A2.O MAGAZINE BUSINESS FALLING CEDI DRAGS GSE DOWN ENTERTAINMENT MR COCOYAM TABLE OF CONTENTS PAPPY KOJO LIFESTYLE HIJARBIE MTAILOR FORD GT There is only one boss. The { customer. And he can fre everybody in the company from BUSINESS the chairman on down, simply by spending his money somewhere { else. Sam Walton FALLING CEDI DRAGS GSE BY: MASAHUDU ANKIILU KUNATEH THE Ghana Stock Exchange (GSE) is bearing the brunt of the weakening Cedi, which over the months has been losing value against major currencies. The currency’s value has taken a tumble against foreign tenders as the United States Dollar and the British Pound, much to the detriment of proftability at one of West Africa’s leading stock exchanges, with a cap of US$ 20.17 billion. GSE, one of the continent’s “young- er” bourses which started trading in 1990, is struggling for competitiveness against other African bourses. As of the time of going to press, the Cedi traded at 3.77 against the US currency. This year, it has depreci- ated 26 percent in value against the Dollar. On a year-to-date basis, the Ghana currency has depreciated by 15.5 percent as of October 2015, compared with 31.2 percent in the corresponding period of 2014, according to the Bank of Ghana (BoG). Moreover, some foreign currency bureau operators in the capital Accra attributed the sharp decline of the dollar and other major trading currencies to speculation in the market, while others are also blaming the BoG for failing to do nothing to arrest the situation. In an interview, Accra-based analyst, John Opoku, called on the government to support the Ghanaian manufacturing companies by reducing the high tarifs on imports and exports. “If one changes $100 000 and buys a company listed, in the next six months what is “Fund managers the return one is looking at?” he asked rhetorically. “The price might not have changed or one would representing frms have experience some loses which is the exchange outside Ghana are loses which is largely due to the depreciation of the cedi, fund managers representing frms outside Gha- not buying which na are not buying which means we are not able to see means we are not some growth and see any appreciation of the price that afect the all share index,” said Opoku. able to see some He pointed out that depreciation of the Cedi was an growth and see any outcome of the performance of the economy. The International Monetary Fund projected the appreciation of the country’s economic growth would fall to as low as 3,5 price that affect the percent this year. In addition, the Ghana Statistical Service’s recent GDP report indicated the economy all share index” dropped from $48.6 billion in 2013 to $38.3 billion last year at market exchange rates. Opoku said the man- ufacturing sector was currently the worst performing sector on the stock market due to the several taxes government charges. Manufacturing companies dominate the listings in the 38-company stock exchange. Therefore, if something can be done to ease the pressure which afect them to reduce their cost of oper- ation ,which is one of the thing the foreign investors are looking at, then their stocks will perform better,” he said. Opoku noted although the Cedi’s negative rating against major currencies was weighing down manufacturing companies listed on the GSE, its downslide was a blessing in disguise to banks listed on the bourse. The fnancial institutions, which are a minority in the bourse, are beneftting immensely. “The companies we see performing well on the exchange are the banks. This is because whether the economy is good or bad, the banks will always churn out proft depending on what product and what management they have in place. In 2015, at half year, the banks had made profts they accrued in the whole of 2014,” the analyst noted. BOG meanwhile absolved itself from the underperformance of the Cedi. The central bank blamed the prevailing situation on the huge consumption of foreign goods, cur- rency expectations and the structure of the country’s economy. Ghana currently consumes more foreign goods than local products. According to data from the Ministry of Trade and Industry, in 2013 alone, the country spent a whopping $1,5 billion in foreign currency on the import of rice, sugar, wheat, tomato products, frozen fsh, poultry and vegetable cooking oils, most of which can be produced locally. LOANS LEAVE GHANA ON THE EDGE OF BANKRUPTCY BY: MASAHUDU ANKIILU KUNATEH IN spite of denials by fscal authorities, Ghana has been relegated to the unenviable group of heavily “We went to the market then without a World Bank Insurance cover because our macroeconomic fun- indebted poor countries (HIPC) as years of an insatiable appetite for borrowing catches up with West damentals were strong, our rating was very good and our debt was sustainable. Even though the global Africa’s second-biggest economy, and the prospects look dire after the country last week launched a $1 credit crunch was rife in 2007 and average LIBOR was 5,251. We only paid a little premium,” said the leg- billion Eurobond, its fourth, becoming the frst country in sub-Saharan Africa outside of South Africa to islator. In the case of the just-issued Eurobond, he lamented that Ghana’s Sovereign Guarantee was of no issue a 15-year bond, at a coupon rate of 10.75 percent. As a result, already searing under a declining value.He attributed to the country’s recent deteriorated ratings and debt unsustainability. economy, Ghana is expected to cough up $107.5 million a year for the next 15 years in interest payments Nii Emma, a PhD student of Development Economics at the University of Ghana, appealed to the govern- on the Eurobond. This is the latest in a series of borrowings that has the country in the HIPC bracket. ment not to misspend the money. Controversy surrounds last year’s issues as $1 billion sourced from the HIPC are a group of 38 developing countries, with the exclusion of Ghana for now, with high levels of international fnanciers could not be accounted for. “We want government to tell the Ghanaian people poverty and debt overhang. According to the United Nations and World Bank, any time a country’s public what actual use they will put the money to. The sad but plain truth is that the managers of the coun- debt hits or crosses 70 percent of its gross domestic product (GDP), then that country can be described try have been manifestly careless in going to the bond market at this material time. “Notwithstanding, as highly indebted, making it difcult for that country to settle its debts on time. While not ofcial, Ghana government must not be callous in spending the money for after all it is the overburdened citizens of has fallen in that category with the country’s debt stock reaching an alarming rate of GH¢ 94.5 billion, this country who will have to pay back the careless borrowing of government when the time is due,” said representing more than 70 percent of GDP of ¢ 146.68 billion (US38.648 billion). Despite this, and the Emma. A renowned economist, Dr Mahamudu Bawumia, lamented that the increase in Ghana’s debt had shooting public debt, pointing to Ghana re-degenerating into HIPC status, Governor of the Bank of Gha- placed a major burden on public fnances with regard to interest payments on the debt Interest pay- na (BoG), Dr Henry Wampah, has stated categorically the country is far from that tag. ments on domestic and external debt declined from 7.5 percent of GDP in 2000 to 2.3 percent by the end Ghana exited HIPC in 2006. of 2008. Since then, interest payment has increased to 5.1 percent of GDP in 2013, and would reach 6.5 percent of GDP by the end of 2014. “The country’s current debt stock does not mean Ghana is now HIPC. It is only government that can de- “The increase in interest payments by 2.8 percent of GDP, between 2008 and 2013, has taken away critical clare Ghana HIPC,” Wampah said at a media conference, albeit unconvincingly. fscal space that was available to the government, and that was created as a matter of deliberate strategy “To go in HIPC is a conscious decision by a country. You can say that it (Ghana’s debt) has reached levels and policy choices,” said Bawumia. of pre-HIPC levels but you can’t say we are HIPC. “To go HIPC is a decision by government; it’s not auto- matic that at some level you should go HIPC,” the apex bank boss added in a cryptic analysis. The recent “The increase in interest payments by 2.8 percent of GDP, between 2008 and 2013, has Eurobond suggests expert warnings Ghana’s debt status could worsen were not heeded. Earlier this year, taken away critical fscal space that was available to the government, and that was created the Managing Director of the International Monetary Fund (IMF), Christine Largard, warned Ghana could as a matter of deliberate strategy and policy choices,” be taking on too much debt in dollars through the issuance of the Eurobond. She said the practice had the potential to further harm the country’s economy. Speaking on the sidelines of the ‘Africa Rising’ con- ference in Maputo, Mozambique, Largard said increasing yields on the bonds indicated investors saw the BoG statistics suggest the country’s external debt stock has increased by $1,28 billion between May and bonds as high risks.