Without long-term funds, our businesses stand no chance – Senior Minister admits …but promises solution is underway

No business can grow and expand in an environment where access to long-term credit is non-existent, particularly in this era of open-market competition, Senior Minister Yaw Osafo Maafo has said.

He said every business and industry thrives when there is a stable micro economic environment, but added that: “High interest rates, volatilities in exchange rates and high inflation are a few of the economic indicators which remain a perpetual threat to our industries and businesses”.

The Senior Minister said this when delivering a key note address at the 58th annual general meeting of the Association of Ghana Industries (AGI) in Accra. It was on the theme ‘Transforming the Ghanaian economy through industrialisation’. 

To reverse the credit-crunch situation facing businesses, he said a Fiscal Responsibility Act and subsequently a Fiscal Responsibility Council will soon come into force.

These, among other measures, he noted, will curb periodic slippages in the fiscal space and create a conductive environment for business growth and industrialisation.

“It is the responsibility of government to point all these fiscal indicators toward the right direction so that industries can plan accordingly.

“In this regard, let me assure all herein gathered that government is prepared to use both prudent judgement and legislation to create a disciplined fiscal environment. Let me take this opportunity to announce that the Fiscal Responsibility Act, and thereafter Fiscal Responsibility Council, are in the offing. These are additional tools which will support existing laws and strategies to create a tidier economic environment for industrialisation,” he assured.

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He added: “It should be possible for Pension Funds and other long-term capital to be deployed in areas of long-term strategic investments, such as real estate and similar ventures. Industrialisation requires long-term patient capital, and our financial sector must be re-designed to support long-term financing.

“And I have tasked leadership of the Bank of Ghana, National Insurance Commission, National Pensions Regulatory Authority and Security and Exchange Commission (SEC) to start discussions toward information sharing and developing modalities for developing a more integrated financial system for the country.”

Mr. Osafo Maafo also indicated that as government strives to make the financial market more responsive to the needs of industry, it is equally imperative for businesses to seriously start exploring the possibility of raising financing from the capital market.

This pathway, he stated, has been used successfully in various countries but has been underexplored in this country: “What is industry doing to take advantage of this opportunity? Are there any challenges inhibiting industries’ ability to leverage capital from the capital market? I am keen to create a platform for deliberation between AGI and SEC”.

AGI bemoans unfriendly tax regime

The President of AGI, Dr. Yaw Adu Gyamfi, said despite the introduction of some tax reliefs last year, introduction of the straight 5 percent levy during the mid-year budget review, among others, is highly unfriendly to businesses.

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“Growth began to pick up for a number of sectors until second-half of the year, when measures put out by government to address the mid-year revenue shortfall came into force. Some of these measures were quite inimical to industry,” he said sadly.

“We do not think there has been fairness in the tax regime, because industry seems to bear the bigger brunt of the current 5 percent straight levy. Indeed, our members have been under pressure from some of these unfavoruable regulations and the tax stamp policy, for which there was no initial consensus on the remedy,” Dr. Adu Gyamfi further lamented.

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