Stimulus package from Ghanaians abroad

HOW GHANA CAN BENEFIT FROM ‘GLOBAL’ FINANCIAL CRISIS – try a stimulus package from Ghanaians abroad

Asare Otchere-Darko

It is almost 100 days of the Mills presidency. Ordinarily this wouldnot have been a big deal but he made it so by indicating in his party’smanifesto specific targets he plans to hit within that period. His PRmachinery is at work spinning the wheels of this car-seizure period tomean the engines of governance have been overhauled and all is set forthe journey into a ‘better Ghana.’ The President's Tuesday meeting with the press (deliberately excluding leading critical newspapers like The Statesman, Searchlight, Punch, Crusading Guide and Observer) was a self-appraisal exercise staged to set the agenda for the first 100 days discourse.

But, the sceptics have an easier task showing that the Mills engineisn’t yet cranking. It is difficult to see a clear-cut vision and focusas to which direction the country may be moving. There’s lethargy evenin the Mills liturgy. People want to feel there is service after asermon. Yet, President Mills has given himself an 80% mark for his first 100 days performance. Unusual, perhaps, for a man who, until January 7, had made his purported 'humility' an electoral asset.

The NDC administration is frustrated by what it sees as probably anorchestrated fast-depletion (if any) of goodwill. Even rising retailprices and a run for the dollar against the cedi are all blamed on NPPbusiness sympathisers. Surely, in a free market environment, if youindeed won over 50% of the popular vote, it should be presumed that youalso have business sympathisers to counter the ‘unpatriotic’ acts ofthe others!

Perhaps, I should let the government in on a secret. An Akufo-Addogovernment had planned to exploit the current economic crisis facingthe developed world by encouraging Ghanaians living abroad to turntheir attention and savings back home for greater returns and helpdevelop the economy. Getting into the last quarter of 2008, Ghana’sstock market was offering the best returns on investment worldwide.

The cedi was relatively stable, interest rates were falling across thevery countries from which most of our inward remittances come. Planswere already afoot to take the Homecoming Summit of 2001 to anotherlevel – this time organising, as well, road shows across thosedeveloped countries to lure more Ghanaians to come and invest theirsavings home. So, what has stopped the Mills government from doing thesame? Is it for lack of ideas or for fear of lackadaisical patronage?

Since 1555 when John Lok, a London merchant, brought five Fantes fromthe town of Shama, in what is today the Western Region, to London to betrained as interpreters in order to assist England’s trade with thewestern coast of Africa, the economic ties between Ghana and the West,though chequered, continues to grow, with the West quick to exploit ourweaknesses and lately, Ghanaians pouncing on migration loopholes for a‘better life’ in the West.

Currently, there is an opening of a different kind in the West causedby the trillion dollar banking crisis. The developed world is worriedthe economic crisis may trigger deflation. Economies with deflationdeteriorate rapidly because people refuse to spend money knowing goodswill fall in value. So a jargon frequently used by the mass media thesedays is quantitative easing. Otherwise known as 'printing money',central banks, such as 'the old lady of Threadneedle Street', haveembarked on flooding their domestic economies with new cash in the hopeof boosting spending.

According to the Bank of Ghana, the money transfer inflows for themonths of October, November and December of 2008 were $654.8 million,$608.0 million, and $990.2 million, respectively. Of the totaltransfers for 2008, $1,678.6 million (or 19.2 percent) accrued toindividuals, compared with $1,660.3 million (24.1 percent) in 2007.Private inward transfers for January 2009 alone amounted to $660.5million. Imagine if just 50% of this went directly into domesticsavings?

Nearly 4 million Ghanaians are estimated to be living abroad – that’sabout an additional 15% of Ghana’s population of approximately 23million people. According to the Ghanaian High Commission in the UK,around 1.5 million Ghanaians live there, with 850,000 of these based inLondon. Compare this to the 1961 UK Census which identified 10,000people born in Ghana then living in the UK.

Even if 50,000 of the Ghanaians in London alone are persuaded to invest£100 a month directly in financial instruments in Ghana for the next 12months, that adds up to £60 million. Replicate that in mainland Europe(Germany, the Netherlands, Belgium, Italy, Spain, France etc) and theUSA, and we are talking about very serious money here.

It can be a win-win situation for Ghana and Ghanaians living abroad.They don’t need to plan moving back home to be attracted by such ascheme. Returns on investments here are nominally 1,500% more than whatyou get in a similar instrument in the developed world. Ideally, aforeign-based individual investor can always take out their money,convert it (back) into foreign currency and spend it there, if theylike. However, with inflation at a five-year high and a fast-weakeningcedi, the danger is that the typical 25% yield that the financialcompanies may be offering on a 90-day T-bill is likely to be eatenaway, especially by devaluation.

Yet, if such a programme is well-organised to mobilise huge patronage,the surge in the inflow of foreign currencies to buy the cedi can helpprop up the local currency, thereby curtailing import-driven inflation.So what’s the Mills government waiting for? Just take a closer look atthe opportunities that the credit crunch adversity presents to us.

The European Central Bank cut its key interest rate (the minimumrefinancing rate) from a current level of 1.50% to an all-time low of1.25%. The interest rate, which is used during weekly ECB refinancingoperations, is the barometer of lending costs in the 16 countries thathave adopted Europe's single currency. Accordingly, German benchmarkinterest rate is now at 1.25%. In Sweden, which continues to use theKronor, interest rates have fallen from 3.9% last year to 2.1% thisyear, expected to recover slightly to 2.2% in 2010.

In the US, the Federal Reserve in January pledged to keep interestrates at "exceptionally low levels," and use "all available tools" tojolt the US out of recession. It reduced official interest rates to arange between 0% and 0.25% on 17 December and has maintained it thisyear. Japan made a similar cut, down to 0.1% in December.

In the UK, the Monetary Policy Committee kept rates on hold in April.The bank rate was cut in early March from 1.0% to 0.5%, with the BoEsignalling it will now rely on aggressive quantitative easing with thehope of stimulating the economy. What this means is that lending andsaving rates in Britain, where over a million Ghanaians live,apparently, should remain unchanged for at least several months andpossibly well into 2010.

To understand better how things have changed: In September 2008, the UKbank rate was 5% per annum. It went down from 4.5% in October to 3% inNovember, (the biggest bank rate cut since 1981).

The bottom line: – you cannot expect to earn more than 2% on an18-month certificate of deposit (CDs), such as Treasury Bills. In theUS, the top-paying CDs, if you are lucky will fetch you 2.79% APY(annual percentage yield), from Northeast Community Bank and 2.71% APYfrom State Farm Bank.

Soon, you’ll have to commit your savings for at least 36 months in theUK or US to stand any chance of earning 3.0% on a savings deal. Forexample, with MetLife Bank, Bridgewater, New Jersey, which boasts thesixth best rate in the US, you have to deposit a minimum of $5,000 toearn 1.34% interest per annum! Intervest National Bank in New YorkCity, was the last bank offering a 3.0% APY on 30-month CDs.

Ghanaians in Europe, typically leave their money in an ordinary savingsaccount, in the old Building Societies. Today, they will be lucky toearn 1.5% in APY or AER (annual equivalent rate). Anglo IrishCorporation Bank, which is offering some of the best yields in Europe,is only promising a gross of 2.752% on a 3-5 year fixed rate bond.

In March 2003 when our High Commissioner in London, Isaac Osei, set upthe ‘Five Pounds No Balance’ fund which raised money for the purchaseof basic equipment for the Ghana Police Service, several Ghanaianindividuals and communities in the UK and Ireland donated to the fund.What will stop the current administration from initiating aself-interest investment promotion for Ghanaians abroad?

In July 2001, the Ghana Investment Promotion Centre, with the supportof Akunu Dake, Kwabena Antwi, Stephen Asamoah Boateng, Ken Ofori-Atta,Dan Boakye Agyemang and others, organised the ‘Home Coming Summit’ –the first ever summit of Ghanaians living abroad.

In his message at the summit, Kofi Annan, UN Secretary General at thetime, said the Homecoming Summit offered an excellent opportunity forexpatriate Ghanaians to join hands with compatriots at home to seek newways to advance the country's development.

Dan Agyemang, a lawyer in California at the time representing theemigrants, saw the summit as an opportunity for a dialogue with theircompatriots and government “about moving the country forward since mostGhanaians abroad have acquired vast experience, resources and contactsthat could and would be brought to bear on national developmentefforts.”

Ken Ofori-Atta, Executive Chairman of Databank, who spoke on behalf ofGhanaians who have returned home, said the nation was in crisis and noone could re-build it except Ghanaians, both at home and abroad.

Mr Ofori-Atta, who received a standing ovation at the time, said “Ghanahas a destiny with greatness - not one of squalor, poverty, illiteracyand moral decay, but one of peace, prosperity and progress.” He urgedpotential homecomers to be willing to endure setbacks, risks andhardships; be willing to sacrifice to pay the price for nationalgreatness and to regain leadership in Africa.

Today, where is that ‘I Believe in Ghana’ inspiration? Where is that ‘Can-do’ spirit? Who is thinking big?

In April 2003, the Non-Resident Ghanaians Secretariat (NRGS) waslaunched in Accra to co-ordinate all activities and serve as the centrefor all programmes and issues involving Ghanaians living abroad. TheGIPC and the office of the National Economic Dialogue established thesecretariat to be headed by Mr Kwabena Antwi, one of the initiators ofthe Homecoming Summit 2001. President Mills has a structure to use.

Mexico, which has more than 10% of its 107 million population living inthe US, is seeking to cash-in by offering higher returns for US savers.Do our current leaders have the confidence to do same?

The author is the Executive Director of Danquah Institute, a freemarket, centre-right think tank. Contact him on: qanawu@gmail.com

Send reply to this email instead: qanawu@gmail.com Asare "Gabby" Otchere-Darko Executive Director Danquah Institute 3 Dadebu Close Nyaniba Estate, Osu Accra, Ghana Tel: +233 21 782878 +233 21 769385/6 +233 21 771371 Fax: +233 21 782906 +233 21 771373 Cell: +233 26 4314312 +233 28 4314312 +233 24 4314312