Ghana's investment drive constrained by savings
Tax increases will not revive economy - Don
Revenue mobilisation shows considerable progress - Chief Executive
Ghana's investment drive constrained by savings
Accra (Greater Accra) 17 Dec. '99
Mr Amoako-Atta, a special assistant to the Governor of the Bank of Ghana, on Thursday said investment drives in Ghana are constrained by the non-availability of savings.
He said Ghana's recorded savings rate is traditionally low even by sub-Saharan standards and called for "fiscal policies aimed at promoting high level of savings to boost the country's economic and employment growth".
Mr Amoako-Atta said this at a day's seminar on money management organised by Gold Coast Securities Limited (GCSL), a financial and brokerage firm in Accra.
He noted that there is evidence from household surveys that large amounts of savings are kept in non-financial forms such as inventories or building materials and idle cash as shown by the high ratio of currency to money supply.
The poor performance of the financial sector in savings mobilisation, are due, among other things, to under-developed financial infrastructure, lack of competition within the financial sector and the non-banking financial institutions, he said.
The level of investments of the country dropped to below five per cent of Gross Domestic Product (GDP) in the early 1980s and has recently been running at about 15 per cent.
Mr Amoako-Atta said indications are that a greater part of investments so far have been undertaken by the public sector, two thirds of which were financed through external loans and grants.
"This shows that public investment is still heavily dependent on foreign loans and grants and could adversely affect the sustainability of public investment programmes".
There has also been a marked decline in inflows of foreign capital to developing countries, which has resulted in the critical need for reliance on domestic resources to finance investment to stimulate economic growth.
Mr Amoako-Atta said there is the need to pursue the accelerated growth strategy (AGS) adopted by the government towards achieving the objectives of Vision 2020, which demands a high level of savings to be channelled into investment.
The strategy requires domestic savings of at least 20 per cent of GDP compared to the current rate of 16 per cent and investment rate of not less than 20 per cent of GDP.
He said so far, under the Economic Recovery and the Structural Adjustment Programmes, significant achievements have been made in the direction of developing an efficient, sound and diversified financial sector.
Under these programmes, the financial spectrum now involves institutions such as the commercial banks, discount houses, development banks and investment trusts that provide resources of short, medium and long-term nature.
Mr Amoako-Atta said new financial instruments would, however, have to be developed in addition to formulation of strategies to popularise the institutions.
Mr Kwame Ofori Asomaning of GCSL enumerated the importance of money management to the individual and the economy as a whole and advised Ghanaians to take advantage of the benefits of putting their moneys into good investments that would yield higher returns.
Dr. Kwasi Nduom, Chairman of GCSL, called for the establishment of more unit trust holdings in addition to the Home Finance Company (HFC) Unit Trust to boost the economy.
He said the seminar would be extended to other regions to educate the public on the importance of savings.
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Tax increases will not revive economy - Don
Accra (Greater Accra) 17 Dec. '99
Professor Kwadwo Asenso-Okyere, Director of the Institute of Statistical, Social and Economic Research (ISSER), on Thursday stressed the need for the government to widen the tax base.
He said it is obvious that there are shortfalls in revenue as a result of lower gold and cocoa earnings and reduced external aid flows, which have negatively affected the economy.
"But efforts to curb the situation should not be done through increased taxation but through increasing the tax net so that those who do not pay tax or their due share could be made to contribute their quota".
Prof. Asenso-Okyere said this during a panel discussion organised by the Institute of Economic Affairs on the economy of Ghana.
He spoke on "The Economy of Ghana - The Way Forward".
Giving figures to support his argument, Prof. Asenso-Okyere said cumulative receipts from January to the end of October, this year, totalled 2,712 billion cedis, representing 71 per cent of projected receipts for this year.
The figure falls far below cumulative payments of 3,335.3 billion cedis for the same period, which represents 82.3 per cent of projected payments for the year.
He said the figures indicate that actual revenues seem to lag behind target while expenditures are on track.
However, "it is necessary for discretionary expenditures to be reduced so as not to increase budget deficits".
On inflation, Prof. Asenso-Okyere commended the government, saying: "Ghana has done well in controlling inflation during the last four years" but described recent developments of the inflationary rate as "unfortunate".
"End of year inflation for 1995 rose a little over 70 per cent and was reduced to about 15 per cent at the end of 1998. It went down in April, this year, to about nine per cent and began to rise again to reach 12.6 per cent at the end of October and 13.6 per cent by November".
The major contributory factors, he said, were the increases in petroleum prices and the steep exchange rate depreciation.
Prof. Asenso-Okyere said in view of this, control on money supply, which is currently at 18 per cent, must be maintained.
He, however, cautioned against the continued stifling of the private sector from credit to check the upward trend of interest rates.
Although the bank rate has not been raised, the 91-day treasury bills rate has increased by 2.03 per cent to 26.56 per cent in October and increased further to 31 per cent in November resulting in increased borrowing by the government to forestall the shortfall in revenue.
"If the rate persists for some time, the commercial banks may have to adjust their own lending and borrowing rates upward and this may not augur well for the development of the productive sectors".
Prof. Asenso-Okyere said the major problem in the area of foreign trade is the fall in prices of gold and cocoa.
The world cocoa market has been experiencing bearish undertones recently due to large stocks of beans estimated at more than one million tonnes at the end of 1998-99 season and the expected upward trend in production from Cote d'Ivoire, Ghana, Indonesia and Malaysia due to favourable weather.
Low demand for cocoa beans due to the economic crisis in South-East Asia, Eastern Europe and Latin America is also a contributory factor.
Prof. Asenso-Okyere said the economic crisis had affected other primary commodities to the extent that the all-commodity price index had declined to its lowest ebb in the last 30 years.
The Government's share of FOB price for cocoa for 1999-2000 is 9.61 per cent as compared with 31.55 per cent in 1998-99.
"The disturbing factor is that the price of cocoa keeps falling with the average price of 663 pounds per tonne in September dropping to 619 pounds per tonne in October".
Prof. Asenso-Okyere placed emphasis on the continued trend of imports exceeding exports and said the government needs to look again at the liberalisation policy and place higher import levies on certain products to promote manufacturing of local products.
He said there is the need to expand the productive base to meet local needs and look for markets in the sub-region before exporting to the Western countries.
He also called for partnership institutions and countries with common aspirations instead of joining various organisations such as the OAU and the ECOWAS, which have so far not benefited the country.
Basic level education should also be looked at to improve technology and knowledge in the agricultural sector.
Prof. Asenso-Okyere advocated a thorough study of the recent Ghana Living Standards Survey by policy makers.
Other speakers at the meeting were Dr. Samuel Apea, a Fellow of the IEA, Dr. Sam Mensah, Chief Executive Officer of SEM Financial Group Limited, and Mr J. E. K Amoah, an Advisor of the Cocoa Reform Secretariat, who spoke on the Cocoa Industry and Marketing Strategies.
Mr Amoah called for new strategies aimed at revising the forward selling marketing strategy of cocoa as well as instituting protective measures in liberalising the cocoa marketing industry.
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Accra (Greater Accra) 17 Dec. '99
Dr. John Abu, Minister of Trade and Industry, on Thursday urged Ernest Chemist Limited (ECL), a leading distributor of pharmaceuticals, to team up with its overseas partners to set up a medicaments production plant in Ghana.
The minister made the call in a speech read for him at a ceremony organised by British-based Seven Seas Limited (SSL), manufacturers of medicaments, to honour ECL "for its immense achievement in the distribution of 25 SSL products in Ghana".
A statement signed by Mr. Robert Gleine, Chairman of SSL, noted that, for the past four years, ECL had trebled annual sales of SSL products and recorded the highest percentage of growth among all other distributors of SSL products globally.
This, the statement said, had made ECL the top distributor of SSL products in Africa and one of the top 10 distributors in the world.
Dr. Abu noted that the remarkable feat chalked by ECL "is indicative of the fact that the local consumption of medicament distributed by ECL is enormous".
He, therefore, urged ECL and its overseas partners to take advantage of the Ghana Free Zones scheme to invest in the production of medicaments locally for export to the West African market.
Dr. Abu noted that the success of ECL is a credit to the private sector, saying: "this is a sign that in spite of the parlous state of the Ghanaian economy, private businesses are able to persevere in their effort to make Ghana a competitive player in the global economy".
Mr. Craig Murray, Deputy British High Commissioner, who presented a plaque to Mr. Ernest Bediako Sampong, Chief Executive of ECL, said the success of the company was remarkable.
Recently, ECL received an award from Bell and Sons Limited (BSL), another British pharmaceutical manufacturer, for being adjudged the biggest distributor of BSL products in Africa.
Mr. Sampong expressed his profound gratitude to SSL for the honour done him and assured them of continuous dedication to the distribution of their products.
He praised SSL for supporting ECL with funds for adverts and acknowledged the foreign branch of Ghana Commercial Bank (GCB) for "assisting us to make prompt payments for all our imports".
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Revenue mobilisation shows considerable progress - Chief Executive
Accra (Greater Accra) 17 Dec. '99
The Accra Metropolitan Assembly (AMA) collected a total of 9.6 billion cedis from traditional sources, out of an estimated 13 billion cedis, Mr Addokwei-Addo said on Thursday.
The revenue, generated from rates, lands, fees, licenses and rent from the assembly's property, forms about 70 per cent of the budget figure at the end of the third quarter.
Giving an overview of the financial strength of the AMA, the Chief Executive said revenue from parks and markets also increased tremendously generating about 747 million cedis of an estimated 900 million cedis.
He said a total grant of 10.64 billion cedis was received for the period under review adding that only the first quarter allocation of 1.1 billion has been received as the assembly's share of the common fund.
Mr. Addokwei-Addo said a total of 21.93 billion cedis were spent on various projects with capital expenditure forming 40.36 per cent and recurrent 59.64 per cent.
He said to ensure a clean and healthy environment, the City and Country Waste Limited (CCWL) has increased its daily tonnage to about 1000 tonnes to the Mallam Disposal site and 120 tonnes to the Compost plant in Teshie Nungua.
Under the Sanitation 2000 programme, the Environmental Health Division is conducting intensive house inspection to ensure basic cleanliness and to rid the city of lunatics and hawkers on ceremonial streets.
On the year 2000 Fee-Fixing Resolution and Budget Estimates, the chief executive said an amount of 70.1 billion cedis would go into the sanitation sector to enhance the cleanliness of the city.
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