Investing petroleum fund in foreign portfolios questioned

The rationale for investing the country’s stabilisation and heritage funds, which have accrued up to US$448million in foreign portfolios at a rate of 2% and 2.5% respectively, has been questioned.

 

An investment banker and Chief Executive Officer of the Gam-Ank Group, Dr. Sam Ankrah, interrogating the rationale for investing the funds called for anurgent sound management of the country’s natural and national resources.

Dr. Ankrah noted that an investment of US$400million that is sitting elsewhere can provide  up to if not more than 20,000 truly affordable rental housing for nurses, doctors, civil and public servants, the security agencies and the general populace at large. 

He added that with an estimated rental income of US$100 per month that can rake back into the stabilisation and heritage funds a whopping US$24million and more annually to establish a sustainable cash flow for managers of the economy and the national budget. This, he suggested, can be repeated in other sectors of the country’s economy without any need for the International Monetary Fund’s (IMF) assistance.

Dr. Ankrah was making a submission at the 14^th Ghana Banking Awards themed ‘Identifying and Rewarding Excellence in the Banking Services Proposition’ in Accra.

By Petroleum Revenue Management law, government is required to wholly invest the Ghana Stabilisation Fund and the Heritage Fund -- collectively known as Ghana Petroleum Funds -- in instruments issued by sovereign states and international financial institutions.

With the onset of producing commercial oil in the country, government created the Ghana Stabilisation Fund to cushion the impact of crude price falls on government’s spending, or to sustain public expenditure capacity in the event of revenue shortfalls resulting from decreasing oil prices; meanwhile, the Ghana Heritage Fund was established as a fund for future generations.

Already, government has for the first time moved to draw GH¢487.2million out of the GH¢525million in the Ghana Stabilisation Fund to support the 2015 budget, after a fall in crude oil prices forced it to slash oil revenue forecasts by 64 percent -- about GH¢2.7billion.

Dr. Ankrah stated that: “At a time when investors are taking advantage of opportunities in the housing sector in our country instead of their own countries due to the low return on investment in Europe, America and elsewhere;

 “At a time when we are borrowing with conditions that are not necessarily in our sovereign interest; At a time when almost every major investment in our country is undertaken by non-Ghanaian firms for lack of capacity and capability with the most obvious excuse being that we do not have the funds; I beg to differ on the issue of where and how we disburse our stabilisation and heritage funds, and I think it is not too late to rethink it through -- after all, that is what the legislature is there for. It’s a clear case of things looking right and not being the right thing.”

He mentioned that if the country is going to get out of the economic stagnation it is currently mired in; it will take a more dynamic, creative, innovative and result-oriented domestic banking and finance industry at the forefront of a collective sustainable and team effort to stimulate the local economy. 

He indicated that government, businesses and individuals must work together by doing what is right to achieve economic prosperity. 

Cataloguing some of the issues confronting the banking and finance industry in the last 12 months, Dr. Ankrah explained that the industry is no doubt the bedrock on which the country's economy is built: “Whatever we do can negatively or positively impact our economy, and consequently our country's socio economic aspirations”.

He observed that the banking sector has over the years largely shied away from the pioneering and adventurous spirit that built the so-called ‘tiger economies’ which most business elites seem to admire so much.  

“We have not invested enough confidence in ourselves, to the extent that a number of us still seek offshore approval for even unpretentious investment proposals from indigenous clients.  Besides the expenditure of time in the process, these approvals often do not materialise.’

He proposed the banking industry operators should consider the Students Loan Scheme’s viability, which has huge potential to ensure business growth and reduce unemployed graduates in the country.

“I am of the view that there is considerable commercial business in the Students’ Loan Scheme: for instance, that with proper screening and a diligent recovery schedule, a consortium of banks ought to have grabbed the initiative from government and set it up more efficiently as an adjunct to our interest in manpower development.”

The economy’s pool of unemployed graduates stands at about 680,000 -- with 68,000 coming out of tertiary institutions each year: “The banking industry need to examine the possibility of introducing incubation seminars for young graduates, who are briefed enough and of entrepreneurial spirit, to pitch their capabilities against the banks’ intention to help open up the economy to new and profitable ideas and ventures.  

He indicated that the banking industry as a service sector requires its interpretation of excellence should include a constant appreciation of the view that the customer may not always be right but is always important – indeed, very important.  

“In identifying and rewarding excellence in our industry, one of the cardinal measures should be our standards in customer relations management and practice.  

“We have to constantly review our index of customer appreciation and satisfaction in all segments of our service to be able to reward ourselves with any accolades of excellence,” Dr. Ankrah remarked.