentions are good including the making of US$1billion for industrial initiative, a stimulus package for struggling industries and industrial zones are good,” he says.

 

Industrial Policy Stutters

Government, in 2011, launched a comprehensive industrial policy to place industry at the centre of development.

The policy, which was started during President John Kufuor’s regime and completed when President Atta-Mills was in power, is a set of specific policy instruments and measures to be applied to increase access of the country’s manufacturing sector to competitive factors of production to enhance productivity, efficiency and competitiveness.

Key development objectives of the policy include expansion of productive employment in the manufacturing sector, promotion of agro-based industrial development and ensure spatial distribution of industries to achieve reduction in poverty and income inequalities. The implementation of the policy was expected to be done through an Industrial Sector Support Programme, which are time-bound interventions to speed up the rate of industrialization over a period of five-years.

The AGI, as the lead industry advocate, played a critical role in shaping the policy but since the launch of the policy nothing has come out of it and despite President Nana Akufo-Addo’s industrial agenda, led by the One District One Factory (1D1F) programme, the policy is still on the shelves.

When asked what is the current state of the policy, Mr. Twum-Akwaboah bluntly stated: “I do not think we have an industrial policy.” He notes that there was one, which was a good one, but implementation was poor and that led to the collapse of the policy.

To him, Ghana needs to incorporate the relevant aspects of the current government’s industrial agenda into the old policy and draw up a revised industrial policy and follow through. “Having a good policy and a plan is better than working on adhoc basis,” he says.

Does 1D1F fits into this policy?

He explains that what needs to be done for 1D1F to succeed is to allow the systems to work including using the 20percent of the District Assembly Common Fund, which is meant for district industrialization by law, to be used for its intended purpose.

“It was envisaged that, at the district level, you need industries to employ people and curtail rural-urban migration. That is why 20percent of the assembly’s common fund is dedicated to industrialization,” he says.

1D1F fits into the industrial policy because it envisaged the spreading of industries across the country and include locational tax incentives to push businesses into the other parts of the country and every location with specific raw materials. “That is an indication that we are encouraging industries,” he says.

But along the line, he notes, the AGI and businesses realized that such incentives were not enough due to the lack of markets, technology and infrastructure for businesses to thrive in such remote parts of the country.

1D1F requires patience

Asked about whether new members have joined the AGI as a result of 1D1F, Mr. Twum Akwaboah, advised that Ghanaians must be patient because 1D1F businesses will not just spring up overnight, especially when it is private-sector led.

Establishing an industry doesn’t happen overnight, especially sustainable private-sector led businesses. These businesses must be commercially viable, technically feasible and financially possible to get funding. To go through the process of acquiring technology, market assessment, right skills and have a proper corporate governance system does not happen overnight. The expectation that once you start, industries will spring overnight will not happen,” he says.

Secondly, he advised that one needs a very good funding arrangement to get the factories running, meanwhile, right from the beginning there was no funding for the programme.

To him, even though Finance Minister, Ken Ofori-Atta has made a pledge to mobilize US$1billion from various funding sources for small, medium and large scale enterprises to accelerate the industrial transformation agenda including the 1D1F programme, government should make a certain percentage for equity funding.

The AGI, he notes, tried to arrange funding to support the 1D1F, but he expects businesses interested in the venture to have some counterpart funding to attract investors. “We will love that the pace of the establishment of the 1D1F will be hastened so that we can all tell what is happening,” he adds.

 

The Business Barometer

One of the products of the AGI that any government is weary about is its Business Barometer. The Barometer is the true measure of business confidence in Ghana, spanning a period of over 11 years. It has consistently captured the views of 500 CEOs sampled from various sub-sectors of the Ghanaian economy.

Administered quarterly and largely through face-face interviews, the barometer touches several areas of economic activity across the 10 regions to ensure completeness of coverage. Assertions on the state of the business climate for the next quarter permit a ±5percent margin of error.

Often the Business Confidence index lies above or below the 100 base index with findings consistent with developments in the economy.

Starting as a Business Climate Survey, the survey was supported by the GIZ, a German development agency, as an annual report but when surveys were published which included key challenges faced by industry and businesses that were biting and needed quick interventions, the annual nature of it rendered it dud.

“We therefore converted it to a more frequent survey and allowed government and other stakeholders to quickly react to the needs of business,” he says, adding that it has helped a great deal in checking the policies being implemented by government in the short term.

 

The Thorny Issue of Power for Businesses

It is common knowledge that the AGI, for the best part of three decades, has been at the forefront of the campaign to not just reduce the cost of electricity or power for businesses, especially manufacturers to operate, but to overhaul the power sector to allow industries pay fairer prices which will allow them to compete especially against imports.

Earlier last year, government significantly reduced tariffs on electricity to as much as 25percent for big businesses but in the view of the AGI, the structure of the tariff regime is the problem not necessarily how much the reduction is.

Due to its squabbles with government over the cost of power, many believe the AGI is looking to run aground the power sector but Mr. Twum Akwaboah notes that that is not the case because power sector players such as the Volta River Authority (VRA), Electricity Company of Ghana (ECG) and Ghana Grid Company (GRIDCo) are all members of the association.

“How will we wish that our own members’ businesses collapse? We actually advocate for them as well. Power is a necessary input for production. What we have been asking for is simple: if you want Ghanaian industries to grow and be productive, they must have efficient power that can be given at competitive price,” he says.

The business principle of power

Apart from industry subsidizing residential users in Ghana, virtually the only country that still does this in the world, AGI’s main concern is the business principle of power being pursued by government which is killing industries.

“An instance is a company in Tema, with one metre, that pays GH¢3million in electricity bills per month. This business does not need a step down transformer because of the high volume of consumption and also does not need a lot of cables and poles to access power. To earn the same amount of GH¢3million from residential users, you need a whole community with several step down transformers, kilometres of cables and poles, hundreds of metres, and more manpower, all of which come at a cost.

That means it costs the service provider more to earn GH¢3million from residential communities than in industry for the same quantity or voltage of power. Also, the bigger the spread, the more leakages or waste occur and you are at a higher risk of illegal connections and other vices. Yet, the business, where the cost of service is cheaper, is paying more than residence where the cost of service is higher,” he says.

Ghana’s cost of producing power is too high

Another challenge the AGI has, when it comes to power, is the cost per kilowatt hour. In highly industrialised economies such as China and India, the cost per kilowatt hour hovers between 3 to 6cents but in the case of Ghana, it is near 20cents per kilowatt hour.

To Mr. Twum-Akwaboah, the Ghanaian industry cannot compete globally if it pays nearly four times the price in China and India, which are major industrial hubs. “It is important that we find ways and means to drive down the cost of electricity. We need to work hard, government and industry, because everybody is suffering when the price of electricity is high,” he adds.

‘Dumsor’

Touching briefly on the effect of the three-year power rationing, popularly called ‘dumsor’, he described its impact on industry as “devastating”.

To avert another power rationing and sustainably provide cheaper power for homes and businesses, he explains that what is needed is planning. “There is an eight-year cycle where the hydro source becomes inadequate and so you plan to get other sources in. unfortunately we did not plan in advance and that is what happened. In trying to solve it too, we signed countless Independent Power Purchasing (IPP) agreements that are not good for us.”

With the population growing, which is leading to sophisticated demands, the need for more energy is growing and so with efficient planning and regular investment in the sector, supply can stay ahead of demand so that Ghana will no longer experience the energy crisis we experienced between 2013 and 2015.

Renewables is the way forward

The AGI believes that with the advancement of technology in renewables, businesses and homes as well as government should aggressively consider the renewable option. “A few years ago it was very expensive to look into renewables but today the cost per production is getting cheaper and so government’s move in that direction is highly encouraged.”

With environmental protection in the face of climate change on the minds of the AGI, what the association wants to see is a flexible regulatory environment that will encourage a lot of private sector players into the space. “If you have a system that encourages the initial investment, then we can immensely benefit from renewables.”

 

Cost of credit, AGI’s bank and EXIM

With key macroeconomic indicators such as inflation, policy rate and Treasury Bill rate falling, AGI believes this should quickly translate into lower lending rates so that businesses can comfortably borrow and expand. “We welcome the consistent fall and we hope it continues to fall. Much as we want lending rates to fall quickly, we appreciate the gradual drops.”

The AGI, about four years ago, was pushing for the establishment of its own bank but not a word has been heard for the past year and a half. To Mr. Twum-Akwaboah, the establishment of the bank looked very good at the time it was being suggested but the economic climate and regulation makes it slightly challenging to run the bank in a manner that will be different from others.

“We wanted to create a scheme that will solve a major problem by providing medium to long term capital for industry. A lot of the banks today are not providing that, not even NIB and ADB, the development banks. With a universal banking license, you will have no choice but go by certain standards and that will make you no different from the others,” he says.

The AGI has repurposed the institution and has set up a fund, registered with the Securities and Exchange Commission (SEC) that can draw capital from government, development finance institutions and banks, and then AGI members can access this fund at much lower rates on medium to long term basis.

The ultimate aim, he explains, is to grow the fund to a level that AGI can secure a specialized license from the Bank of Ghana to operate as a specialized development bank.

Touching on the impact of recently established EXIM Bank, he notes that the AGI is very happy about its establishment but cautioned the business community to have patience for the institution since it is still early days yet.

“EXIM needs bigger capital and just the money coming from Import Levy is not enough. The whole idea of establishing an EXIM Bank is good because it can leverage its balance sheet to draw in capital from other institutions including other EXIM banks across the globe and create a bigger portfolio of funds and those moves do not happen in a day. We are monitoring and we can only be cautiously optimistic.”

 

Taxes and China’s US$2bn package

As businesses, paying taxes is unavoidable as taxes go a long way to develop economies and so with that the AGI wholeheartedly backs the government in pushing everyone to pay taxes. But AGI’s challenge is the implementation of some tax policies, especially the tax stamp, the frequent changing of the tax regime and the introduction of some new taxes.

The AGI, according to its CEO, has complained to government about some businesses that avoid taxes through under-invoicing and under-valuation and that led to the creation of a task force to monitor movements at the ports.

On the controversial tax stamp policy, which was welcomed by the AGI, the views of local manufacturers were not taken into account. The stamps, in the current format, will slow down high speed lines, especially for big beverage manufacturers such as Accra Breweries Ltd, Kasapreko, Cocacola, and Guinness Ghana Breweries Ltd.

But at the end, government and businesses have reached a compromise and now importers and local manufacturers are affixing the stamps and the Ghana Revenue Authority (GRA) is monitoring the situation aggressively. The textiles sector is the latest to start affixing the stamps, which is highly welcomed by players.

On the ECOWAS Common External Tariff, the AGI is still working on a comprehensive study to identify benefits and challenges but Mr. Twum-Akwaboah believes that being part of a common market is good for local businesses since the ECOWAS region is bigger than Ghana. “We just have to monitor how it is positively or negatively affecting our businesses.”

China’s US$2bn

The AGI truly secured a US$2billion credit facility with the China National Building Materials Company (CNBM) and so far several businesses have benefited. The whole idea, the AGI notes, is to use this to support the 1D1F.

The arrangement is such that businesses do not get direct financing but request for equipment when setting up factories and then repayment can be done till up to 10 years. The only challenges were guarantees from banks or government backing it with a sovereign guarantee but government is not prepared to do that.

So far, EXIM Bank and a few other banks have guaranteed projects for about 10 companies and construction is underway for some of the factories.

 

Future of AGI

For 60 years, AGI has become a stronger institution but the future is bigger and broader than one can imagine. Starting as a manufacturers association, it has moved beyond to encapsulate businesses. “As long as we continue to promote industry then AGI has a future but if we kill industry then there is no future for AGI. It is as simple as that.”

To Mr. Twum-Akwaboah, the current government has an eye for industry and a look at the 2019 budget leans heavily towards industry and initiatives such as 1D1F are industry focused and then there is the Ministry of Trade’s 10-point agenda. “As long as government itself has industry at heart, then AGI can only be smiling into the future and our core interest is to see members’ businesses grow.”

Therefore, the AGI will not relent in its efforts to engage with government to formulate business-friendly policies to see businesses grow. So far, the trend, he notes, is that global actions such as the ECOWAS Common Tariff and the Continental Free Trade Agreement are signs that the future looks promising for Ghana’s businesses.

“I am very positive that the future looks good but we need to advocate for the right policies and we need to have good entrepreneurs that are forward-thinking, committed and dedicated to doing businesses in a transparent manner,” he says.

 

Advice to members

To the members of AGI, over 1,500 of them including small, medium and large businesses, the association’s CEO believes that internally, implementing best corporate governance systems, good management style, recruiting the right talent, making sure efficiency is key and developing financial modules to survive during times of crisis, and prudent resource management will see businesses grow.

As the business grows, Mr. Twum-Akwaboah notes that there is the need for professional engagement. He further stresses “business leaders should not shy away from bringing in such help to develop and sustain their businesses. To go beyond generations, succession planning is key”.

For external factors such as inflation, interest rates, policies from government are not in members’ domain and so they should not be bothered about such actions. “Leave that to the association to handle.”

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