Friday, September 29, 2017

Economy records 9% growth in Q2

…highest since 2014

The country’s economy grew by 9 percent in the second quarter of this year, the highest recorded since the third quarter of 2014 when it grew by 13.5 percent, a  release by the Ghana Statistical Services (GSS) has shown.

Compared to same to period last year, the economy grew by 1.1 percent; and 6.6 percent compared to quarter one of 2017.

Measured in monetary terms, the oil GDP estimate at current prices at purchaser’s value for the second quarter of 2017 was GH₵45.3 billion compared to GH₵38 billion in the same period last year; and GH₵44.7 billion in the first quarter this year.

The non-oil GDP estimate at current prices for the second quarter of 2017 was GH₵43.3 billion compared to GH₵37.6 billion in same period last year.

This, Acting Government Statistician, Baah Wadieh said, is attributable to the improvement in oil production which sped up growth in the mining and quarrying subsector.

“The quarter two growth rate is mainly attributable to growth in the following subsectors. We have mining and quarrying which grew by 75 percent and under the mining and quarrying we have oil and gas growing by about 188 percent. 

Then, we have health and social work which also grew by 18 percent; we have information and communication growing by 15. 6 percent; then water and sewage by 13.3 percent; education by 9.6 percent and crops by 8.3 percent, with cocoa growing at 15.6 percent. 

But by and large, you realise that the contribution of the mining and quarrying subsector far outstrips the other sectors. This is due to the input of oil and gas production because only that subsector grew by 188 percent, and it is because some of the repaired FPSO’s came into production and Sankofa and TEN also produced oils and these shot up the growth rate of mining and quarrying,” Mr. Wadieh said.

Further details in the release show that the services sector remains the largest contributor to GDP, even though industry outpaced it in terms of the growth of rate for the period under discussion.

The sector’s contribution to GDP was 62 percent, followed by industry which recorded 26.5, with agriculture trailing at 11.5 percent. 

Meanwhile, the services sector grew by 5.6 percent; industry 19.3 percent; and agriculture grew at 3.4 percent.

The second quarter performance seems to boost the confidence of managers of the economy who have set end of year overall GPD target of 6.3 percent, and non-oil rate at 4.6 percent.

Some have argued, though, that government’s end of year target is ambitious and can only be achieved if serious policies and programmes are successfully implemented.

Finance Minister, Ken Ofori-Atta, has maintained that government will be able to achieve its target in the 2017 budget and make Ghana a "country beyond aid."

"We expect to be able to meet the targets that we have and we look forward to a good year. This budget presents a clear roadmap on how we will move this economy from its current state into a full-fledged middle-income economy a Ghana beyond aid. Our goal is to build the most business-friendly and people-centered economy in Africa, which will translate into job creation and prosperity for all Ghanaians," Mr. Ofori Atta said.

2016 revised figures
The GSS release also revised some figures in the 2016 annual GDP growth rates. Overall GDP has been revised from 3.5 to 3.7 percent. Agriculture and services growth of 3 percent and 5.7 percent were maintained, but industry growth was revised upwards from -1.4 to -0.5 percent. B&FT

Investment certainty after ITLOS ruling--Terkper

The decision by the International Tribunal for the Law of the Sea (ITLOS) has brought certainty to the energy sector, Seth Terkper, former Finance Minister, has said.

The International Tribunal For The Law Of The Sea on Saturday, ruled that Ghana did not infringe on the territorial sovereignty of the Ivory Coast in granting oil concessions in the  previously disputed area offshore Cape Three Points in the Western Region.

“The certainty in the energy sector from the ITLOS decision in boosting production. Exports and revenues also improve the success of Ghana’s new debt management and capital expenditure policies--substantially rooted in allocating oil revenues to manage our debt instead of channeling it into consumption through the recurrent budget,” Seth Terkper said.

Expressing his views about the ITLOS decision and it impact on the economy, Mr. Terkper told B&FT that the flows into the Sinking Fund and subsequent use of same to “buy-back” the sovereign bonds are based on capping the Stabilization Fund and channeling the annual excess flows into debt management, as required by the Petroleum Revenue Management Act (PRMA).

He added that by the end of 2016, Ghana had used slightly over US$330 million of its own oil revenues to redeem various debt, notably part of the 2007 Sovereign Bond that is due for redemption next month. 

This, he said, has averted the payment of US$750 million to redeem or refinance the Bond—at a high interest rate or outright default. .

“The combined Sinking Fund and ‘Buy-Back’ programme means that Ghana is gradually lowering the ‘roll-over’ risk associated with its long-standing ‘interest-only’ loan payment policy for bills and bonds. The nation is on course to replace them with gradual redemption of the principal element of these so-called ‘bullet’ loans,” Mr. Terkper said. 

He explained that the Stabilization Fund itself was set-up under the PRMA as a conditional or rules-based savings account to provide a buffer for the budget by minimizing the adverse impact of deficits on the economy. 

According to Mr. Terkper, in the 2015 and 2016 financial years, as crude oil prices fell, the country tapped into this Stabilisation Fund and utilized over US$250million to augment budget revenues, adding that: “No matter the level of sacrifice that went into postponing consumption, especially the build-up that saw the Fund accumulating over US$500 million between late 2011 and 2014 during the crude oil price boom, this outcome justifies the precautionary steps that nations take to save for a ‘rainy day’. 

He stated that the additional oil flows that will arise from the ITLOS decision is welcome in continuing with these policies under the PRMA.

The significant policy measure linked to the PRMA is setting up of the Ghana Infrastructure Investment Fund (GIIF) as a Sovereign Wealth Fund (SWF), and this Mr. Terkper explained that the main flow which GIIF could leverage to borrow is a percentage of the PRMA oil revenues to the budget, known as the Annual Budget Funding Amount (ABFA), adding that the other source was the 2.5 percent portion of Value Added Tax (VAT) collection that has just been repealed in the 2017 budget.

He indicated that the rationale for GIIF, a technical institution, is that commercial projects financed by direct loans or guarantees to State-Owned Enterprises (SOEs) must be subject to a self-financing programme under the smart-borrowing rules, based on rigorous project evaluation processes. 

“As envisaged, it will be the project, not taxpayers or the budget that will pay for the loans underlying all commercial projects. As the practice goes in the Emirates and other places, to qualify for SWF financing, the GIIF Act requires that a project must have a positive rate of return,” he said.

Commenting on the midstream and downstream investments benefits from the ITLOS decision, he stated that the case for value addition and diversification of the economy through the energy sector is strong. This is to avoid the fate of other primary products such as cocoa and minerals.

The decision not to flare gas led to the investments in pipelines and power plants including Ghana Gas Atuabo, VRA thermal, and Individual Power Producers (IPP) plants and are significant first steps in stabilizing power supply to businesses and households.

In this regard, the certainty that comes with the ITLOS decision bodes well for the World Bank PRG that was negotiated to underwrite the gas-to-power projects.

While the focus of the PRG was on Sankofa, gas from all the oil fields will flow through the same domestic pipelines—to be connected to the West Africa Power Pool (WAPP) through the recent adoption of the east-to-west (Tema-to-Takoradi) “reverse” gas flow programme.

Decision could be mutually beneficial
While Ghana savours the ITLOS decision and is undoubtedly proud of its legal team and foresight to go to the court to seek an amicable settlement, the decision is expected to be beneficial to both parties as it brings certainty in the award of oil contracts within the contested area. 

Ghana and Cote d’Ivoire already share power under the West Africa Power Pool [WAPP]. Indeed, Ghana benefited a lot from Cote d’Ivoire during half a decade of power rationing, otherwise called “dumsor”.  There is also a cordial relationship between the two states in the West African sub-region.

Osafo-Maafo wants PPP Bill re-submitted to Cabinet

Senior Minister, Yaw Osafo-Maafo, has asked that the Public Private Partnership (PPP) bill, currently before Parliament, be returned to Cabinet for a review before it is finally passed into law.

Cabinet, he said, needs to make additional input and necessary changes to help address the current infrastructural demands, he said.
He said this at the initial market sounding event for the Accra – Tema Motorway Upgrading Project, which brought together investors, project financiers, investor analysts, construction consultants, civil engineers, legal practitioners, officials from the Ghana Highways Authority, the Ministry of Roads and Highways, the Ministry of Finance and the Ghana Infrastructure Investment Fund.  

“The recent reports in the media about some private sector players hiding behind PPPs to defraud the state is very worrying,” he said. “This, therefore, calls for proper reforms in the PPP modalities in any PPP arrangement government is entering into. With the expected passage of the PPP law in the very near future, it is envisaged that the private sector will be assured of security for their investments.” 

The PPP law, when enacted, will support the implementation of the national PPP policy that was launched by the government in 2012. It is expected to give confidence to both local and international investors who would want to participate in PPPs with the government. 

Ghana currently does not have a specific legislation governing the implementation of PPPs; however, efforts are ongoing to enact a PPP Law.

Notwithstanding the absence of a specific PPP law, there have been efforts to provide for a framework for the implementation of PPP.

On June 3, 2011, a National Policy on PPPs was approved by the then Cabinet, to guide the implementation of PPP in the country.

Mr. Osafo-Maafo explained that PPPs are not a universal solution to underlying sector investment and performance problems, adding that PPP development requires sustained policy dialogue and the development of suitable legal, regulatory and institutional frameworks.

The development of road PPPs usually requires the government to assume demand risks and/or provide financial support, as it is usually difficult to charge tariffs that cover costs. The risk sharing structures need to be perceived as fair and manageable, he said. 

He indicated that some infrastructure sectors such as power are more conducive to private sector participation and PPPs than the road and transport sectors. This is due to a range of reasons, including better potential for cost-recovery, lower levels of stakeholder resistance to private sector participation, greater institutional capacity, more progress with sector unbundling and utility restructuring. 

This, he said, does not mean that PPPs in other sectors are without prospects. Government recognises the road sector’s importance to economic growth and has accorded it a high political commitment, with support for capacity development and other sector reforms. 

“Government’s decision to encourage PPPs in the road sector is due to a number of reasons, including reduced budgetary support, access to capital, need for off balance sheet borrowing, innovation and transfer of risk,” he stated.

Ghana is presently faced with a huge infrastructure gap, and needs an average US$1.5billion per annum for the next decade to address it. This is required to bring the nation’s infrastructure to the recommended status for a middle-income country.

Studies on the country’s infrastructure requirements indicate that for the next decade, government requirements for the transport sector alone average US$307 million annually to provide the needed infrastructure.

Mr. Kwasi Amoako-Attah, the Minister of Roads and Highways, said PPP market sounding events are opportunities for the public sector to establish the market and to manage the private sector expectations on what will be achieved by the project.  

“One of the key objectives of the government is to increase the efficiency and effectiveness of the development, management and maintenance of the country’s road network. 

This is motivated by the recognition that the road network constitutes the single largest asset owned by the government, and that a less-than-optimal system for its management and maintenance generally results in huge losses for the national economy. 

These losses occur not only in the form of road deterioration but also in increased vehicle operation costs which have to be borne by road users,” he said.