Thursday, March 28, 2013

Bullish forecast on cedi

The cedi is expected to be more stable this year, but economic growth will moderate to 6.5 percent on account of fiscal tightening, emerging-markets investment bank Renaissance Capital has said.

Ghana’s economy grew by 7.1 percent last year, according to provisional data; but the cedi fell by 17.5 percent against the US dollar due to strong import spending and speculative activities.

“While we expect a strong growth recovery in the oil sector to be positive for output growth in 2013, we think expenditure growth is likely to be undermined by a slowdown in fiscal spending and smaller wage hikes,” said Yvonne Mhango, Renaissance’s sub-Saharan Africa economist.

“The cedi should fare much better than in 2012, and we forecast a moderate depreciation to GH¢2/US$1 in 2013, from GH¢1.9/US$1 in 2012. Inflation should average 9-10 percent,” she added.  
 The Bank of Ghana, which has held its policy lending rate at 15 percent since June 2012, should find room for a 150-basis-point reduction in 2013 on the back of stable exchange rates and inflation, she said.

After the budget deficit widened to 12.1 percent of GDP last year, Finance Minister Seth Terkper promised that Government will rein it in to 9 percent this year by boosting revenues and controlling expenditure.

Renaissance observed that Ghana is at an attractive stage of its development cycle due to the successful elections and transfer of power in 2012, and “ticks many boxes for us in terms of what we look for in fast-growing emerging markets.

“We expect the Jubilee Field’s peak production of 120,000 barrels per day to be reached in 2013. This implies a 40-50 percent increase in oil production in 2013 by our estimates, compared with a decline in 2012.
“We believe this strong improvement in production from the oil sector, Ghana’s third-biggest industry, implies significant upside potential for industrial growth in 2013. However, this will only have a positive bearing on industry if manufacturing’s growth recovers and construction activity is at least sustained.”
With the Jubilee gas pipeline expected to be operational in September, Renaissance said power shortfalls will ease and the cost of energy will be significantly reduced.
“We expect lower energy costs to boost households’ disposable incomes -- which is positive for consumption, and increases businesses’ profit margins. Lower energy costs will also increase the attractiveness of investing in Ghana, particularly in energy-intensive sectors such as industry.”
On interest rates, the bank said it expects fiscal tightening to place downward pressure on yields, and be positive for the inflation outlook.

“This implies positive real rates can be sustained, albeit moderately lower than they were in 2012. Although credit growth is quite strong in Ghana, we do not expect it to keep the Bank of Ghana from easing the policy rate in 2013. The risks to our interest rate view include an external shock that weakens the cedi and a local drought that pushes up food prices.”

Banking sector

Ghanaian banks completed a four-year regulator-driven capital-raising drive in 2012, ending the year with a 19 percent capital adequacy ratio against a 10 percent regulatory requirement. This forms a solid base to deliver strong credit growth over the next few years, according to Renaissance, which announced that it has begun coverage of the Ghanaian banking sector.

“The sector has a history of elevated NPL ratios -- and although the trend has been improving it has been sticky, trending down at around 13-14%. As we expect loan-growth to outpace NPL growth in 2013, this should lead to a fall in NPL ratios.

“Nonetheless, we note that the strong loan growth cycle we expect over the next few years could pose new asset quality challenges, especially for those domestic banks whose risk management standards are not comparable with those of the larger domestic and foreign banks. External shocks to the Ghanaian economy are also a risk to asset quality.

“Considering the higher returns the Ghanaian banks have delivered historically, we believe they deserve to trade at a premium to banks in other markets.”

Gold Production hits 4.2m ounces in 2012

Gold production climbed 4.2 million ounces in 2012 as compared to 3.6 million ounces recorded in 2011, Mr. Benjamin Aryee, Chief Executive of the Minerals Commission ,has said.

The figure represents a 17 percent increase over the 2011 production figure and is attributed to rising prices and higher output by miners.

Gold prices averaged US$1,668 an ounce in 2012 from US$1,572 an ounce a year earlier.
“Gold prices are still appreciable and motivational enough for mining companies to produce more. The trend will follow as long as gold prices are high,” Mr. Aryee said.

Bauxite rose to 662,925 metric tonnes in 2012 from 410,918 tonnes a year earlier, while Diamond output fell to 215,118 carats from 283,368 carats.

Mining companies’ expressed a mixed outlook for the country’s mining industry this year, expecting gold to sustain its good performance in the global market while bauxite and manganese exports could fall as the result of a decline in demand, Daniel Owiredu, President of the Chamber of Mines, told B&FT.

“The year looks promising for the mining industry. Additional production from new mines --Adamus Resources and the prospects from the Owere Mines -- is expected to bring an increased production beyond the marginal output arising out of existing mine projects.

“The expected higher volumes of mineral production and the strengthening of gold price are expected to result in increased mineral revenue, with a corresponding increase in mineral royalties and corporate tax payment to Government,” Owiredu said.

Figures from the Chamber indicate that a total investment inflow into the mining sector in 2010 was US$770million, up from the US$762million that was recorded in 2009.

Cumulatively, the investment inflow into the sector from 2000 to 2010 stood at approximately US$6.2billion.
The total mineral revenue rose significantly from US$2.93billion in 2009 to US$3.73billion in 2010, representing an increase of 27 percent -- mainly on the account of healthy price of gold, although other minerals also recorded increases in price during the period.

The mining sub-sector grew remarkably: by 11.2 percent compared to the 6.8 percent it recorded in 2009. By this growth-performance, the industry came second behind the electricity sub-sector which grew by 16.7 percent in 2010.

Mahama cautions on destination inspection

President John Dramani Mahama has asked heads of Customs in the sub-region to take a critical look at the role of Destination Inspection Activities by the private sector and revenue and security implications within the various countries.
“Directors-General should look at innovative ways to improve transit trade and the free movement of people in the sub-region without compromising revenue and national security.

“Directors-General of Customs in our sub-region should explore areas where progress is needed in trade facilitation and improved revenue mobilisation.”

President Mahama made this statement in a speech read on his behalf at the 18th Conference of Directors-General of the Customs Administration For The World Customs Organisation West and Central Africa Region, under the theme “Innovation in customs, a catalyst for regional capacity building”.

President Mahama said: “Indeed, the WCO trade facilitation has become a core mandate of Customs; but the reality is that our tax administration should be able to balance trade facilitation with revenue mobilisation. That is why we need to enhance regulatory cooperation among Customs administrations in our sub-region.

“Improved tax systems will certainly serve as catalysts for trade facilitation, investment promotion and the creation of a solid regional block.”

He added: “Customs is always at the cutting-edge of trade facilitation efforts, by ensuring the seamless flow of goods and people across our borders. These efforts are aimed at reducing the transaction costs of business and improving investment opportunities.”

The Minister of Trade and Industry, Haruna Iddrisu, disclosed that very soon the Customs Division of the Ghana Revenue Authority(GRA) will perform the role of destination inspection -- which calls for the capacity of Customs to be built in order to perform this role more efficiently.

When this is done, it will help simplify trade facilitation processes and improve Customs procedures to improve revenue generation.

Mr. Idrrisu indicated that Government will equip all entry points with up-to-date scanners to facilitate trade and also improve on revenue generation. There are revenue leakages, and every effort will be made to plug them to bring efficiency and enable Government to derive the much-needed revenue for national development.

 “We need to reduce the time and cost in our port clearance system. Best practice exists in this part of the world; we have no reason not to work toward attaining best standards.”

Mr. George Blankson, Commissioner-General of the Ghana Revenue Authority, said Ghana’s tax system is expected to be fully transformed when the current integration and modernisation programme is fully implemented.
He said over the years Customs has assumed some equally challenging roles which now include trade facilitation, investment promotion and national security -- including controlling the  entry of prohibited and restricted goods.

Globally, Customs modernisation programmes are driven by information communication technology. The establishment of an electronic data interchange platform has drastically transformed the operational environment of Ghana Customs, he said.

Secretary-General of World Customs Organisation, Kunio Mikuriya, for his part said his outfit intends working with the African Union and the African Development Bank to boost intra-African Trade, which should begin by 2017.

This can become a reality when trade facilitation is given top priority, which requires a new role for Customs to take centre-stage to fast-track the process.

Mr. Mikuriya pledged his outfit’s support in the area of capacity-building for Customs to do detailed analyses of goods to facilitate trade and also improve the technical-know-how of Customs.

Gov’t to design new medium-term plan

Minister of Finance and Economic Planning Seth Terkper says Government will develop a new medium-term plan to realise the nation’s developmental objectives over the next few years. 
The new plan, he said, will be anchored on macro-economic stability and promote private-sector competitiveness, modernise agriculture, develop infrastructure, and ensure transparent and accountable governance.

The current medium-term plan, the Ghana Shared Growth and Development Agenda (GSGDA), which started from 2010, expires in 2013 and will be succeeded by the new plan to be developed.

The GSGDA is successor to the Growth and Poverty Reduction Strategy (GPRS II), which covered the period 2006-2009 and was linked to Ghana’s debt-forgiveness programme with external creditors.

Addressing Chief Executive Officers and business elites at the Ghana Economic Forum (GEF) 2013 in Accra, Mr. Terkper highlighted the changing structure of the economy and growth in the gross domestic product (GDP) as key drivers that will propel the country forward.

Concerns have however been raised about the country’s inability to develop and implement a national long-term strategic plan that will guide the development process over at least a decade.

The long-term plan, according to its promoters, must be adopted and mainstreamed into all sectoral strategies and implemented by successive Governments.

Speaking under the theme “The Role of Leadership in Driving National Economic Prosperity”, Mr. Terkper said Government will make a conscious effort to correct the many forms of inefficiency in management of the country’s public institutions.

He said the public sector can draw useful lessons from the private sector, where management systems are more effective and efficient.

“The Government’s focus now is to diversify the economy in order to avoid contracting the Dutch Disease,” he said.

He proposed the creation of an infrastructure fund, using oil revenue, to accelerate economic development -- adding that it is time Government assesses the Petroleum Revenue Management Act to evaluate its benefits. 

Touching on the growth in GDP, Mr. Terkper said the country, with its current middle-income status, has more access to capital and expressed Government’s resolve to partner the private sector to create a congenial atmosphere for businesses to thrive.

The Minister of State in charge of private-public partnerships, Alhaji Rashid Pelpuo, assured the private sector of Government’s commitment to partner it in the provision of public goods.

He said partnering the private sector will create the necessary environment to conduct business with ease, adding that Government is working on a public-sector partnership strategy to foster a closer working relationship with the private sector.

Bankers told to uphold industry ethics

The 12th Ghana Banking Awards has been launched in Accra with a call on bankers to uphold the tenets of ethics, integrity and compliance.

Afotey Odarteifio, Executive Secretary of Corporate Initiative Ghana who made the call, said the call to ethics and integrity in banking is to promote social and environmental responsibility in the financial sector based on principles of transparency, social and environmental impacts of projects, and narrow profit margins.

“Ethical banks are supposed to perform more than the normal role expected of conventional banks by maximising returns for their clients and adhering to their own moral concerns.

“Regulations initiated by an informed public would effectively ensure that banks follow socially accepted morals and ethics.”

The 2012 awards, organised by Corporate Initiative Ghana is under the theme “Promoting Ethics, Integrity and Compliance in the financial services industry”.

Mr. Odarteifio observed that the perennial strong debate on the high cost of credit to business and industry has weakened competitiveness of the industrial base.

This development, he said, has always been based on the cost of funds, risk levels and non-performance assets.
 “It is argued that it makes for ethical balance if banks can share some of those profit margins with their customers -- especially those in manufacturing, housing and other critical areas -- if they really believe that their sustainability as banks depends on the sustainability of their customers.”

Mr. Odarteifio indicated that there is a certain feeling in the business community that anytime people send project ideas to banks, their officials usually steal those projects and implement them.

Mr. Willing Vanderpuije, Chief Host and Chairman of the Planning Board, urged bankers to demonstrate honesty, openness, transparency and fairness in all business activities.

“We encourage banks to observe and comply with applicable laws and regulations; act honestly and with integrity at all times; develop their skill and knowledge; and to demonstrate their commitment to continuing professional development.

“Inappropriate actions by individuals can result in great cost to firms, adding that fostering an environment of trust, integrity and professionalism leads to greater confidence -- which ultimately strengthens the bank’s reputation in the market.”

Awards to be won include Bank of the Year, Best Bank-Corporate Banking, Best Bank-Retail Banking, Best Bank-I.T/Electronic Banking, Best Growing Bank, and Best Bank-Customer Care.

Other awards also include: Most Socially Responsible Bank, Best Bank-Financial Performance, Best Bank-Competitive Pricing, Best Bank-Trade Finance, Best Bank-Advisory Services, Best Bank-Short Term Loan Financing, Best Bank-Long Term Loans, Best Bank-Agriculture Financing; and Special Award - Best Bank, Mobile Banking.

 New awards introduced include Life Time Awards, Trade Finance Deal and Consumer Financing Bank of The Year.