SOEs face public funding cut

Government has tasked state-owned enterprises (SOEs) to borrow on the strength of their own balance sheets and stop the over-reliance on central government for funds to execute their projects.

“All SOEs must work to fund their infrastructure projects and also ensure they pay for the projects by themselves,” President John Dramani Mahama said at the recent sod-cutting for construction of a new terminal at the Kotoka International Airport (KIA) in Accra.

There are about 36 state-owned enterprises in the country spanning trade and industry; engineering services; media and arts; the energy sector; transport; agriculture; and water and housing.

The transport sector has the likes of the Ghana Civil Aviation Authority (GCAA); Ghana Ports and Harbours Authority (GPHA); the Aviation Social Centre; Ghana Airports Company Limited (GACL); and the Volta Lake Transport Company (VLTC).

Ghana Airports Company Limited (GACL) recently secured a US$250million loan on the strength of its balance sheet, from a consortium of banks led by Ecobank Capital, to fund a new terminal at the Kotoka International Airport (KIA).

It also secured a US$150million loan from ABSA to expend on rehabilitating the Wa aerodrome, Sunyani aerodrome, and construction of a new aerodrome at the Volta regional capital, Ho.

“I wish to encourage all SOEs and corporate entities to emulate the example of Ghana Airports Company,” President Mahama said.

The 2015 budget approved by Parliament grants utilities the concession to approach the capital market -- on the strength of their own balance sheets -- to raise capital for their operations and various expansion projects.

SOEs in the power sector have indicated their preparedness to straighten out their finances to enable them attract private capital for various infrastructure developments.

The Volta River Authority (VRA) for instance signed a US$150million facility agreement with the African Export Import Bank (Afreximbank), arranged by C-Nergy Ghana Limited -- a subsidiary of C-Nergy Global Holdings (Pty) Limited, a South African- based investment advisory services firm -- to restructure its balance sheet.

The US$150million facility, secured in 2014, constitutes the first tranche of a total balance sheet restriction requirement of US$450million.
On completion VRA's working capital position is expected to improve significantly, a pre-requisite for going into the capital market.

The Securities and Exchange Commission (SEC) has been urging SOEs to list on the Ghana Stock Exchange to raise long-term funds for financing their expansion projects.

State-owned alcoholic beverage producer GIHOC Distilleries Company Limited is also being prepared to list on the local bourse, allowing the public to buy shares in the company.

The listing of one of the oldest distilleries in the West African sub-region is expected to boost its capital base so that it can increase its presence in the sub-region and remain profitable in the long-run.

Dr. Camynta Baezie, Executive Chairman of the State Enterprises Commission -- the entity with oversight responsibility for SOEs -- told the B&FT last November that: “We are in discussion with the Securities and Exchange Commission (SEC), and it is an on-going discussion.

“We have been working to ensure that we list the state-owned enterprises that are doing well on the Stock Exchange. It is not a new thing; we have done it before. We did the recommendation for listing Goil and it is going well.

“So there are a few of them that we are looking at. In particular we are looking at GIHOC Distilleries as one of the first for listing on the GSE; also allowing Ghanaians to own shares in the company.”

If successful in its bid to list, GIHOC will be joining state-owned enterprises like the Cocoa Processing Company, Goil, Produce Buying Company, SIC and GCB which have successfully listed on the local bourse.