I. Introduction

It will be dishonest to jump into quick conclusion that, the investment confidence of Ghana’s economy has grown worst with this current government as at 2019.

Generally, the average performance of Ghana’s economy had not made it a natural destination to attract lucrative investment for quality industrialization, except certain government initiatives negotiated with some special incentives to attract certain targeted investment partners.

When poor policies drives an economy for a longer period of time to make it defunct, the implication is, it makes the government the only Institution in such an economy to have some level of credibility and trustworthiness in-terms of guarantee to facility payment from external investment, while in that same economy it private sector industry is perceived to lack credit worthiness and in some extent perceived as toxic assets to be offered a better investment deal comparable to what will be offered to it government.

The conundrum, Ghana has always find itself in. As at March 2019, Standard and Poor’s rated the investment environment of Ghana as “B” just as Fitch, while S&P defined the outlook as developing, Fitch defined it as stable.

Observing a lot of misinterpretation of this grading assessment per the economic outlook on the media front of Ghana, the article will briefly elaborate how this grading assessment and interpretation is carried-out in the investment community.

Long term ratings from the highest ‘AAA’ to the lowest ‘D’ are grading methods of S&P and Fitch, while Moody’s uses ‘Aaa’ as the highest to the lowest ‘C’.

The ratings of these three credit agencies are categorized into two; based on the level of credit risk of the country, which are,

1. The first Investment category grading is for lower levels of credit risk countries, which comes with the alphabets ‘AAA’ to ‘BBB’ as an assessment method of S&P and Fitch, while Moody’s uses ‘Aaa’ to ‘Baa3’.

2. The second investment grading category is for higher levels of credit risk countries and do term such a grading “Speculative”, which uses ‘BB’, ‘B’ and below as alphabetical assessment by S&P and Fitch, while Moody’s uses Ba1 and below.

The term ‘Developing’ outlook used by S&P indicates an observed strong fundamental trend with a conflicting elements of both positive and negative associated to Ghana’s economy.

We must acknowledge that, credit watches do not include ‘Stable’ as an outlook in their analysis because they believe it an event-driven, which denotes a high probability of change.

Just to explain Fitch report for Ghana and how it is uphold externally by the Investment community. So to naively present such assessment report to indicate a better and progressive economic environment is either a propaganda tool of the politicians or some level of ignorance on-the-side of the journalists presenting it as an information to the public.

(II) The status of the private sector environment

It is empirically established, only a vibrant private sector environment do attract investment to empower economic growth. The Ghanaian private sector is struggling due to poor policy enrolment.

A kind of ‘copy’ and ‘paste’ policies with a straight jacket implementation biased towards political party in government, ignoring the fundamental indicators that drives Ghana’s economy, making it unique of its kind in the global economic market.

When policies take such approach and government in that moment lack the efficiency and productivity, as a wheel that private sector thrives on, it causes the economy to become defunct from it potential capacity.

It is a well documented fact that a vibrant private sector economy runs at the back of a strong financial industry as it engine. Therefore will be reasonable to empirically analyse the financial market of Ghana in complement to the private sector performance on it role to strengthen the credit worthiness of the country.

Since 1960 to 2017 the average credit advanced to the privates sector of Ghana by the World Bank report was 8.25% of the country’s GDP within the same period. In 2016 the value was measured as 14.4% of GDP.

An effort was made to find the credits from Banks advanced to governments, which per the IMF report was estimatedly valued at 10.38% of GDP in 2016, which Indicate a narrow gab of government competing with private sector for domestic funding in a shallow financial market.

In that same year it was observed from world bank data reports that the financial system deposits in Ghana was 25.52% of GDP.

To conduct analysis of credits advanced by the Banks to the Privates Sector and the governments in 2016 being 24.82% of GDP and the financial system deposits to the Banks coffers do establish 0.7% of GDP in 2016 as a balance in favour of the Banks, which such analysis concludes, either the Banks were being over risk conscious due to under-capitalization reasons or lacked the innovative will to exploit the full potential of the economic market of Ghana through private sector funding supports, maybe because there were easy way-out to still run their business and be profitable in Ghana.

All these figures generally indicate a poor performing financial industry, lacking the readiness and the will to support private sector, which has the qualities to drive the economy in credit worthiness, the axiom to attract lucrative investment into the economy for it development and such a blame could be rooted at the door of government policies.

III. Conclusion

As a country, if we want to have a vibrant economy, with a better credit ratings to boost investors confidence, it not just a matter of capitalization of Banking sector proposed to be a success of it end but rather taking an interest to avoid the attitude of easy way-out in doing things just for monetary returns, which is very prevalent in our economy, for instance, take a critical look into 95% of insurances policies and premium in the market of Ghana, it is just copy paste policies branded across board in different companies names, lacking proper actuary analysis into risk quantification and assessment to develop accurate premiums beneficiary and addresses the actual needs of the citizens in Ghana.

The same applies to Banks policies documented in their application forms, some legal clauses for clients to make choices to transacts with the Banks are ridiculous yet it cut across, if one is to follow such issues strictly he/she may not transact with any local Banks in Ghana, then not far away from the academic arena, analyzing some of the programme contents for students studies etc.

When we have no desire for quality and sustainability, but everything is measured in the context of how much do I stand to earn by the least possible investment efforts, then we have no option to drive our economy on a fraudulent pathway, judged externally as a system of mediocrity, hence poor ratings against the sovereign credit worthiness of Ghana.

Emmanuel Tweneboah Senzu, Ph.D.
Dean of Research, University College of Management Studies
Director of Research, Frederic Bastiat Institute, Ghana.
Tsenzu@ucoms.edu.gh