Kwabena Boamah, Managing Director, Stanbic Investment Management Services: Interview

Interview: Kwabena Boamah

What is Ghana’s economic recovery outlook?

KWABENA BOAMAH: The outlook is mixed. An important factor to watch is Ghana’s fiscal gap. Government expenditure, already fuelled by the pandemic, must continue to rise to improve infrastructure and fund efforts to bridge the gap between low- and middle-income earners. However, Ghana’s revenue mobilisation is not strong enough to cover expenditure, with tax income accounting for less than 15% of GDP. To address this, an e-levy was re-laid before Parliament for consideration in early 2022, which would apply to electronic transactions, including mobile money. Successful implementation could significantly contribute to government revenue and support economic recovery, but if it the levy is not applied well, the informal sector and the cash-based economy may grow and the fiscal deficit may widen.

How attractive is Ghana for foreign investors?

BOAMAH: Ghana offers attractive yields to investors, irrespective of the developments in the US economy, as seen in the issuance of five-year government bonds in December 2021, which closed at 21%. Investors are primarily concerned with the country’s fiscal deficit and debt sustainability. Ghana has a good track record of servicing sovereign obligations faithfully, even at the worst of times, and this goodwill still exists. At the same time, we hold a lot of promise for restructuring the economy. The government has allocated sizeable funds in the 2022 budget to increase the contribution of small and medium-sized enterprises (SMEs) to economic growth, productivity gains and job creation, and to fast-track economic recovery. The commitment to deliver on these fronts will ensure that Ghana remains an attractive destination for foreign investors.

In which ways could reforms enable SMEs to become the growth engine of Ghana’s economy?

BOAMAH: The first challenge is reducing the cost of credit that SMEs require to achieve scale. The second is providing professional support; for example, in bookkeeping and repackaging products to improve competitiveness and move beyond small turnover sheets. An important consideration is ensuring that the funds are directed to those SMEs with the highest growth potential. We are beginning to see several private equity funds take action on this front. The government should partner with the Ghana Venture Capital and Private Equity Association to identify qualifying SMEs and deliver the appropriate resources.

Which sectors have the highest potential for further private equity investment?

BOAMAH: In the short term, private equity investments are most likely to be directed at SMEs, financial services and warehousing. Additionally, education and student accommodation are also rising as target investment sectors. The introduction of free education in 2017 has increased the student subscription rate. However, the implications for the quality of education in public institutions has created a demand for private schools, especially among middle-income earners. 

To what extent can technology boost inclusion? 

BOAMAH: The size and cash-based nature of the informal sector is a fundamental problem. Deploying technology to trace and track transactions with the highest turnover can help the Ghana Revenue Authority to extend its tax base and boost revenue mobilisation. At the same time, the development of mobile money platforms that facilitate deposits, withdrawals and investments in unit trust funds without even necessitating smartphones has improved inclusion. Some banks allow the purchase of Treasury bills via mobile phones. The tools and channels are already available and various industry players have embarked on campaigns to educate the informal sector on investing their savings. Therefore, the proposed e-levy must include targeted exemptions to prevent the derailment of these efforts.