Chris BishopBy Chris Bishop|December 8, 2020|12 Minutes|In Economy

You Know We Came Into 2020 Feeling Really Happy With Ourselves Then Came COVID And Cold Reality

On the cusp of Ghana’s December 7 elections, finance minister Kenneth Ofori-Atta spoke to Billionaire Tomorrow in an exclusive interview in Accra about his hopes to repair the economic damage of COVID-19 with the help of the cheaper capital and the country’s entrepreneurs.

It was a strange build up to a vote in Africa. If you didn’t watch television or read the newspapers in the weeks leading up to elections in Ghana you would hardly have known there was an election on. The only signs of an approaching poll on December 7 were flags and posters here and there on the street poles in the centre of Accra.

Nevertheless, 17 million voters across Ghana will decide what is expected to be a tight contest between the incumbent President Nana Akufo-Addo and former president John Mahama.

President Akufo-Addo with his New Patriotic Party is selling it to voters as a centre right economic freedom party that supports entrepreneurs. In that vein, it swept away 17 so called “nuisance” taxes for businesses in the last budget and has been busy with vote winning schemes like free education for hundreds of thousands of children. Days before the poll, President Akufo-Addo unveiled a new pension scheme for 1.5 million cocoa workers who make up the backbone of employment in Ghana.

On the other side of the fence, former president and historian Mahama – who ran the country between 2012 and 2017 – is believed to be a strong contender with his National Democratic Congress Party. He too pledges to revive the economy and has raft of promises from creating one million jobs to tax incentives for landlords that could reduce rent.

There has been talk in the newspapers about growing violence and vigilantism, but the run-up election appeared to be more Queensbury Rules than street fight. As the special early vote for 100,000 essential workers – from police to nurses – played out in the week before the main poll, the pictures emerging from Ghana were more about vote monitoring and the handing out of face masks than conflict.

Equally laid back was the atmosphere at the finance ministry in Accra when Billionaire Tomorrow arrived for an interview with the avuncular finance minister Kenneth Ofori-Atta. Security men waved us through a relaxed regime at the doors of the ministry.

“Chris!” was the word that broke the silence of a waiting hour in the reception room at the ministry. The two of us had shared a stage at a World Bank debate, in Washington, back in 2017.

The minister wore a mask and soon we were talking about the terrible cost of COVID-19 how Ghana had mobilised money to fight it. Ofori-Atta recalled a crisis cabinet meeting as the pandemic took hold earlier this year.

“The Minister of Health and the Chief of Staff, and I think the Minister of Health was thinking, well we need an intervention of two to three million dollars, so that, you know, we can manage it. And at the end of the meeting the president looks at me and says: ‘Well, so, finally I think this is a 100-million-dollar problem. And so, go find the resources to do that.’ Like, we were talking about three million!” he smiled.

Well, so, finally I think this is a 100-million-dollar problem. And so, go find the resources to do that. Like, we were talking about three million!

- Ken Ofori-Atta

“Then we worked with the bank of Ghana, and then looked at our own oil revenues and put that together. But the president was very clear that, you know, we can rebuild the economy, but we can’t bring people back to life.”

Yet the rebuilding of the economy is likely to be tough. As the cabinet sat down and worked out how to raise money for the battling of COVID-19, a lot of the damage had already been done turning what promised to be a good year into a poor one.

“You know, we came into 2020 feeling really happy with ourselves, because in 2019 we exited the IMF program. You know, inflation was in the single digits for the first time in nearly a decade, the growth rates are averaging about 7%, and coverage of foreign exchange imports for three to four months…then in March this important pandemic came in and ruined everything. So, from the 6.8 projection of growth, this you know, a steep fall to 0.9%,” he says.

Yet Ghana took comfort from the by the issue, earlier in the year, of a heavily oversubscribed bond that will help shore up finances on the way to recovery.

“We have changed our predictions this year to 1.9%, which is fairly good, and expecting 5.7% for next year, for 2021. So, we are expecting a good recovery because the business sentiments are strong and we’re still keeping a hold on interest rates,” he says.

Where is this growth going to come from in Ghana, I ask, in very tough times for the world economy?

“And so, expectation is that we’re going to be reducing food imports…I suspect services are going to do well in terms of banking in the FinTech industry, and more of that really is also the beginning of pushing up entrepreneurship for people to do things for themselves, the whole issue of economic freedom from the beginning preferential option for the poor, which means that everybody has their basic needs been satisfied, and then creating that sense of confidence.”

Yet Ghana needs more capital and cheaper capital to feed this growth – a difficult job even in the best of times.

The finance minister told Billionaire Tomorrow Ghana is setting up a National Development Bank to lend more capital to build the roads, rails and infrastructure need to nurture economic growth. The World Bank has pledged $250 million to the project and the European Investment Bank $170, with the government of Ghana putting up another $250 million. The bill is through Parliament and the government is recruiting with a view to beginning operations at the new bank by the end of March.

“Maybe revenues are not going to grow fast enough, so you need FDI and savings to fill that gap. Savings are not adequate. So FDI can come in through Public Private Partnerships or through just direct investment. Or create a National Development Bank, which also has capacity, like KFW in Germany, and to be able to create another pipeline to get resources. So, that’s what we are seeing so it’s another retail bank really going to look for ways to mobilise capital from outside,” says Ofori-Atta.

“It technically means we can support the venture capital companies, a lot more, and then we also put in place a guarantee fund, which the banks control on, which then enables them to also give more liquidity to entrepreneurs.”

Then, there is the birth of the African Continental Free Trade on January 1. The headquarters of the new continent-wide trading area is just down the road from where this interview is taking place in Accra – a nod to Ghana’s status as one of the first nations in Africa to free itself from colonialism. As Ghana inspired a score of African nations towards independence in 1957; so too could it help usher in free trade in Africa in 2021. Ofori-Atta has high hopes even though he sees a lot of work to be done.

“It’s always difficult I mean, the whole concept of payment systems where they kind of balance out at the end of the day, and you have this swath of capacity on the continent in which some are really in dire straits and so is going to take intentionality from the bigger economies to let this happen, France and Germany for EU type of thing and whether the leaders will rise up to that sort of historic responsibility to do that, it is going to be a challenge,”

“I think there are traditional problems with any, you know, trade agreement. I think it is one of our Achilles heels for this continent is the lack of digitalisation and therefore technology. So, I keep telling the World Bank that maybe the greatest legacy they can do is to have Africa digitised,” he says.

Above all, the finance minister believes in the entrepreneurs of Ghana. If he can funnel cheaper, long term, capital to these entrepreneurs there is a strong possibility they can believe too.

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