Critical News, 5th May 2012

By Sydney Casely-Hayford, Sydney@bizghana.com

We finished the 4^th movement in BVR minor this Saturday 5^th May.  Half way in the middle of it all we went an octave higher and started a violent movement in a major city.  Between Ododiodoo and some other places, it was completely overshadowed by the Oman hiplife rap.  Kennedy Agyapong is still on bail and the prosecutors are looking for his docket, lost somewhere between the police, BNI, National Security and the Attorney General’s office.

President Mills Cannot See The Problem

By Sydney Casely-Hayford, Sydney@bizghana.com

As far back as July 2009 I wrote a piece on the Quality Grain Rice saga, which triggered a $22million loss to the Government of Ghana.  I wrote that piece under a series which I themed “A Guide to Corruption”.  The link to the article is here.  http://www.modernghana.com/news/230489/1/a-guide-to-corruption-in-ghana.html

When Mr. Atta Mills was made Vice President and put in charge of the economic management team, he inherited the Quality Grain Rice project. He later testified to a court presided over by Justice D. K. Afreh in April 2003, that “ …. throughout my four years as vice president, there was no project which occupied more of my time than this Quality Grain Project”.

There were many red flags all over the case at the time and they were all ignored.  The government failed to join in several suits against Ms. Cotton.  They (Government) did not accept the FBI’s (who finally prosecuted and jailed Ms. Cotton in the USA) invitation to sue Ms. Cotton.  Prof. Mills said the reason for inaction was because the Government “had a “trump” card” – a deed of indemnity and a floating charge on assets.

The Hydra-Headed Woyome, Caveat Emptor

By Sydney Casely-Hayford, Sydney@bizghana.com

We are going through a Governance litmus test.  At the end of 2012 Ghana will have transitioned its fledgling democracy to a nation state where the rule of law has finally become a true pillar for fighting corruption; and politicians will finally realize that we will change our Government when we are dissatisfied with economic progress and governance.

Woyome has made history and the NDC Government will remember him not for the word “gargantuan” in the media but the impact he will have on our democracy from the ghc518million gifted to him.

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.

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.

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.

Waiting To Analyse The Economy

By Sydney Casely-Hayford, Sydney@bizghana.com

Should we follow in Nigeria’s wake and hold part of our reserves currency in Chinese Yuan?  The question has come up in business news more than once in recent weeks.  I first commented on this on a Joy Business Trends program and I said an emphatic yes!  Not just because Nigeria has done so, but also because they are ahead of us in analyzing and making the decision.

Deciding what currency to hold in foreign reserves is not a very complicated analysis when you have all the data.  When asked, other analysts and ministers in Government cautioned that we should take our time, tread gently and make the decision hesitatingly.  As they claim, we are a small country with too much to lose, we must take care and ensure that we make the right decision.  Then one day this week on BBC World Service the African proverb was, “people who have nothing, fight over nothing”.

Last month the World Bank released project evolution figures on Ghana’s portfolio.  A clear representation of where we are.  $1.5 billion in awarded contracts and we have only performed 23% of the work required to release funds.  Facilities are about to run out for key interventions, which we are complaining about.  Roads, water, education, sanitation.