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  1. 1. A M O N T H L Y M A G A Z I N E BUSINESS & FINANCE DECEMBER 2010 - ISSUE 001 GH¢5.00 Looming Price War on the Horizon Telecom price cuts would mean a plus to consumers... (page 32) Local versus Foreign Expertise The Consultancy Practise dilemma lingers on... (page 46) Hope er tt of Be ices Squeezing Out Oil Prhana cops? G ill How w oil price e fall Inflation or 1 if 201 (Page 54) Growth? Accra: Finance Minister A Mecca for Kwabena Duffuor International Airlines shares views (page 26) on resultsUSA.......................$5.00 EUROPE............... E4.00 CFA ZONE...... CFA 2,500 SOUTH AFRICA.........R25 (page 16)UK.........................£3.00 AUSTRALIA......... A$7.50 NIGERIA.................N500 SOUTHERN AFRICA...R25THE FIRST BUSINESS READ IN GHANA Follow us online at
  2. 2. GHANA BUSINESS & FINANCE DECEMBER 2010 - ISSUE 001 Managing Editor Mark A. Kwateng Special Reports Editor Evans Boah-Mensah Contributors Contents Nana Sifa Twum Nana Spio-Garbrah Emilie Norkor Kinkan Leader Raphael Adeniran 5..... Can Ghana become the centre for Evans Boah-Mensah Mark A. Kwateng ECOWAS trade and investment? Fred Alipui Many trade experts agree that the current Nana Robert Mensah situation where the volume of trade Director, Sales & Marketing among members of the Economic Martino Kashif Community of West African States (ECOWAS) comes up to just about 14% is unacceptable... Deputy Manager, Marketing Michel Kouassigan Bulletins Economy: Dr. Kwabena Duffour, Deputy Manager, Sales Minister of Finance and Josiah Spio-Garbrah 8..... The economy this month Economic Planning, shares Take a look at what has been taking a his view on page 16 Editorial Committee nose dive and what is up and coming Prof. Paul N. Buatsi Prof. Kwame Addo 12..... Business & Finance this month Mr. Gaddy Laryea Take a look at how corporate Ghana Dr. Ekwow Spio-Garbrah is responding to government policies Mr. Ray de Bono Nana Robert Mensah Mr. Fredrick Alipui Ms. Susie Efua Kotoku Economy Ms. Johanna Awotwi Ms. Dede-Esi Amanor-Wilks 16..... Is the pursuit of anti-inflation Prof. Stephen Ayidiya economic policies helping Sam Fletcher President Mills to deliver the Contact: promise of a “Better Ghana”? Ghana Business & Finance The man in the thick of affairs in Taxation: Integrating Ghana’s Africa Business Media prosecuting the agenda of ‘zero-tolerance revenue management system: P.O. Box 0772, Osu, Accra for inflation’, Dr. Kwabena Duffour, Risks & opportunities page 49 House No. 7, Minister of Finance and Economic Lamb Street Off Farrar Avenue Planning, shares his view on how Tel: +233 302 240 786 government’s economic management Fax: +233 302 240 783 strategy is bearing fruits. Energy 22..... A new resolve to reduce electricity waste It has emerged that a major part of the waste of electricity in Ghana is attributable to the use Branding, Layout & Design of “The Ghana Business of second-hand refrigerators. But attempts Media: Private broadcasters & Finance” magazine by Dmax Studios to ban the importation of used raise alarm over digital migration in Malta, EU ( refrigerators are being thwarted page 30 by importers CEO & Art Director Ray de Bono Senior Designer-in-Charge of Publication Sasha Vella Client Relations Executive Natalia Pundieva Studio Support Executive (in charge of GB&F Online) Jonathan Galea IT Strategy Director Uwe Schoenfeld Subscribe online at or please refer to page 11 Contents continued overleafAll information contained within this magazine is the property of Ghana Business & Finance and is not to be used without written authorisation from GHANAthe publishers. Although every effort is made to ensure the correctness of information submitted for publication, the magazine may inadvertently containtechnical inaccuracies or typographical errors. Ghana Business & Finance assumes no responsibility for errors or omissions in this publication or otherdocuments that are referenced by or linked to this publication. BUSINESS & FINANCE 3
  3. 3. GHANA BUSINESS & FINANCE DECEMBER 2010 - ISSUE 001 Contents Aviation Agriculture 26..... West Africa Gateway dream 42..... Cocoa finance in high gear in sight State-owned purchasing and global For years Ghana has had the ambition marketing agency, COCOBOD, of positioning herself as the gateway to continues to make successful pre- West Africa. Thanks to the growing financing deals with many international traffic of passengers travelling around banks. With Ghana’s new oil economy the globe to Accra, more international in sight, how would the golden pod airlines are now planting their flags in sustain its investor attention? Ghana. Why is the country recording consistent increases in passenger arrivals?Oil & gas: How will Ghana cope Managementif 2011 oil price falls to $60/barrel?page 54 46..... Consultancy practice in vogue Media As Ghana’s economy expands it appears 30..... Jitters over digital TV move to be attracting all kinds of consultants Countries all over the world are expected from within and outside the country. to migrate from analogue to digital TV This may be an indication that there is broadcast transmission by 2015. Ghana enough business to go round both local has already begun the process to digitalize and foreign consultants. But who gets TV broadcasting but attempts to use the the real beefy assignments? state broadcaster as the sole signal distributor is raising eyebrows Taxation Telecommunications 49..... One roof fits all taxes New tax reforms in Ghana has resulted 32..... Telecom battle cries in the creation of a single all powerfulAgriculture: Ghana cocoa Ghana’s mobile telephony operators tax authority to collect taxes on behalffinancing enjoys over-subscription know that fierce competition in their of government. How do the three mainpage 42 industry is inevitable. But now they previously autonomous tax agencies have taken it to a level where they can’t co-exist under one roof? resist taking off their gloves to do battle with their bare knuckles. Mobile phone users in Ghana should begin to feel the Oil & gas benefits of the intense competition in their pockets 53..... The Kosmos asset sale: Doing it right this time! Will Kosmos/GNPC battle push ICT Finance the government of Obama to talk to President Atta-Mills? 39..... Renewed push for mass Internet broadband access 54..... Ghana’s oil: Hopeful The challenge of promoting investments of a better price in Internet broadband access beyond As the Jubilee field pours out its first regional and district capitals may not barrel of oil, expectations of heavyTelecommunications: The be peculiar to Ghana. With a new injection of oil revenue into thecoming telecom price wars international funding agency in the Ghanaian economy is 32 offing, Internet connectivity to rural How would the country cope communities is set to receive a big boost if oil price take a dip in 2011?4 GHANA BUSINESS & FINANCE
  4. 4. Positioning Ghana to compete LEADEReffectively in the ECOWASmarket: A policy challengeMany trade experts agree that the current situation where the volumeof trade among members of the Economic Community of West AfricanStates (ECOWAS) comes up to just about 14% is unacceptable,considering that the objective for setting up the regional body in 1975was to create a free trade area with the eventual introduction of asingle currency; a common external tariff regime; and a commonmarket that will eventually culminate into an economic union.T he member states recognize that their individual In order to take full advantage of the vast West African market trade and industry policies, as well as regional of nearly 300 million people, Ghanaian entrepreneurs would do investment promotion initiatives therefore, must well to enter into joint ventures with their counterparts, within take into account the need to accelerate trade the Federation of the West African Chambers of Commerce and transactions among themselves. It has been Industry (FEWACCI) to try to produce directly or in partnership expected for decades that as the regional integration with other investors from non-process evolves, member states would re-organize their strategy ECOWAS countries, including European, Asian, Middle-easterntowards the West African market. However, not enough seems or American have been achieved on this front. Partnering with European investors to produce for the ECOWASJudging from the type of commodities being traded, Ghana for market is one of the key objectives of the sometimes controversialexample, could target some of the products that are being imported Economic Partnership Agreement (EPA), when it finally getsby its neighboring countries from outside the region and produce signed by all ECOWAS member states.them for those target markets. Current trade statistics show thereare a lot of trade opportunities in the sub-region that For Ghana to prepare adequately, the country needs to understandGhana could take advantage of, with the right preparation. the West African market from a number of strategic viewpoints. For example, it would be necessary for Ghanaian businessmenThe major products that Ghana currently exports to her and women to understand the Francophone business system andimmediate neighbours, Côte d’Ivoire, Burkina Faso and Togo business laws and practices. This is becauseare frozen tuna, plywood, cotton seeds, mattresses, sacks and the immediate markets on Ghana’s borders are all French speaking.bags of polymer of ethylene, rubber and plastic products. In this context, it is important to important to point out that theThe major commodities imported by Ghana from her business laws of Burkina Faso, Côte dIvoire, Togo and Beninneighbours are fresh tomatoes, onions, millet, dried beans, are governed by the Organisation for the Harmonisation ofcement clinker, petroleum and crude oil. Business Law in Africa (OHADA), to which belong 17 mainly francophone countries in Africa.However, Ghana’s neighbours all import a large range offinished and semi-finished goods which Ghana could (NB OHADA includes two lusophone countries and one Spanish-consciously strategize and plan to produce for the sub-region. speaking.) GHANA BUSINESS & FINANCE 5
  5. 5. LEADER Furthermore, Ghana would need to make a conscious and strategic effort to align its domestic laws with the numerous Acts and decisions of the ECOWAS Commission. In particular, this magazine would like to invite the Ghana Investment Promotion Centre (GIPC) and the Ministry of Trade and Industry (MoTI) to examine the state of the ECOWAS Investment and Competition Acts with a view to aligning them to Ghana’s business and investment laws. It is instructive that the GIPC has been holding stakeholder forums to update Ghana’s investment laws, and it is expected that making Ghana the centre of production for the ECOWAS market will be at the heart of the review process. If Ghana is to position herself strategically to compete on the ECOWAS market in the decades to come, the Ghana National Chamber of Commerce and Industry (GNCCI) and the Association of Ghana Industries (AGI) as well as the Federation of Associations of Ghanaian Exporters (FAGE) would need to form strategic alliances with the newly revived Federation of West African Chambers of Commerce and Industry in order to build the capacities of the Ghanaian entrepreneur in identified areas in order to take full advantage But even as the spotlight is focused on FDIs, it is important of the West African market. to also highlight the fact that investment promotion in West Africa cannot be discussed on the blind side of intra-regional Political leadership also has a role to play. There is the need trade and investment. for the leadership of ECOWAS to work in concert to initiate far-reaching reforms that can attract international capital In preparing herself to take advantage of all possible trade funding for sub-regional projects. These reforms have to and investment opportunities in the West Africa sub-region, include the tax regime; legal and judicial reforms; institutional Ghana has to play up her competitive advantages. These reforms; capital market development; credible privatization; include the fact that the country is a natural leader within the upgraded and harmonized infrastructure planning; and West African sub-region, being the first African country, south investment promotion and facilitation in all member states. of the Saharan, to gain independence in 1957, and having successfully steered herself through varied types of political This need for reforms has become even more imperative governance for more than half a century without any civil because the nature of current globalization trends and the war. Its civil service, notwithstanding various difficulties, is flow of foreign direct investment (FDI) require such still considered one of the best in Africa, its educational system aggregation and integration of economies of proximity. Thus, still produces some of Africa’s best professionals, it has two ECOWAS, with a market size of close to 300 million people, major seaports and several airports, more reliable energy and cannot afford but foster closer collaboration and co-operation other utilities compared to its English-speaking neighbours, to make itself more attractive in comparison with other and currently boast 18 continuous years of democratic rule investment destinations. At the moment, the region attracts without any military interference. less than 5% of global FDIs, and only a sense amongst foreign investors that a business established in the sub-region will Over the years, Ghana has continued to play a leading role in benefit fully from the protocols of an integrated market, will the socioeconomic and political growth and development of lead to a significant increase in that percentage. West Africa. In an era in which many international analysts allude to the sub-region as a hotbed of instability, the country, The need for the effective implementation of the ECOWAS in a very exemplary manner, has anchored its governance on Regional Investment Policy Framework therefore, cannot be a thriving democracy resplendent with a culture of political overemphasized. One of the requirements of the framework tolerance and peaceful co-existence. In the last five years, the is the establishment of a Regional Investment Promotion discovery of significant quantities of oil not just in Ghana, Agency (RIPA) which will function to increase international but in Benin, Liberia, Sierra Leone, in addition to Cote d’Ivoire, awareness of member state’s investment opportunities, when added to vast fossil fuel resources of Nigeria and incentives, legislation, practices, and major events affecting Equitorial Guinea, has made the West African coastline a hot investments through the regular dissemination of information. new attraction for global investors. The creation of RIPA is long overdue. That notwithstanding, this magazine is of the view that Ghana At present, almost all the member countries of ECOWAS needs to show some more seriousness about further enhancing have their own individual national policies and programmes her competitive advantage in the sub-region by first, developing which offer varied incentives to attract investment. Some offer her capacity in basic French communications skills and to tax rebates for foreign-owned companies that invest in specific train its businessmen on how to succeed in cross-border sectors of the economy while some allow for foreign-ownership trading and investment. The French Embassy in of private enterprises up to 100%. The difficulty, however, is Ghana, through the Alliance Francaise, has some facility in that most of the countries are too small, on their own, to this direction but this needs to be expanded. We may wish to wield the necessary clout that can woo the attention of the invite the Embassies of Francophone countries in Ghana and movers and shakers of international private capital. However, the Canadian High Commission in Ghana to join this French the experience of the European Union is signal, where a communication skills initiative. Ghanaian businessmen and number of quite small countries have nevertheless benefited women need to take active interest in becoming bilingual from common economic, financial and trade policies, and now business executives if they are to compete effectively in the a common currency - the Euro. In the case of West Africa ECOWAS common market. Equally necessary is for the and the ECOWAS region, the much-discussed sub-regional governments and business communities of ECOWAS states currency, the Eco, is still on the drawing board after more and the ECOWAS Commission to take speedier measures to than 15 years of meetings, conferences, workshops, proposals, implement the many accords that have been agreed to integrate resolutions and timelines. ECOWAS must wake up. the sub-region. 6 GHANA BUSINESS & FINANCE
  6. 6. BULLETINS The economy this month Cocoa purchases drop Cocoa purchases for the 2009/2010 season came in about 10 % Ostensibly to address the price differentials between Ghana and lower than the projected figure of 700,000 tonnes. As of the end her neighbour, in the hope of reducing the incidence of smuggling, of September 2010, provisional figures from the industry regulator, the producer price of cocoa was increased 33 % for the 2010/2011 COCOBOD, for both the main and light crop seasons stood at main crop season which began October 1, 2010. A tonne of 632,024 tonnes. Earlier, the 33-week main crop season which cocoa now goes for GH¢3,200 compared to GH¢2,400 during ended July 2, 2010 saw cocoa purchases drop 8 % in year-on- the same season last year. The new price represents 75 % of the year terms to 581,436 tonnes, compared to the corresponding net FOB price, compared to last season’s 71 %. period last year. COCOBOD officials have cited smuggling activities of farmers as the cause of the decline. Prices of cocoa Government has also directed that bonuses be paid to cocoa are market determined in neighbouring Cote d’Ivoire (the world’s farmers on the 2009/2010 main crop before December 2010. In biggest producer of the commodity), because that country has addition, government is funding the Cocoa Farmers’ Housing a liberalized price regime that allows farmers to sell directly to Scheme and has asked COCOBOD to expedite action on setting exporters. In Ghana, the market is regulated with government up structures to run a pension scheme for farmers. taking up the responsibility of providing extension services to farmers to ensure good yield and quality beans-the reason Ghana is ranked one of the best producers of quality cocoa beans in the CUMULATIVE COCOA PURCHASES (TONNES) world. MAIN CROP SEASON 2008/2009 2009/2010 Ghanaian cocoa farmers are currently paid 75 % of the net FOB Actual 634,256 581,436 price while the remaining 25 % is shared among other players in Ghana’s cocoa industry such as the licensed buying companies, Target 600,000 580,000 the Cocoa Marketing Company and the haulers. Source: BOG Cocoa finance deal over subscribed This year’s trade finance facility for cocoa purchases recorded However, there are fears that with the start of oil production an over subscription of 20 % to US $1.8 billion at the end of by first quarter 2011, the country may shift its attention from the syndication exercise which ended in September. cocoa. At the signing ceremony of the trade finance loan, COCOBOD, however, signed for US $1.5 billion. The finance Finance and Economic Planning Minister, Kwabena Duffour, deal, the biggest in the history of trade finance in Ghana, was said government will not abandon the cocoa sector because made possible by 36 banks, comprising local and foreign of theemerging oil and gas sector. entities from the America’s, Asia and Africa. The facility will ensure farmers receive prompt payment for their cocoa in the He added Ghana intends to recapture its position as the biggest 2010/2011 season and also ensure that the crop continues to producer of the crop. play its developmental role. Cocoa production and export, has over the years, been seen as one of the possible ways to earn For the 2010/2011 cocoa season, 700,000 tonnes has been steady income to transform Ghana’s economy and eventually set as target but government plans to increase production to rise out of poverty. one million tonnes by 2012. 8 GHANA BUSINESS & FINANCE
  7. 7. BULLETINSInward remittances hit US$4.2bnData from the central bank shows private inward transfers through These remittances, according to the Bank of Ghana, were receivedcommercial and retail banks increased 22 % in the first half of by NGOs, embassies, service providers, and individuals. The risethis year to US $4.23 billion, compared to the same period last in Ghana’s inward remittances follows a global and continentalyear. pattern. PRIVATE INWARD TRANSFER (JAN - MAY: 2002 - 2010) 2002 2003 2004 2005 2006 2007 2008 2009 2010 US$’m 555.7 845.2 1,027.5 1,630.8 2,270.4 2,590 3,562.1 3,461 4,230.7 TRANSFERS TO INDIVIDUALS (JAN - MAY: 2005 - 2010) 2005 2006 2007 2008 2009 2010 Level (US$’m) 483.5 672.1 582.1 704.6 604.8 626.2 Share (%) 29.6 29.6 22.5 19.8 17.5 14.8Source: BOG At the global level last year, US $300 billion 800 was transferred in remittances, out of 700 which US$ 40 billion came to Africa. 600 However, in Ghana, the share of 500 remittances that accrue to individuals has 400 been dwindling since 2006. Of the total 300 US $626 million recorded between January 200 and May this year, 14.8 % was received by individuals, compared with US $604 100 million, representing a share of 17.5 %, 0 during the same period last year. LEVEL (US$’M) SHARE (%)Tax revenue target missed Public debt hits US$10 billionTaxes collected by Customs Excise and Preventive Service Provisional total public debt stood at US $10.3 billion at the endunderperformed in the first half of this year, totaling GH¢1,018 of June this year from US $9.2 billion, at the end of Decembermillion, which was 85 % of the target. Even though other taxes 2009, according to Bank of Ghana. The debt stock representedsuch as those on income and property, collected by the IRS, and 56.5 % of GDP in June, compared with 61.7 % of GDP at thedomestic VAT, by the VAT Service, met their targets and in some end of December 2009. Total external debt stood at US$5.2cases exceeded it, the pace of growth of tax collection slowed, billion (28.6 % of GDP) at the end of the first half of this year,in year-on-year terms, to 25 % from 30 % for the corresponding compared with US$5 billion (33.6 % of GDP) at the end ofperiod in 2009. December 2009.However, total revenue collected by CEPS, comprising importduties, import VAT and petroleum taxes, for the first half ofthe year increased 12 % over last year’s total revenue of GH¢907million.Total domestic revenue for the period also increased 25 % toGH¢2.9 billion. Total expenditure for the period amounted toGH¢3.8 billion (14.7 % of GDP) compared with GH¢3 billion(14 % of GDP) spent in the corresponding period last year. Theamount was 1.7 % more than the half year target and representeda year-on-year increase of 25.2 %, compared with an annualgrowth of 12.2 % recorded for the same period in 2009.The increase in government spending, according to official sources,was mainly fueled by discretionary spending.It is expected that with the inauguration of the new GhanaRevenue Authority, tax collection efforts will improve.The authority, according to its mandate, would put in placemeasures to overcome challenges including unprofessional conductand compromise of integrity which gives rise to collusion withtaxpayers to evade tax. GHANA BUSINESS & FINANCE 9
  8. 8. BULLETINS Inflation drops further The inflation rate for September 2010 dropped for the 15th The largest decline in inflation this year was recorded in April consecutive month since June 2009 to 9.38%. The decline was (1.66 %) followed by January (1.19 %) and June (1.16%). Even 0.06% lower than that of August 2010 which was 9.44%. though the non-food inflation rate declined, it still remains in the September’s inflation rate was the lowest in eight years since the double digits. It fell from 18.79 % in January 2010 to 11.84 % CPI was rebased in 2006 to shift the base year from 1997 to 2002. in July but increased to 12.25 % in August. The rate of inflation in Ghana, measured by the percentage change in consumer price index over a 12-month period, takes With recent labour unrests, there are signs of potential wage account of staples in the country’s food basket as well pressures which could exert pressure on the government’s budget as non-food items such as transportation, education and hotel and consequently affect prices. There are also concerns about services. the accumulation of arrears and the rolling out of the new public sector wage policy and the single spine salary structure. According to the Ghana Statistical Service, the food component of the price index is mainly responsible for the continuous fall However, the period between July and October is the traditional in the rate of inflation over the period. bumper harvest season for most food staples in Ghana and it is expected that there would be adequate supply Food inflation has been recording single digit percentages since of foodstuffs on the market which should help contain food January 2010 falling from 9.1 % to 5.3 % in August. prices. CONSUMER PRICE INDEX (CPI) JANUARY 2010 - AUGUST 2010 CHANGE RATE (%) MONTH/YEAR INDEX 2002 = 100 MONTHLY YEARLY Jan-10 319.83 1.59 14.78 Feb-10 324.66 1.51 14.23 Mar-10 328.35 1.14 13.32 Apr-10 332.99 1.41 11.66 May-10 339.21 1.87 10.68 Jun-10 344.52 1.57 9.52 Jul-10 347.35 0.82 9.46 Aug-10 344.87 -0.71 9.44 Source: Ghana Statistical Service FDI up close to 600% A total estimated value of US $850 million worth of investment Among the agriculture entities attracted to the country were was recorded in the first half of this year, according to the African Plantations for Sustainable Development, which will Ghana Investment Promotion Centre. be involved with setting up fast growing tree plantations to har vest pulp and biomass for the production of Of the amount, the foreign direct investment electricity. Others include Mass Industries, an agro-food (FDI) component was US $761 million, a significant increase industrial project and Galten Agro, which will cultivate Jatropha of 599% compared to US $109 million recorded in the for the production of biodiesel. corresponding period in 2009. The service sector’s share of the investment was nearly 38 %, Officials attribute the sharp rise in FDI inflows to the emerging with companies such as Beacon Life Assurance attracting oil and gas sector. Ghana is expected to pump its first significant some US $13.50 million in fresh capital injection, and Soroma amounts of crude oil by the end of 2010, following the Ghana Funds attracting US $3.5 million for the construction discovery in commercial quantities of crude oil in 2007. of apartment style residences. The sterling performance of the national football team, the The sources of the half-year to June 2010 investment were Black Stars, at this year’s FIFA world cup in South Africa is mainly from Bermuda and Trinidad and Tobago, both also believed to be attracting investor attention to Ghana. accounting for more than half of the total value. The agriculture sector was the biggest beneficiary of the FDI In terms of the number of projects registered, India and China inflows for the first half of this year, accounting for half of accounted for the biggest share followed by Nigeria and Britain the total value of investments recorded during the period. in that order. 10 GHANA BUSINESS & FINANCE