On Continuous Fall Of Cedi
Businessman, Ibrahim Mahama, has taken the managers of the Ghana’s economy to the classroom, suggesting that the continuous fall of the Cedi and other currencies on the African continent is mainly due to capital flight, saying “no money stays in Africa”.
The man who started his company; Engineers & Planners (E&P) at a tender age of 26, virtually warned Finance Minister, Seth Terkper and Bank of Ghana (BoG) boss, Dr. Henry Kofi Wampah and others that if the continent did not come up with action-oriented strategies towards harnessing the resources of the continent for self-growth and prosperity, the repercussions would be costly.
According to the 46-year old brother of President John Mahama, apart from using part of the money generated in Africa to pay salaries, the rest were repatriated to foreign countries by expatriate businessmen operating on the continent.
Mr. Mahama was quoted by the Daily Graphic yesterday as having said these at a management retreat organised by the Afri Exim Bank in Dubai in the United Arab Emirates, recently.
His suggestions, comes as the Cedi continue to fall against all the international trading currencies, especially the United States Dollar, the Euro, the Pounds Sterling among others, and what was thought to be the prescribed solutions administered by Mr. Terkper and Dr. Wampah, but still the Cedi goes into coma at the sight of the Dollar, most especially.
Indeed, Ghanaians are experiencing the severe effect of the Cedi’s fall; the highest in recent times, and going through lots of economic hardship with the daily increase of goods and services in the market. Recently, in a matter of a week, cement price moved from GH¢20 to GH¢25.
The situation at the harbour is not different, importers and exporters are also lamenting about the rise of the international currencies.
For the first time in the country’s history, the costs of petroleum products and transport fares are rising averagely every two weeks with claims that a Committee setup at the Ministry of Finance to hedge petroleum price increment by Dr. Kwabena Duffuor, had been collapsed by his successor and onetime Deputy, Mr. Terkper.
About two months ago, a group of Ghanaian Economic Intelligence officers, attributed the causes and effects of the Ghana’s currency against the major trading currencies to the ineptitude on the part of Bank of Ghana (BoG) to monitor huge foreign currencies going or being kept abroad.
According to them, “the drain on the country’s foreign exchange appears to us to be the main cause of the depreciation in the Cedi. This problem has been occasioned by the following: GIPC – Technical, Management Services and Technology Transfer Fees, Foreign Direct Investment (FDI), Mining Companies & Retention of Export Proceeds and Timber Companies Migrating into the Free Zone”.
For instance” …whilst the Scancom actual transfers amounted to $146 million, the BoG figures showed a paltry $24,920,562.76 below. Grave problems exist in the management of Public Records even in this 21st Century of massive Technological changes.”
These officers, The Herald gathered have advised Governments including that of Jerry John Rawlings, John Agyekum Kufuor, John Evans Atta Mills and presently the John Mahama administration on the challenges facing the Cedi and what could be done to block its freefall that leads to the increases in prices of goods and services, especially fuel prices.
In their opinion, “If there is such a serious liquidity crunch, then the drain of foreign currency could NOT be laid at the door of the selfsame importers with bulging warehouses. The reason therefore for the currency depreciation lies somewhere else – mainly we believe of massive unchecked and unregulated drain of the country’s foreign currency unmatched by any visible production or of financial inflows which could be traced to the vast amounts of foreign currency payments made abroad”.
Back to Ibrahim Mahama, he also said if Africa did not take up the challenge to develop the continent, the reality would dawn belatedly that the opportunities on the continent had been taken over by foreigners.
He said, one other challenge militating against the growth and self-sufficiency of the continent was lack of access to needed financial resources for businesses.
He said, for example that there had been instances when African entrepreneurs, had come up with viable business proposals, but had been unable to raise the needed capital to execute them. “If we are looking to build African champions, we need to move on the ground and see what and where the financing is really needed,”
There were times, he said, when he had projects and approached local banks, but was not successful in raising the funding, adding that it would have been impossible for 10 local banks to pool resources to raise the needed funding.
It was regrettable, he said, that when investment opportunities opened up in Africa, the politicians always told the local investor that they were not capable of raising the needed funding.
“And sometimes when you look at the project, it will only cost $200 million, but if it is, being given to a foreigner, it will cost the country a billion dollars,” he asserted.
He was of the opinion that it should be possible for local banks to pool resources in helping local businesses raise the needed funding for the development of the continent, without fear of having the accrued profits repatriated.
That, Mr. Mahama observed, would build the capacity of local industries and ensure that resources generated provided the maximum cushioning for those with lucrative ideas but inadequate resources.
Africa, he said, was gradually being shipped away in bits by foreign interests, without the opportunity to negotiate, and wondered where the continent might have gone wrong. “Where we went wrong is that we don’t have access to capital. Africa needs capital and the problem of Africa is within us,” he said.
Mr. Mahama said, there were huge gold deposits in Guinea, for instance, but that resource had been given out to foreigners and suggested that it would be good for Africa’s entrepreneurs to team up to mine the resource for the benefit of their people, instead of the present arrangement where the profits were repatriated.
In prescribing a way forward, Mr. Mahama called for a re-think of the banking proposal system available to the private sector, which quite often limited access to credit, no matter how viable a business model might seem.
Africa, he said, had higher returns and better profits than Europe, but admitted that “In Africa, the challenges are many, but the returns are much greater”.
Banks in Africa, he noted, do not go cross-border, thereby limiting the options available to a local investor in another African country.
He was of the view that more banks, such as the Afri Exim Bank, which provided support for indigenous African businesses, were needed across the continent to effectively bridge the funding gap that existed for local entrepreneurs.
“We need more of the Afri Exim banks in Ghana to listen to local entrepreneurs and the projects they have,” he urged.
He recounted that as a young businessman with few resources, the various banks he did business with in Ghana, lacked the capacity to provide him with the needed funding as he progressed and expanded his operations.
That challenge, he said, persisted until he was introduced to the Afri Exim Bank that saw the company’s profile and was impressed by its performance, adding that it took the bank seven years to come to his aid.
“But with determination, we stood the test and proved ourselves by ensuring that we delivered on our services,” he recounted.