Belling The Cat

Nana Yaa Ofori Atta

There is talk of a potential source of Ghc 9 billion from institutional investors including private pension funds that could bridge the gap of the national budget.  Required if African countries like Ghana seek to fund the critical infrastructure projects they need.  The headline ambition around these parts,  is for these projects to generate large scale employment, transfer skills and technology to unlock real growth.

And there is a catch.  Corporate Governance.

President Nana Akufo-Addo will speak at the UK-Ghana Investment Summit in London on Tuesday, April 17, 2018.  He and his Ministers will likely be sharing there, as they have done on previous other international sorties, details of the definitive investment portfolio, they have developed.  Essentially, an album that prioritises 3 projects aligned with Ghana’s new growth pillars.

Each of these projects, whether in the flagship One District One Factory Program, the Savannah Accelerated Development Agency or across the 14 Ministries – from Aviation, Energy, Health, Railways, Works and Housing through Sanitation & Water Resources – requires capital financing from institutional investors including pension funds. It also requires definitive movements.  At home and from abroad.


First Steps

Analysts suggest, that compared to North Africa where coverage is estimated at 80 percent, only 5 to 10 percent of sub Saharan Africans are covered by pension funds.  Even in Nigeria, West Africa’s economic powerhouse, pension funds amount to only 5 percent of GDP, compared to 131 percent in the UK.

In OECD countries, institutional investors own US$93 trillion in assets, one of their comfort zones for long term capital investment is naturally, in infrastructure.  There is informed suggestion, that improving corporate governance in Africa could enable this diverse continent of 55/54 countries – give or take, depending on who is counting – access to up to $36 trillion in OECD pension funds.

With its stable democracy, the Fourth Republic in Ghana has soldiered on under trying circumstances for 25 years, it marks the longest period of constitutional rule since independence in 1957.  Ghana could leverage its political credentials to surge forth.

And there are stumbling blocks.  As long as less than 1 percent of OECD pension funds is currently invested in infrastructure projects in Africa, the continent’s ambitious first mover, must clean up house with serious reforms and sequencing, at home.  First.


Growing Pains

In pre teens, the stock advice for addressing ‘growing pains’ – cramping and achy pains in thighs, calves and behind the knees – is that they are usually self-treatable.  Usually self-diagnosable, lab tests or imaging are rarely required.  The condition is medium term and resolves itself usually within months.

The issue of the recapitalisation of banks in Ghana, the potential repositories of the pension funds that this government seeks to court to fund large infrastructural projects, will also be resolved, within months.

Either by the end of May 2018, when following a petition made by ‘indigenous’ banks, a recently instituted Presidential Commission is to provide a report on their viability now and their competitive future.  Or by December 2018, when the Central Bank’s deadline for all banks to step up their minimum reserves from Ghc120 million to Ghc400 million expires.

Corporate Cats in the banking industry have 3 options.  Straighten up and recapitalise.  Merge.  Or be resolved, by natural selection of the Governor’s decree.  In the last year, 2 indigenous Banks have had their operating licenses revoked.   With 26.5 Banks – the ‘half’ being uniBank Ghana Ltd currently under administration – to supervise, the Governor of Ghana’s Central Bank, Dr. Ernest Addison, appears to have taken the pragmatic approach to the cramping, aching, self treatable diagnosis with a lab test.

On March 29th, within weeks of putting uniBank into something akin to remedial classes (KPMG has been appointed as administrator), the Central Bank warned the public that Wyselink Microfinance Limited, a deposit and lending institution (not a commercial bank) located and previously operating in 6 towns in the Western and Central regions, is not licensed to do business.  ‘The Bank of Ghana will not be liable for the refund of any deposit lost by a depositor,’ the statement read.


Calling It

Dr. Addison is likely paying closer attention to other numbers as well. Powered by growth of 9.7 percent in the third quarter of 2017 and 8.1 percent in the last quarter of 2017, Ghana’s Statistical Service has provided provisional estimates for year on year growth.  According to the Service, in 2017, the economy expanded by 8.5%, up from a withering 3.7 percent in the previous year.  Inflation in March 2018, recorded at 10.4%, 0.2 percent lower than the previous month.  Good news.  But.

When you are looking to develop a new Bulk Supply to improve power supply in the capital, Accra as well as the strategically import premier port city of Tema; or when you seek to develop a 200km pipeline linking the Gas in Prestea, in the Western region to Kumasi in the Ashanti region that could run through and power the country’s plan to harvest bauxite deposits in the Eastern region for the development of an integrated aluminum industry.   You are likely looking for how and where to make investors confident enough to bring their capital to lodge in your banks to support your ambitions.

Speaking at a recent gathering, the Minister of Finance, Ken Ofori-Atta, laid out what he said were the minimum criteria for improving corporate governance enough for others to feel that there are credible systems that will safeguard their investments.  The Central Bank Governor may want to take notes, if he has not already done so.

  1. Independence of directors.
  2. Disclosure and Transparency including robust audits.
  3. Control processes.
  4. Board Commitments
  5. Separating the Board Chairman from the CEO.


Clarity Validation and Incentives

Tony Burkson, Chief Executive Officer of the UK-Ghana Chamber of Commerce, hosts of the event in London where President Akufo-Addo will speak on Tuesday said “The feeling around UK investors is that it is really difficult to re negotiate every time there is a new government.  Clarity on corporate governance and transparency on why and how transactions go ahead or not are key for Ghana.”

Based on the sheer will that it has taken to turn around the economic numbers  in 2017 and stabilise, has Ghana – with its portfolio of investments and armed with a Central Bank Governor determined it seems to call it – done enough for instance, for institutional investors like the UK Exim Bank to signal their confidence?

An increase in the envelope of funding from an institution like the UK Exim Bank from $750 million to $1 billion, could be validation and further incentive.  Including of Dr. Addison’s determination to bell the corporate cats in the banking industry of Ghana.  Indigenous growing pains fully acknowledged.

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