Declining gold price poses serious danger

Mr. Benjamin Aryee, the Chief Executive Officer of the Minerals Commission, says the persistent decline in gold prices poses a serious threat to the country’s revenue inflow.

 

Gold prices have declined by 30 percent on the world market as at June 2013. Currently, gold is trading between US$1,300 and US$1,350 an ounce.

This year, the price of gold has experienced a free-fall from its historical highest to its lowest in recent years at US$1,192 per ounce in June. From $1,224.53 per ounce in 2010, gold prices rose to US$1,571 in 2011 and subsequently to US$1,669 per ounce in 2012.

Expressing worry over the volatility of the metal price, Mr. Ayee said the effect would negatively impact government’s revenue and the economy since gold is the country’s highest gross foreign exchange earner.

“In the immediate term, the magnitude of the impact will be felt mostly by production and profit -- which can lead to job-cuts.

“In the short-term, we cannot do too much about it, because when the price goes down profits go down, which affects the dividend paid to government. So government needs to start rethinking its priority areas.

“In the medium- to long-term, there are issues of employment. Government should generate employment; if the price keeps going down and costs remain the same, employment is likely to go down. And that creates complications which government would have to face again, so those are things we are also going to look at.

“As of mid-July, operating mines estimated total job-cuts at 3,000, whilst production losses were estimated at 750,000 ounces -- approximately 17.4 percent of the 2012 production figure,” he said.

Mr. Aryee told public sector players in the minerals industry at a meeting in Accra to find ways of reducing the impact of a falling gold price on the Ghanaian economy.

The workshop was put together by Minerals Commission as part of a series of brainstorming sessions aimed at ensuring that the economic shock that comes with a falling gold price -- unemployment and revenue loss -- has little impact on the Ghanaian economy. 

It brought together participants from the Minerals Commission, the Ministry of Trade and Industry, the Ghana Revenue Authority, civil society and the Bank of Ghana.

Gold currently contributes 27 percent to government’s revenue as captured by the Domestic Tax Division of the Ghana Revenue Authority.

After two years of soaring gold prices in 2011 and 2012, the price of the metal recorded very low prices, forcing industry players to re-strategise on possible policy interventions to avert its negative impact on the economy.

According to GRA figures, last year the country raked in US$5.6billion in export revenues. Between 1983 and 2012, total foreign direct investment into the mining sector reached US$12.5billion.

Professor Bruce Banoeng-Yakubo, the Chief Director of the Ministry of Lands and Natural Resources, said: “The recent significant fall in the price of gold, Ghana’s flagship mineral, is a major concern to government as well as industry players.”

Prof. Banoeng-Yakubo commended the Minerals Commission for its preliminary assessment of the anticipated impact of the falling prices which will be discussed extensively to find immediate, short- and long-term antidotes. 

  

“These significant contributions have been possible because of the country’s conducive environment for investment as well as favourable precious-metal prices in the past four years,” he remarked.

Terkper set outs strategy to control SSSS

Government says its 2014-2016 budget guidelines will instruct all government agencies to provide realistic budgets for the compensation of their employees as part of broader measures to avert fiscal explosion, Minister of Finance and Economic Planning Seth Terkper has disclosed.

 

Appropriate sanctions will be applied to Ministries Department and Agencies (MDAs) and Municipal, Metropolitan and District Assemblies (MMDAs) that fail to comply with the guidelines related to budgeting for compensation of employees, he said.

Mr. Terkper outlined this directive when he spoke to journalists on a wide range of economic issues at a two-day programme organised by the Institute of Financial and Economic Journalists in collaboration with Star Ghana on the performance of the 2013 budget and expectations for 2014.

Mr. Terkper said: “All MDAs and MMDAs are to budget realistically for the compensation of their employees using the new chart of accounts. Salary and salary-related allowances, and other allowances, are to be budgeted for and supported with copies of approval of conditions of service by the Fair Wages and Salaries Commission and the Public Services Commission.”

He explained that only net recruitment of staff will be permitted for MDAs with an automatic recruitment policy in 2014 and into the medium-term. 

He also said salaries of employees of MDAs and MMDAs will be paid by the Controller and Accountant-General’s Department only after the heads of these institutions have certified a pre-list of persons and amounts to be paid.

There have been calls on government to trim expenditure on wages, which have become a bane to the national economy with critics insisting that the Single Spine Salary Structure is the cause of the huge wage bill.

Approximately 73 percent of domestic revenue from taxes is used to pay public service workers.

The wage bill jumped from about GH¢2billion prior to the implementation of the new pay policy to about GH¢7billion in 2012, according to data from that year’s budget.

Recent data from the Ministry of Finance also indicate that about GH¢3.5billion was spent on wages and salaries from January to May this year, and this was about 22.4 percent higher than the budget target of GH¢2.9billion.

The International Monetary Fund (IMF) in April this year sounded the alarm over the country’s rising wage bill and warned that if it was not tamed, it would increase the country’s debt portfolio to levels which could pose a risk to its transformational agenda.

Touching on the huge budget deficit registered in 2012, he said government hopes to reduce the gap to 9 percent of GDP in 2013, and further down to 6 percent by 2015. 

Proposed supporting measures to fix the fiscal challenges include an upward adjustment in petroleum prices to address the burden of subsidies on the budget. The strategy is to implement frequent petroleum price adjustments, he emphasised. 

The high interest cost is being addressed with plans to refinance government debt through substitution of short-term debt that has high interest rates with medium- to long-term low interest debt.

Government, according to the Finance Minister, will also conduct closer scrutiny of monthly expenditure relative to forecasts to ensure that expenditure targets are achieved.

The economy is expected to grow at 8% in 2013, with an end-period inflation of 9% and gross international reserves equivalent to not less than three months of imports.

ECOWAS railway nears reality

The proposed ECOWAS railway system is expected to commence soon after years of neglect to connect Nigeria to Benin, Togo, Ghana and Côte d' Ivoire. 

Transport ministers from the Economic Community of West African States (ECOWAS) are awaiting the technical details of the proposed single railway line, expected to be 1,178 kilometres long, to connect the sub-region.

This was made known after a four-member ECOWAS team of experts met in Accra to discuss modalities to implement the project.

The project is expected to transform the region’s transportation system by launching new high-speed passenger and goods rail services.

This will allow large container ships to concentrate on a smaller number of ports, thereby increasing efficiency and reducing the costs of international trade.

It is also to facilitate a major industrialisation of West African countries, improve transportation of agricultural produce, and create immediate economic emancipation for the about 300 million people within the region.

A team of consultants assembled by HammcoBTB Engineering International Inc., Canada, to initiate a design, prepare construction specifications and implement a fast rail route for the sub-region presented a report on the project to representatives of the member countries in Accra.

Chief Obaga Idow, the team member from Nigeria, called on heads of West African states to remain committed to the implementation of the project in order to ease the myriad transportation difficulties hindering economic development.
He also asked the delegates to get actively involved to ensure the project is executed within a scheduled timeframe, saying “we need to learn the pitfalls in the West African Gas Pipeline project that took 35 years to start.”

In 2002, ECOWAS and the African Development Bank (AfDB) in Abuja signed a loan agreement for the feasibility study of a sub-regional railway Master Plan. The 14-month study cost approximately US$3.1 million.


Comparing ECOWAS and Southern Africa

Unlike the situation in southern Africa, there is no real regional rail network in the ECOWAS area, nor are the rail gauges internally compatible.

In fact, the national rail networks of ECOWAS‘s member states are mostly disconnected from each other.

This is in contrast to southern Africa, where interconnected national railway systems form a regional railway network that spans half a dozen countries and extends from the southern part of the Democratic Republic of the Congo all the way to Durban in South Africa.

Further integration of West Africa‘s rail systems is complicated by the presence of multiple rail gauges.

The case for further regional integration of railway networks is constrained by the relatively limited usage of existing lines.

Rail traffic density in West Africa is only a fraction of that found in southern Africa and North Africa. With the exception of Ghana Railways Corporation (GRC), most West African railways are serving well under one million traffic units per year.

The Nigeria Railways Corporation could potentially serve a much higher volume of traffic than it does today, but it has suffered long-term decline due to neglect and substandard performance.

By global standards, these levels of traffic are little more than what might be carried by a moderately busy branch line.

Moreover, such low traffic volumes do not generate the revenue needed to finance track rehabilitation and upgrading. Under these market conditions, and given the technical incompatibilities, the case for further integration of railway networks is quite limited.

Before contemplating further extensions to the rail network, a turnaround in the performance of existing railways is sorely needed to regain competitiveness with road transport.

The poor quality of service provided by West Africa‘s railways makes it increasingly difficult for them to compete with road transportation.

Most railways in West Africa operate at the standard at which they were originally built and now face major problems with competing modes of transport. West African tracks can accommodate relatively lightweight and slow-moving trains.

Poor maintenance over extended periods of time has caused the deterioration of many sections of the track beyond repair and resulted in a loss of competitiveness and rolling stock productivity.

Producer inflation falls to 7%

Producer inflation fell for a third consecutive month to 7 percent in June, the Ghana Statistical Service said.

The rate fell from a May figure of 8.3 percent and was 0.6 percent on month-to-month basis. Manufacturing inflation was the highest by sector, registering 10.6 percent, followed by utilities with 0.6 percent while mining and quarrying recorded a negative rate of 1.4 percent.

Dr. Philomena Nyarko, Government Statistician, told a media conference in Accra that between June and July 2012 producer inflation rose steadily and then fluctuated until December 2012.

However, from December 2012 to February 2013 the rate declined to 9.1 percent, but increased steadily to 10.6 percent in March 2013 and subsequently declined consistently to 7 percent in June.

Manufacturing record a monthly inflation rate of 1.1 percent, while mining and quarrying saw a fall of 0.8 percent, with the utilities sub-sector remaining virtually unchanged.

Manufacturing trends

During the month, six out of the 16 major groups in the manufacturing subsector recorded inflation rates higher than the sector average of 10.6 percent.

Manufacture of paper and paper products recorded the highest inflation rate of 25.2 percent while producer prices in the manufacture of electrical machinery and apparatus recorded the lowest inflation rate of -0.1 percent.

Tax-defaulters intransigent

Patronage of the Ghana Revenue Authority (GRA)’s tax-amnesty exercise, which seeks to grant a pardon to tax defaulters who come clean, has not been encouraging, the B&FT has been told.

The amnesty provides a limited time opportunity for taxpayers who have defaulted in filing their tax returns or paying their taxes to discharge their obligations, in exchange for a pardon for liabilities that they would have incurred, such as interest and penalties.

The GRA legislated the policy last year to improve tax-compliance and widen the tax-net.

“So far many tax defaulters have not taken advantage of the initiative. Provisionally, the amnesty will run for a period of one year. We are expecting to receive good patronage, but if we don’t we may extend it,” said a senior official of the GRA.

“We want people to voluntarily come forward and declare their tax status. That is one objective. Another objective is that we want to widen the tax net,” he added.

To take advantage of the amnesty, which will expire after September 2013, a defaulting individual or company that was not previously registered with the GRA must first register and submit all tax returns for the years in which their taxes have been in default.

GRA’s drive to boost tax-revenue collections comes at a time when government has outlined new measures to avert a fiscal explosion as expenditure continues to spiral ahead of revenues, threatening the attainment of key budgetary targets.

The government’s budget deficit rose by almost three-fold in 2012 to 11.8 percent of GDP, fuelled by excessive spending on public wages and energy subsidies.

Earlier this month, Parliament passed a fiscal stabilisation levy and additional import levies to plug the deficit, which is forecast to narrow to 9 percent of GDP in 2013.

This year the GRA has been tasked to collect GH¢15.6 billion for the state, with GH¢7.4 billion expected from domestic direct tax, GH¢2.2 billion from domestic indirect tax, and almost GH¢6 billion from customs.

‘AGOA extension will unleash African businesses’

Even though total exports under the African Growth and Opportunity Act (AGOA) have increased by 300 %, the US government believes that extension of the deadline beyond 2015 will create bigger opportunities for African businesses.

 

AGOA is the US government’s signature trade initiative with sub-Saharan Africa. In 2012, eligible countries exported nearly US$35billion worth of products to the United States under AGOA and its related general system of preference provisions.

Total exports under AGOA have risen more than 300 percent since the programme started.

Although petroleum products accounted for 84 percent of AGOA imports to the United States in 2012, the programme has helped promote other value-added exports such as vehicles, apparel, footwear, processed agricultural products, and manufactured goods.

Non-oil exports to the United States from sub-Saharan Africa totalled US$4.7billion in 2012, rising more than 250 percent since AGOA’s inception.

“We are extending AGOA beyond 2015 to promote economic development and expedite the integration of African economies into the world trading system. This will provide a framework for governments, the private sector and civil society to work together to build trade capacity and expand business links between the United States and Africa,” said Ms. Florizelle Liser, Assistant U.S. Trade Representative for Africa in the office of the U.S Trade Representative. 

She explained that AGOA has been implemented to support regional economic integration to provide incentives for African countries to improve their investment climates, reduce corruption, respect human rights and the rule of law, improve infrastructure, and harmonise trade standards to help them become more competitive in the global marketplace.

 “The United States is strongly committed to expanding trade and investment, and to supporting broad-based economic opportunity and prosperity in sub-Saharan Africa,” she said.

Ms. Liser was addressing African journalists during a telephonic media briefing to preview the 2013 AGOA forum to be held in Addis Ababa, Ethiopia, from August 9th to 13th under the theme “Sustainable Transformation through Trade and Technology”.

The forum will be the 12th annual high-level meeting that the United States and AGOA- eligible African countries have held since enactment of the law in 2000 by the US Congress. 

This year’s forum, which is being organised by the Corporate Council on Africa in collaboration with the Ethiopian Chamber of Commerce and Sectoral Association (ECCSA), will be preceded by a private sector and civil society programme that will include a high-level dialogue on the future of US-Africa trade and economic cooperation.

It will also include a US-sub-Saharan Africa trade exhibition to run concurrently with the forum. 

AGOA also generated a US$13billion increase in two-way trade between 2010 and 2011, and a total of US$716.1billion since 2001.

Currently, there are thousands of products that are available under the AGOA-list to enter the United States duty-free.

With more than 6,000 products receiving duty-free treatment when exported to the United States, AGOA has helped generate jobs through trade and investment opportunities during its short lifespan.  

AGOA provides a framework for improved access to US credit and technical expertise, and establishes a high-level dialogue on trade and investment in the form of an annual US-sub-Saharan Africa Trade and Economic Forum.  

BMW’s electric car to hit market

The new all-electric BMW i3 is a landmark in BMW’s mission to provide a completely sustainable, electric vehicle that stays true to its ultimate driving machine signature. 

The BMW i3 is the first product of the new BMW i sub-brand, and is a truly purpose-built electric car. It’s a new era for electro mobility at BMW.

The vehicle concept behind the BMW i3 was designed from the outset to incorporate an all-electric drive system. This has numerous advantages over “conversion” vehicles, in which the original combustion engine is swapped for an electric motor. 

The engineers can design whatever works best in terms of construction, dimensions and configuration of the electric-drive system’s components.

The car’s development is dictated by the characteristics designed into the car by the development team, and not by the constraints imposed by a pre-existing vehicle design. 

For example, the space in a conversion vehicle set aside for the fuel tank or exhaust system cannot be used. In the BMW i3 there is no need for this kind of compromise.

This leads to the architecture concept, which was purpose-built specifically for the BMW i3. It is comprised of two modules; the life module, and the drive module. 

Think of the Life Module as the passenger cabin, or greenhouse. It is the first-ever mass produced Carbon Fibre Reinforced Plastic (CFRP) passenger cell in the automotive business, and is a big factor in the cars efficiency. 

Carbon Fibre Reinforced Plastic is equally as strong as steel, while being 50% lighter and 30% lighter than aluminium.

The interior is made using high quality renewable sources and recycled materials. The BMW i3 has the next premium interior, which blends sustainable resources with a premium feel for the same interior quality as the BMW 5 Series Sedan. 25% of the plastics in the interior and 25% of the thermoplastic parts on the exterior are made from either recycled materials or renewable sources.

The BMW i3 will be able to travel 80 to 100 miles on a single charge. This can be increased by up to approximately 12% in ECO PRO mode, and by the same amount again in ECO PRO+ mode. It is able to recharge in only 3 hours with the use of a 220V Level 2, 32-amp J1772 charger. 

The ultimate-drive machine

BMW i3, the ultimate driving machine, features brake energy regeneration, which when the driver sets off the motor acts as a generator and converts the kinetic energy into electricity, which is fed back into the battery for a range gain. 

This Regeneration is speed-sensitive, which means that the car “coasts” for added efficiency at high speeds, and generates the strong braking effect at lower speeds.

The BMW i3’s accelerator pedal has a distinct “neutral” position. Rather than switching straight to energy Regeneration when the driver eases off the accelerator, the electric motor uses zero torque control to separate from the drive train and deploy only the available kinetic energy for propulsion.

In this mode, the BMW i3 cruises using virtually no energy at all. This is another way anticipatory driving can preserve energy and increase the car’s range.

The impressive electric motor, small turning circle of 32.3 feet -- a major benefit to driving in the city -- BMW’s near-perfect 50-50 weight distribution, precise electric power steering and the stable suspension set-up help to make the i3 as satisfying to drive as every other BMW.

To improve efficiency it has low rolling resistance, and the narrow section width is a key factor in the BMW i3’s super-tight turning radius.

Beyond the traditional immediacy of response offered by electric motors when pulling away, power development in the BMW i3 also remains unbroken through higher speeds. 

Power is sent to the rear wheels through a single-speed transmission, allowing the BMW i3 to accelerate with an uninterrupted flow of power up to its top speed.

City-friendly

The BMW i3 marks the introduction of a new type of megacity vehicle. Its small size allows it to easily manoeuver and park on city streets, while the car’s short front and rear overhangs make parking in tight spaces much easier. Its sharp turning radius and nimble handling is a perfect match for city driving. 

In the front, the slide-through experience allows the driver to slide through the car and exit on the passenger side, to avoid exiting into a busy city street. This is made possible because of the absence of the transmission tunnel. 

The coach doors make getting into and out of the car much more practical by eliminating the B pillar and creating one large opening to enter and exit.

Not having to fill up on gas is a big advantage while living in the city, due to the lack of gas stations. Since electricity is so readily available, recharging is possible almost anywhere, and practically gives the BMW i3 unlimited range due to being able to charge at any and every stop.

Emission-free driving is also a plus in the city. Cities are so congested with cars idling at red lights or stop and go traffic, so having a car that runs on electricity that doesn’t pollute is another way that the BMW i3 benefits the environment, and its owner.

On a similar note, the navigation system can take traffic conditions into consideration and help route around any areas of large congestion, which is a huge benefit when living in a city with a lot of traffic. It can help maximise efficiency and cut down commute times in order to save you time.

The same navigation system also remembers the owner’s driving style and can judge by that and the amount of charge left if a route is too long or if a recharge is necessary for the return journey.

Combining aluminium and plastic

The new drive module has also been carefully designed and structured with these exacting crash requirements in mind. 

Crash-active aluminium structures in the front and rear sections of the vehicle provide additional safety. In a front or rear-on collision, these absorb a large proportion of the energy generated. 

The battery, meanwhile, is mounted in the under-body section of the car to give it the best possible degree of protection. Statistically, this is the area that absorbs the least energy in the event of a crash, and the vehicle shows barely any deformation here as a result. 

Moreover, positioning the battery in the under-body allows the BMW Group development engineers to give the vehicle an ideal low centre of gravity, which makes it extremely agile and unlikely to roll over.

The high-voltage battery also benefits from the excellent deformation properties of the CFRP Life module. In the side crash test, the pole does not penetrate as far as the battery. The mix of materials used and the intelligent power distribution module ensure that the high-voltage battery is optimally protected even in the side-sill area.

All in all, the high-strength CFRP passenger cell teams up with the intelligent distribution of forces to lay the foundations for optimum occupant protection.

In the unfortunate situation that an accident occurs, Intelligent Emergency Call sends information like location, number of front-seat occupants, and even crash severity data to the Connected Drive Call Centre, which quickly informs the appropriate dispatch centre.

Lithium-ion batteries are safe even in the event of a fire

Safety is a key criterion in the development of the BMW i models. A range of systems and measures have been implemented in the vehicle, which ensure safety in normal operations and in the event of accidental fires.

 The high-voltage system is designed to cope with accidents beyond the legal requirements, with the high-voltage battery including features that ensure its safe reaction even in situations such as this.

The latest series of tests conducted concluded that electric and hybrid cars with lithium-ion drive system batteries are at least as safe as vehicles with conventional drive systems in the event of fire.

To ensure maximum safety in a crash scenario, the high-voltage battery is disconnected from the high-voltage system and the connected components discharged when the passenger restraint systems are triggered. 

This safely feature prevents the possibility of a short-circuit, which could lead to electric shocks or cause a fire.