Time to encourage foreign inflows

…say investors amid dollar scarcity

Investors want government to encourage more foreign investment into the country and develop the newly-touted Ghana Infrastructural Fund (GIF), rather than play with interest rates and money supply as a way of curbing the cedi’s depreciation.

The local currency fell by 3.1 percent in January against the dollar, and is down 21 percent from a year ago amid pressure from high import demand. Analysts fear the Bank of Ghana (BoG), whose monetary-policy committee meets this week, could be tempted to raise interest rates to stem the slide.

“The biggest thing the Finance Ministry needs to do is to encourage foreign investments into the country and develop the infrastructure fund. Trying to manage interest rates and money supply and improving banking regulations will not be good,” Kenny Hearn, a fund manager at Coro Capital, a South African-based investment house, said.

Mr. Hearn noted that increasing already high interest rates will have an adverse effect on the economy, because “if you go any higher it will eventually have an impact on the country and foreign investment is going to leave anyway, and then the currency will depreciate further”.

Speaking yesterday at the second Stanbic Bank Investor Conference in Accra, the fund manager said educating local companies on the benefits of foreign investment can be crucial to the development of the country.

The conference brought together listed companies on the Ghana Stock Exchange (GSE) and investors from the USA, Europe, Asia and other parts of Africa. It presented a one-on-one platform for the investors to get information on the outlook of the Ghanaian economy, particularly the securities industry, to help them make informed decisions.

Director in charge of the financial sector division at the Ministry of Finance, Joseph D. Chognuru, said one factor contributing to low growth rates in developing countries is insufficient, inappropriate and poorly maintained physical infrastructure.

“Improving the investment climate will encourage more infrastructure investors to take full advantage of the opportunity. This in turn will make infrastructure services more widely available and encourage other types of investments.”

Mr. Chognuru noted that there is an increasing number of SMEs seeking to penetrate often complex global markets. “Investors providing SME-friendly services can play the role of effective business partners for these SMEs in the expansion programme.”

Director-General of the Securities and Exchange Commission (SEC) Adu Anane Antwi said the commission has played and will continue to play a key role in the integration of West African capital markets.

He added that the SEC has also forged international cooperation with other securities market regulators outside the West African sub-region for information-sharing and effective regulation of capital markets.

“The capital market has assumed increasing importance in the financial markets in Ghana. Creating prosperity has largely been a matter of bringing together people who are prepared to invest capital with people who are able to use it to create wealth.”

Chief Executive Officer of Stanbic Bank Alhassan Andani said the economy’s current challenges, such as tax hikes and the removal of subsidies, should also be seen as necessary actions that will create a better future.