Government is to set up a new national development bank to “mobilise private capital toward agricultural and industrial transformation”, Finance Minister Ken Ofori-Atta revealed in the 2018 Budget and Economic Policy of Government presented to Parliament yesterday.
“To achieve an efficient financial sector with innovative and long-term financing instruments to support economic development, government will design the requisite financial architecture that is capable of mobilising resources through the following:
Launch a national development bank, with the capacity to mobilise private capital toward agricultural and industrial transformation, among others,” Mr. Ofori-Atta told the 275-member Legislature.
The country’s financial sector is made up of 34 commercial banks, more than 40 savings and loans companies, and over 300 microfinance institutions. However, no one commercial bank is strong enough to undertake big-ticket transactions.
In September, the Bank of Ghana (BoG) introduced the Internal Capital Adequacy Assessment Process (ICAAP) under the Basel II framework.
The ICAAP will require banks to more than treble their minimum capital to GH¢400m (US$91.6m) by December 31, 2018. This represents a much bigger jump than previous increases imposed by the regulator over the past decade to strengthen the balance sheets of Ghana’s banks.
Two main banks with significant government interest, the National Investment Bank (NIB) and ADB, will have to recapitalise before the December 2018 deadline – raising questions about the need to set up another national bank.
The National Investment Bank (NIB) leads indigenous banks that have to raise millions in their recapitalisation drive. The NIB has a capital shortfall of about GH¢255million; it has a stated capital of GH¢70million and an income surplus of GH¢74million as at July 2017.
The ADB – a publicly-traded company with majority government ownership – also has a capital shortfall of GH¢310million and a stated capital of about GH¢275million, but a negative income surplus of about GH¢185million.
The ADB, in December last year, started trading on the local bourse. Institutions with an interest in the company include: SSNIT, 9.5% of the shares; Starmount Development Company Limited, 11%; and SIC Financial Services 10%.
Restructuring the Infrastructure Fund
Ghana Infrastructure Investment Fund (GIIF), a wholly state-owned entity, was established pursuant to the Ghana Infrastructure Investment Fund Act, 2014, Act 877, (“the Act”).
The Fund’s mandate is to mobilise, manage, coordinate and provide financial resources for investment in a diversified portfolio of infrastructure projects in Ghana for national development.
A 2016 study of the country’s infrastructure deficit, quoted by the Finance Ministry, reveals that the country needs US$7.3billion to bridge the current deficit.
Mr. Ofori-Atta, in his presentation to Parliament, said the Fund is to be restructured and modelled along the lines of a private sector Fund to enable it play a key role in bridging the country’s infrastructure deficit.
“We will restructure the Ghana Infrastructure Investment Fund (GIIF) with the capability to mobilise foreign private capital for critical infrastructure development, using a private sector model; and enhance the capacity of Ghana Exim Bank to support agriculture and industrialisation for export,” the Finance Minister said.
The commitment to strengthen the Ghana Exim Bank so as to enable it support Ghana’s export trade will come as good news for vegetable exporters and factories to be established under the ‘One District, One Factory’ programme.
The European Union lifted the ban on export of five Ghanaian grown vegetables – chilli pepper, bottle gourds, luffa gourds, bitter gourds and eggplants – two months ago, after government’s stringent effort to ensure the right standards of production, harvesting and packaging were met.
Vegetable farmers, hence, will from January 1, 2018 have duty-free and quota-free access to the EU market like any other product from Ghana.
By Dominick Andoh & Thomas-Moore Adingo l thebftonline.com l Ghana