Economist and finance lecturer at the University of Ghana, Professor Godfred Bokpin, has expressed concern that the 2022 budget, in its current state, will stifle the growth of small businesses despite its purported goal of creating a conducive environment for entrepreneurs.
The budget statement, which has been ‘rejected’ by Parliament, was crafted under the theme ‘Building a Sustainable Entrepreneurial Nation – Fiscal Consolidation and Job Creation’.
It revealed a number of initiatives geared toward driving entrepreneurship and job creation; including the ‘YouStart’ programme which seeks to “raise GH¢1billion each year to catalyse an ecosystem to create 1 million jobs, in partnership with the finance institutions and development partners”.
This is in addition to an agreement by local banks to a package that will result in increasing their SME portfolios up to GH¢5billion over the course of the next three years.
Speaking at a post-budget forum organised by First National Bank (FNB) Ghana, Prof. Bokpin described the budget as “anti-entrepreneurial and a ploy to ease concerns of offshore investors, to the detriment of local businesses”.
He noted that the lofty aspirations of the budget for businesses are at variance with its intention of raising revenue by 43 percent in one year, primarily through taxes – which he said was a knee-jerk reaction. “One way to summarise the budget is to say it was made to please investors and rating agencies. The concerns from overseas investors are fuelling the reforms that we are seeing. It is a case of ‘let us inconvenience ourselves to appear better’ and we have come up with quick fixes.
“It is inconsistent to talk of an austere budget such as this, with fiscal consolidation as its focus, and also talk about business-growth and job-creation, which is contradictory. It cannot deliver on job creation as promised when you see that over a 12-month period you are hoping to grow your tax revenue by more than 40 percent, which is huge in terms of the impact of this on businesses.
“The increase in tax revenue shows how much you are siphoning from businesses, depressing capital formation and eating into the capital base. I know there are initiatives like YouStart, but you want to assess the budget within the framework of it lending itself to a favourable entrepreneurial ecosystem.
“When you relate the budget to the ecosystem, then you realise it is anti-entrepreneurial in the first place – notwithstanding specific interventions within it to cushion entrepreneurs. The ecosystem has many dimensions, and this budget stifles most elements. How does government policy overall lend to the business community? It doesn’t!” he explained.
No money, more problems
Director of Business at Dalex Finance, Joe Jackson, on the same platform stated that the only silver-lining is the fact managers of the economy have conceded they are not under any illusions as to the size of the task it faces in seeking to transform the economy and create jobs.
He said despite the inconvenience people must face the reality and grit their teeth, as the nation is “broke and over-borrowed” and on the verge of collapse, particularly due to the high cost of debt-servicing.
Mr. Jackson warned that the cedi could face further pressure as the result of a number of factors, including offshore investors dumping their locally denominated bills and bonds. He said it would not come as a surprise if the Bank of Ghana reviewed the monetary policy rate upward by as much as 150 basis points in the coming months to hit 16 percent – adding that despite the undesirability, the nation could end up at the International Monetary Fund (IMF).
“We are between a rock and a very hard place. My sense is that we may have to grit our teeth and bear the taxes. I know that is a hard thing to say. We can go into debates about whose fault it is, but the numbers are grim and the alternatives are dire… The cedi is going to be under pressure and interest rates are expected to go up, and the MPR could go as high as 16. I am going to say something that we do not want to hear, but with these challenges we might have to end up with the IMF again. We have to refinance the bond that is due in 2022.”
Head of Global Markets at FNB, Kofi Asare Pianim, on the other hand said the talk of doom and gloom might be a little premature. He called for time to see how the state performs, particularly in the upcoming year’s first quarter.