All too soon the year 2021 is coming to an end. Thanks be to God for his unflinching watch over each and every one. This is a good time to reflect on all the articles I produced in the year 2021. I remain grateful to all cherished readers, editors, publishers and those who provided valuable insight into these thought leadership information publications. I`m humbled and appreciate all the support and guidance. I make special mention of Mrs. Miriam Amoako (nee Opuni-Frimpong) who has been very instrumental with the periodic reviews. Did you miss any of the top headlines in 2021? Here is a summary of the various articles.
14th January 2021
#1. Exploring alternative funding through financial markets
In an environment of increased volatility and uncertainty, maintaining a sufficient buffer of liquid assets may at times detract from the ability to allocate assets with the highest potential returns but potentially lower liquidity. This trade-off can sometimes be minimized by employing derivative instruments. Even though obtaining funding via the traditional methods such as the loan syndications market and others remains important, being funded on the back of derivative instruments provides some key benefits. Whiles in the University years ago, I saw a lot of students struggling to understand the topic ‘Derivatives’. Indeed, in the ‘corporate world’ understanding how ‘Derivatives’ works and its application on the financial market remains a mirage to most finance professionals.
In this article, I explored some Swaps funding solutions that are available on the financial markets where prospective clients (Commercial Banks and Corporates) could tap into and grow exponentially. I discussed funding products like Total Return Swaps (TRS), Cross Currency Swaps, FX Swaps, Structured Funding – USD loan against Marketable Securities.
In summary, there are several ways to obtain Cedi or USD funding in Ghana, but I believe the derivative market is less explored. There is a huge opportunity for corporate treasurers to tap into this area to support funding requirements for expansion, infrastructure or working capital needs. Bank Treasurers can also take advantage to increase liquidity by raising the needed funding to support their underlying clients
18th February 2021
#2. Key parties in domestic debt capital markets transactions
I chanced on a report published by the Ghana Fixed Income Market dated January 2021 as well as the December 2020 monthly bulletin from the Central Securities Depository providing some useful information on the domestic capital market. Based on these reports, I delved into how the corporate bond market had performed over the years and the lessons that could be picked to further develop and strengthen the market.
There were nine corporate issuers with a total shelve registration of Ghs17.6bn. Out of this amount, ESLA PLC which had a shelve registration of Ghs10bn and Daakye Trust PLC with a total issuance of GH¢5.5billion accounted for 56% and 31% respectively, controlled the biggest market share. Out of the Ghs17.6bn proposed issuance, only 58% representing Ghs10.2bn had been raised and trading actively on the secondary market. In fact, on a year-on-year perspective, the total outstanding corporate securities had declined by 7% to Ghs9.12bn due to lack of issuance by Edendale Properties Ltd.
Comparing above analysis to our peers in the Africa sub-region like Nigeria, Kenya and South Africa, there has been the need to raise the awareness and educate Corporate issuers to explore the domestic Capital Market to raise funding. Efforts were made to briefly explain the roles and responsibilities of players involved in the domestic capital market with focus on corporate issuers.
I discussed the need to issue Corporate Bonds, starting the bond issuance Journey, The need for Joint Lead Managers/Bookrunners, Co-manager/Sponsoring Brokers. Was it important to have Special Purpose Vehicles (SPV), in the bond issuance process? Bond Trustee/Account Paying Banks, Corporate Managers and roles of Escrow/Paying Banks, legal Counsel, Credit Rating Agencies.
In summary, understanding the roles and responsibilities transaction parties play is a function of a successful debut Issuance. Let`s all help to develop the local market to reach international standards.
17th March 2021
#3. Navigating through the complex corporate world successfully
The Ghana National Service Secretariat released the posting for the 2020/2021 placement and over 86,000 graduates were posted to various institutions to undertake their mandatory national service. This number, I believe, had seen a significant growth year on year thereby increasing the number of unemployed graduates across the country. The National Service programme lasts for about nine months. Undoubtedly, about 95% of these graduates will always wish to have been maintained in their respective places of work. However, the reverse is the case with a few securing entry level jobs after their service placements.
The truth of the matter is that Corporate waters can really be difficult to navigate for new potential employees coming out of school. Sometimes, it may seem that your best chance for success lies in simply doing your job as effectively as possible. Though that may be true in many professions, the corporate world may demand a little more.
In this article I shared some lessons and encouraged colleagues who are still navigating the corporate world to achieve greater success. The lessons I shared included the need to embrace Capacity building, Practise good networking, Deploy Your Transferable Skills, Take A Good Role Model, Dress Well and Look Presentable.
The list could go on and on, but the message was that, it takes a deliberate and conscious effort to be successful in the corporate environment. There will always be office politics one must deal with, don’t hate on people. Study the people that succeed and learn to have a winning mentality
1st April 2021
#4. Experts push for monetization of Ghana’s mineral royalties
I was honoured to join some experts at a public forum organised by the Minerals Income Investment Fund (MIIFe) on the monetisation of mineral royalties. I made a case for Ghana to take such an action if it intends to make the most of the opportunities in the sector. Speakers at the forum, included Hene Aku Kwapong, the Founder of the Songhai Group; Kwabena Ata Nuamah Mensah, a Resource Governance Professional and myself. I argued that countries like South Africa and Saudi Arabia, which have seen large-scale investments in infrastructure were able to do so because they, among other things, monetised their resource incomes.
I called for a review of all existing gold mining agreements to enable the country maximise the benefits of monetising its mineral royalties. I further noted that, a restructuring of the gold mining activities in the country would place the country on a firmer footing and this will enable it to take advantage of the huge cash flow within the gold royalty space. However, I mentioned that for the country to derive the full benefits of monetisation, there must be a plan that establishes a baseline to identify the gap between where the country is now and where it desires to be.
16th May 2021
#5. How To Secure Loans With Your Financial Securities
Ghana’s Domestic Capital Market (DCM) is evolving, and this has been made possible by the continuous awareness creation by stakeholders as well as various market players and participants. In fact, latest reports from the February 2021 monthly bulletin of the Central Securities Depository (CSD) showed that out of the Ghs158.4bn financial securities held as Bonds, Notes and Bills. A total of Ghs124.3bn, representing 78% were held by domestic investors and the remaining 22% were for foreign investors. On the domestic front, in terms of the various securities types, investments in Bonds stood at Ghs74bn representing 59.63%.
Today, many people hold some of these securities and are not aware they can secure some form of funding to manage their liquidity at a much flexible rate. Loans backed by securities as collateral provide a level of comfort to the lenders. Since this inevitably reduces the potential default rate, banks who embrace such types of arrangements will further see a drop in non-performing loans. This form of Collateral can enable banks to consider offering lower interest rate on loans. This also provides banks the opportunity to grow their loan book. For clients, this provides a better financing option as compared to traditional loans. Extending such loans to private sector will further boost economic growth.
29th June 2021
#6.Problematic engineering work on Pokuase interchange -an open letter to Roads Minister
This article was a blockbuster! I notified the Minister for Roads and Highways (Hon. Amoako Attah) of the potential road menace that was brewing and would manifest sooner or later if it was not properly addressed.
Indeed, when the news broke that the interchange was going to be constructed at a cost of USD94.8million dollars and funded by the African Development Bank and the Government of Ghana, it was received with great joy, considering the unbearable traffic the communities around Pokuase and commuters to Kumasi and beyond had to go through on a daily basis.
I made a recommendation that, that U-turn should be temporally closed during rush house from 5:00 am to 10:00 am and divert the traffic flow to Kwabenya stretch to descend on the interchange to Accra. Alternatively, I highly recommended that the U-turn be closed permanently to allow ease of traffic to move the bottleneck away from the hot spot. Thankfully, some of the measures were implemented.Â
25th July 2021
#7. Innovative financing structures needed to fund Africa growth
Africa undoubtedly has the fastest urban growth rate in the world. Research by the Organisation for Economic Co-operation and Development (OECD) indicates that by 2050, Africa’s cities will be home to almost a billion additional people. As these cities grow, it’s important that the appropriate urban infrastructure – from roads and transport systems to water and waste management systems – is in place to enhance wellbeing and productivity for people living in these areas. Shared perspective on innovative financing Leverage on Zero Coupon Bonds, Export Credit Agency (ECA) backed Financing, Focus on Sustainable Linked Bonds, Future-Flow Securitization for Development.
The innovative financing options to fund Africa are non-exhaustive. What is important is leadership`s commitment to tackle the issues and challenges facing Africa to ensure that it take its rightful place
17th August 2021
#8. Project Finance a catalyst to bridging the economic development gap
There is a massive infrastructural development across Europe, Asia and America which gives a clear indication of the conscious efforts made by leadership of these continents to ensure sustained developments there. The story is quite different in Ghana and across Sub-Saharan Africa. Although we see some infrastructural development on our continent, there is still room for improvement.
I shared some perspective on Ghana Infrastructure Plan (2018-2047) Sector Overview, Investment required in Information Communication & Technology (ICT) Sector, Transportation, housing, Water and Drainage and Energy.
I concluded that, to undertake any project financing activity for the above infrastructural development, there must be compelling need for the project to ensure that the process becomes successful. For example, a creditable consultant must perform extensive due diligence and develop the finance structure. Â There is also the need to ensure proper scrutiny of uncontrollable factors that may hinder the success of the project.
17th September 2021
#9. Sierra Leone To Redenominate Its Currency, Any Lessons From Ghana`s 2007 Exercise?
A few weeks ago, I arrived in Sierra Leone (Salone) and while at the Airport, I was asked to undertake another COVID 19 test. To my surprise, while the COVID test was USD80, I was asked to pay the equivalent of SLL800,000. Your guess may be as good as mine on what was already going through my mind. I secretly spoke to myself, that before leaving the country, I was going to taste the status of being a ‘billionaire’. Maybe I was dreaming in daylight. Why? Assuming that SLL800, 000 was in Ghanaian local currency (i.e. GHS800,000), that could buy me a mansion at Airport Hills, East Legon in Accra, a family trip to San Francisco or Maldives island across the Indian ocean
The Governor of the Central Bank of Sierra Leone (BSL), Prof. Kelfala Murana Kallon on 11th August 2021 issued a circular pursuant to Section 30 of the Bank of Sierra Leone Act 2019 as follows:
- The Country`s legal tender, the Leone (Prefixed ‘Le’) shall be redenominated by the removal of the three Last Zeros (0`s) from the face value of the said legal tender.
- The current legal tender shall continue to remain in force until such time and date that the Bank of Sierra Leone shall by public notice designate.
What has been the learning curve?
Undoubtedly, redenomination exercise in Ghana in 2007 didn’t occur without its associated challenges and this is something BSL must carefully deal with to ensure the success of the programme. Redenomination is not a challenge-free policy because in every policy there is a price to pay to make it successful. Redenomination comes with its challenges which include issues associated with rescaling, cost involved in disposing of the old notes and coins, cost associated with citizenry education, enlightenment and advertisement of the change to citizens, etc. (Bank of Ghana, 2007).
27th October 2021
#10. A fresh approach to digitalising and financing supply chain
Lending rates in Ghana continue to be high. While the Bank of Ghana has maintained the monetary policy rate at 13.5% for the third time since May 2021. The various commercial banks continue to lend at an average interest rate of 20.6% which may in a way hurt the ability to deploy capital to private businesses. This is not new to businesses in Ghana and indeed there have been several calls by industry watchers and players to ensure that the yawning gap between the Central Bank’s monetary policy rate and the lending rate of commercial banks is bridged. While this may be true, efforts are being made by these financial institutions to bridge the seemingly huge gap.
This article examined and explored how corporate organisations can leverage on their good standing or ratings with their respective commercial banks, to obtain cheaper sources of funding to support their internal supply chain management and take advantage of recent technologies and innovations in the space to provide such services to their clients. Â I advised that corporates rethink and embed such innovative financing solutions to manage the entire supply chain. The Chartered Institute of Purchasing and Supply and its stakeholders must continue the education, embrace the changes in the world of supply finance and collaborate with corporate organisations to achieve the needed objective.Â
24th November 2021
#11. Role custodial banks play to protect investors
The financial investment landscape in Ghana has seen massive improvement over the last couple of years. A lot more people are warming up to understand the entire value chain, as well as the key industry players. For many investors, the moment they buy or sell their securities on the primary or secondary market, it ends there. However, there is more to the investment activity that is not recognised.
An investor, whether a direct retail or corporate investor, a contributor to a pension fund, an investor in a Collective Investment Scheme (Mutual Fund/ Trust Fund) or any other type of investor – investing in financial assets be it equity, debt or a hybrid, needs to understand the servicing around these assets i.e. how the institution that holds or safe keeps the asset manages the corporate actions on these instruments; income payments (dividend or interest), voting on resolutions that affect the issuing entities’ actions or other actions the investor needs to participate in for holding the security including responding to an offer by the issuer to exchange the security for another, the settling of a sale or purchase within the investment portfolio, etc. This is where banks offering Securities Custody become crucial.
I have worked in the financial sector for over a decade and I dare say, not much is known about the significant role custodial banks have played and continue to play in the safekeeping and protection of assets in the Financial Markets. Custodians provide all of the services mentioned above and more, taking over assets services, corporate actions, transactions settlements, investment position reporting and all these relevant securities services activities to enable the other providers within the financial service sector like Fund and Asset Managers to concentrate on the building of the investment portfolio on behalf of the investor. In this article, the focus was to examine the role a custodial bank plays to ensure an investor is protected.
Conclusion
This is the last article for the year 2021, I thank the Business and Financial times both online and print media, myjoyonline.com, Modern Ghana, Citinews.com/FM, Ghanaweb, Goldstreet Business, Economy Times etc for publishing all these articles. It`s very much appreciated. Permit me to say a big thank you to my cherished wife Hilda Odame-Gyenti, readers for spending time to read and providing the needed feedback in areas requiring improvement. I also take the constructive criticism in good faith because it makes a person better. Better days are ahead in 2022, expect more from me.
I wish each and every one a merry Christmas a prosperous new year in 2022.
Start today! Thank you for reading.
Disclaimer: The views expressed are personal views and doesn’t represent that of the media house or institution the writer works.
Credit: Lawyer Miriam Amoako,Â
About the writer
Carl is a Finance and Investment professional, Country Head (Ag) Client Coverage of an International Bank in Sierra Leone. Contact:Â [email protected], Cell: +232 33240467
