Challenges to businesses continue beyond elections

Some of the representatives from Norwegian businesses and their partners present at the forum.

A well-attended Norway-Ghana Business Forum discussed Ghana's business climate. In particular the discussion was centred around access to stable energy supply, the utility costs, access to and cost of credit and the conditions for developing the extractive industries

This Norway - Ghana Business Forum took place in Labadi Beach Hotel in Accra on Tuesday, 18th of October.  About 50 representatives from Norwegian businesses in Ghana, and their Ghanaian counterparts, participated.

The new counsellor at the Norwegian Embassy, Mr. Haakon Svane, was introduced to the audience. He has recently replaced Ms. Harriet Solheim. He offered the business section’s services to the community, presented the agenda and chaired the first session.

Dr. Ishmael Ackah from the Africa Centre for Energy Policy presented a civil society perspective of the future prospects and challenges.  He spoke on “Energy for businesses”. He reiterated the current situation where industries contribute more in terms of revenue to the sales of Electricity Company of Ghana.

He indicated that industrial energy demand has been growing at 7 percent annually. Recent surveys show that unreliable energy supply and high tariff are the major challenges facing businesses in Ghana. Last year there were 150 days of unstable supply and prices went up by 26 percent.

Currently Ghana is producing 1700 MW out of an installed capacity of 3800 MW. Some of the factors accounting for this include the low water levels in the dams and inadequate supply of fuel (gas, oil) partly due to unpaid debt to Nigeria. This is compounded by the very high distribution losses of 32 percent of the power in 2015.

He touched upon prices of energy, especially the fact that industries in Ghana pay a higher tariff than residential consumers, contrary to what is the case in most countries, where industries are offered lower tariffs in order to encourage business development. He attributed the higher tariff to excessive levies and taxes such as the 17% tax on electricity prices for industries and the 10% tax for public lighting.

But Dr Ackah ended on an optimistic note saying there is the possibility of an improvement in the supply situation in 2017, pointing to an additional possible capacity of 1800 MW in the pipeline, planned restructuring of the ECG, planned payment of government debts through the energy sector levies, investments in regasification and even the opening up for reverse flow in the West African Pipeline

Dr. Ackah recommended that in order to deal with poor power supply, the financial challenges of the power sector should be dealt with. Again, Government should reverse the policy of industry subsidizing the cost of electricity for residential customers. Government should remove some of the taxes and levies that make electricity very expensive e.g. the 10% energy levy for National electrification and public lighting.

Mr Stephen Antwi from Zenith Bank spoke on “Access to and cost of credit”.  He told the audience that he was often asked the question by expatriate friends: How is it possible to borrow money in Ghana and still make a profit?

He attributed the situation to two main factors. The Bank of Ghana’s Policy rate of 26 percent and the attractive rates on government bills and bonds which out competes the private sector. In addition, the high individual banks rate is due to factors like lack of credible borrower identification systems, absence of a uniform national ID-system and even credit referencing system; is still in its infancy compared to the developed markets abroad.  This increases risk and hence – the price of borrowing.

Mr. Antwi suggested the introduction of legislation to set at debt ceiling for government, the development of  more Public Private Partnership lending schemes, the establishment of specialised banks for niches or sectors of the economy (to support manufacturing and other sectors). He also mentioned that since the banking sector more liberalized and more banks came into the market especially the foreign ones, customer service levels have improved tremendously. Some banks through the provision of excellent customer advisory services are prepared to help business find solutions to their credit requirements.

The editor of Offshore Ghana, Mr Gilbert Costa, presented the Ghana oil and gas resource profile. He argued for more realistic expectations from Ghanaians stating that local production of gas will not be enough to meet domestic demand in the foreseeable future. The known reserves are only 3 trillion standard cubic feet, from three fields, as compared to Nigerian reserves of 190 trillion scf. LNG import and regasification is a way to go, he said, referring to three planned projects, including with Norwegian involvement.

The editor warned about critical macroeconomic effects of the emerging oil and gas industry. – The oil surfaced only five years ago. “We started out spending like there were no tomorrow, and now we are playing catch-up”. He lamented about the lack of transparency and accountability as Governments are always too eager to enter into agreements.

He called on the need for forward thinking in the management of the oil resource. He further suggested that Ghana should learn from the ongoing impasse with Cote D’Ivoire and take steps be agree on its maritime border with Togo. Maritime demarcation issues often become more complex once petroleum reserves have been found – better to start early with whatever necessary demarcation efforts are required

Mr. Costa called on the need for continuity in the sector as that enables business to do forward planning instead of demobilising and remobilising at huge costs. The present embargo on new exploration and production activities in the west, due to the unsolved conflict with Cote d’Ivoire, is unfortunate and is a disincentive for businesses. Their presence is an important driving force for the development of local service providers and related businesses.

The CEO of Ghana Minerals Commission, Dr. Toni Aubynn, also focused on the management of community expectations in his presentation of prospects and challenges for the solid minerals industry. "Out of the 4 minerals that are commercially extracted in Ghana, gold accounts for 85 percent of our earnings. He lamented on the low production figures in the extractive industry as compared to countries like South Africa (gold production of 30 million ounces compared to Ghana’s 3 million ounces annually) and oil production of 12000 barrels per day as compared to an estimated 2 million barrels per day in Norway and 2.5 million barrels per day in Nigeria."

He underlined that the extractive industries are highly profitable for the country, but that one major challenge is to secure added value. He used the example of aluminium, which would provide 12 times the value of exported bauxite. The CEO acknowledged Ghacem, but he wanted to see more Norwegian interest in solid minerals.

Dr. Aubynn touched on the important issue of illegal mining (“galamsay”), for gold in particular. Ghana’s gold mining industry was traditionally low tech, labour intensive and with regulations not suited for modern production. With the introduction over the past years of stronger, more consolidated actors in informal mining, using large machinery and excavators, a host of problems had developed. Pollution is up, together with disputes over land use. He lamented the involvement, of key stakeholders and individuals in society.

The CEO outlined some measures being taken such as reclassification of mining firms, the introduction of tracking mechanisms on excavators, and other target interventions to address this situation.  . He also suggested the oil and gas industry learn from the solid minerals industry to avoid some of the mistakes of yesterday as petroleum may be found and developed on shore in the time to come.

Mr. Fred Pappoe moderated the panel discussion following the presentations.

The Country Manager of Rendeavour, Mr Holger Adam, introduced the company to the forum and presented the Ghana projects of Rendeavour, Africa’s largest urban land developer. Rendeavour, a company with Norwegian interests, is currently undertaking two major urban development projects in Accra (Appolonia) and Takoradi (King City), which offer secure investment opportunities in land, as well as buildings for lease or sale.

HE Ms Hege Hertzberg, Norway’s Ambassador to Ghana, provided head and tail to the meeting. In her welcome note she addressed the insecurity facing everybody at election times. – Both the major parties promise change, so we know there will be changes. We do not know how the incoming government will address the current challenges, and how that will affect the business climate, irrespective of which of the two parties ends up winning the majority, she said.

The Ambassador underlined that the Embassy is ready to continue to support businesses in various ways.  In relation to the elections, the Embassy can contribute in two main areas i.e.  compile suggestions on how policies can be improved, including policies that will help develop business cooperation and further economic growth. The Embassy can also help businesses establish contacts with the incoming holders of public office.

In her closing remark and security brief, she maintained that there is little to suggest that these elections will be chaotic and violent, with possible exceptions at the local level. She said she had good reasons to believe that Ghana will continue to be a beacon of democracy in the region.  Nevertheless, she laid upon the audience to stay vigilante, adhere to security alerts and make sure Norwegian citizens staying in Ghana during the elections register with the embassy.