FDI into Africa accelerates as investor perceptions begin to shift

Distributed by African Press Organization on behalf of Ernst & Young

There was strong growth in the number of new foreign direct investment (FDI) projects in Africa in 2011 with project numbers almost up to levels last seen in 2008. In the last decade Africa has seen an increase in inward investment from 339 new projects to the continent in 2003 to 857 in 2011 (an increase of 153%).  Investment has come from across the world, with strong growth in project numbers from rapid-growth markets and developed markets alike with projects from the former increasing from 99 to 319 and developed markets projects from 240 to 538 since 2003. Intra-African investment has also been a key driver of this growth.

Africa Rises But Bwana Is Out Of Step

By Michael Holman, From the Financial Times.com

Africa is on the move: from basket case to a potential bread basket, from dodgy debtor to investor opportunity.

Too bad that Britain risks remaining out of step and out of touch.

Last week’s London summit on Somalia was remarkable for its high turnout and admirable in its good intentions. No one can dispute the damage done by piracy in waters used by international shipping, or the threat posed by extremists who shelter behind a collapsed administration. But safety at sea is dependent on economic recovery on land. And restoring a failed state means tackling poverty.

Chinese Money, The New Safety Net

By Sydney Casely-Hayford, Sydney@bizghana.com

Two weeks on 11^th December, I made the argument that Government had no choice than to raise fuel prices. http://thenewghanaian.wordpress.com/2011/12/11/expect-fuel-price-hike-soon/

I also said this would happen after Christmas or in the New Year and I predicted at least a 15% hike.  I was spot on.  December 29^th, Government announced 15% increases in petroleum prices, except for Kerosene and Premix.  Both these subsidized fuels are “political fuels” used to stave off the inevitable rebellion by the poor but radical fisher folk.

Expect Fuel Price Hike Soon

By Sydney Caasely-Hayford, Sydney@bizghana.com

A recent decision by an Accra High Court could have misunderstood the use of the Ex-refinery price differential In the calculation of fuel pump prices and this may force Government to raise retail pump prices if the National Petroleum Authority (NPA) loses its appeal and Government is mandated to carry out the court order.

Simply explained, the court ruled that the ex-refinery differential used in the calculation of the fuel prices is a form of tax and must therefore have Parliamentary approval before implementation.  The detail of the case is captured in a series of articles in most Ghana media.

If you delve a little deeper into the calculation of retail pump prices made available by the NPA and in the public domain, you notice that the ex-refinery differential is used to reduce the final pump price rather than increase it.  In effect, it is a subsidy not a tax.

International Monetary Fund expands lending tools

The International Monetary Fund (IMF) has announced new measures to help countries protect themselves from the eurozone debt crisis.

The Precautionary and Liquidity Line (PLL) is designed to help countries with “sound economic fundamentals” meet short-term financing needs.

To qualify, countries must also have “sound policies”.

Italy and Spain have seen their borrowing costs spike on fears they may fall victim to the debt crisis.

Earlier on Tuesday, Spain raised 2.98bn euros ($4bn, £2.6bn) in an auction of three- and six-month bonds, but at much higher yields than in a similar auction last month.

2012 Budget Missed The Point

By Sydney Casely-Hayford, Sydney@bizghana.com

A day before budget reading there was no shortage of advice for the Government.  Most Policy Think Tanks and talking heads offered all the wisdom they had accumulated over the year(s).  Even the opposition New Patriotic Party and the Convention People’s Party had a few kind suggestions for Finance Minister Kwabena Dufuor.  It did not take five minutes after the dead-pan-budget presentation for the cacophony to start.  And there was a lot to criticize.

The Finance Minister is a conservative banker and economist and the President John Atta Mills is ultra conservative.  No surprise therefore that we got a very unimaginative budget with no major departures from previous years.  In fact, most comments from the opposition harped on the fact that current projects carried forward from 2009, 2010 and 2011 budget statements.  How many times are we going to build the landing sites for fisher-folk on the coast?  It started with the NPP Government and we have re-budgeted for it three years in a row from 2009.

Business Regulations Improved in Record Number of Economies in Sub-Saharan Africa

Washington D.C., October 20, 2011—A new report from IFC and the World Bank finds that a record number of economies in Sub-Saharan Africa improved business regulations for local entrepreneurs in the past year.

Released today, Doing Business 2012: Doing Business in a More Transparent World assesses regulations affecting domestic firms in 183 economies and ranks the economies in 10 areas of business regulation, such as starting a business, resolving insolvency, and trading across borders. This year, the rankings on ease of doing business have expanded to include indicators on getting electricity.

The pace of regulatory improvements has picked up across Sub-Saharan Africa. Six years ago, a third of Sub-Saharan African economies made improvements to the regulatory climate for domestic firms. Between June 2010 and May 2011, 36 of 46 governments in the region implemented reforms in at least one of the 10 areas measured by the report.

Looking Forward to a Forward Looking Budget

By Sydney Casely-Hayford, Sydney@bizghana.com

This year’s budget must focus on generating enough revenue to meet our expenditures and more.  The 2011 budget targeted ghc10.6billion in revenue, adjusted in August with an supplementary ghc1.3billion to the end of the year.  On the flip side, expenditure was planned for ghc12.7billion and supplemented with ghc0.9million. This reduced the budget deficit gap by ghc0.5billion, leaving a financing gap of ghc1.5billion.  We plan for our friendly donors to help us finance the deficit.

This year must be different.  We have a lot more with which to plan.

Political Debt, Are We Budgeting Enough?

By Sydney Casely-Hayford, Sydney@bizghana.com

This year our budget must center on whether we can raise sufficient revenue to cover our full expenditures and not rely on donor support to shore up our politically generated deficit gap.  In finance parlance, we must cut the deficit budgeting this time round and look to growth measures and increase taxes to meet our expenditures.  It means tackling the tax base confidently and that should include the informal sector.

In the 2011 budget we planned some bold measures to ensure growth and revenue mobilization and throughout the year Government has announced better than planned revenues.  It has not made, as much noise about the expenditure overruns and not all the Single Spine implementation is complete.  The big one, Teachers and second largest Health are yet to be included.

In the 2011 budget we estimated revenue of ghc10.6billion.  In August 2011 it was supplemented by another ghc1.4billion, making total expected budget revenue ghc12billion.  Expenditure increased from ghc12.6billion initially and supplementary was ghc900million.  Our overspend (budget gap) is ghc1.5billion, which we couch as infrastructure needs, but it really is not.

The Composite Index of Economic Activity is Improving, So What, says the Informal Sector

By Sydney Casely-Hayford, Sydney@bizghana.com

The Bank of Ghana (BoG) uses an aggregate of indexes, grouped and called the Composite Index of Economic Activity (CIEA) to guide the Bank’s Monetary Policy Committee in its bi-monthly report and policy interest rate setting.

The CIEA gets little mention in the financial press compared to its more well-known counterpart the Gross Domestic Product (GDP).  The GDP is produced by the Ghana Statistical Service (GSS) and the CIEA is a BoG product.  However, according to the Monetary Policy Analysis Division of the BoG, the CIEA tracks the GDP very closely and is taken by the BoG as a very good indicator of business confidence.

Once a month the Monetary Policy Analysis Division (MPAD) of the BoG undertakes a real sector survey of the economy.

Let me explain the CIEA a little more.