• Home
• About Us
• Archives
• Classifieds
• Photo Gallery
• Audio On Demand
• Podcast

• Africa/International
• Editorials/Opinion
• Entertainment
• Feature Articles
• General News
• ICT
• Insurance
• Investment
• Lead Story
• Politics
• Second Lead
• Sports
• Tourism

Ghanaian businesses not likely to benefit from policy rate cut – Analyst

Bank of Ghana

The Bank of Ghana cut its benchmark lending rate by 200 basis points from 18% to 16% Friday February 19, 2010. It is the second time in three years that the central bank has done so. But the country’s expectant business sector won’t benefit from the cut anytime soon, an analyst has said.

There are expectations of further cut in the interest rate if inflation continues to decline.

Ghana’s inflation has been declining. Inflation stood at 20.53% in March 2009 and it went up to 20.56% in April 2009. The rate of inflation increased for six consecutive months from November 2008 to April 2009, driven primarily by the non-food group, such as hotels, restaurants and cafes.

But in January 2010 inflation fell to 14.8% from 16% in December 2009 which was the seventh consecutive time raising expectations for a cut in lending rates, particularly from small businesses.

Speaking to ghanabusinessnews.com soon after the announcement of the cut, Sampson Akligoh, Senior Analyst at Databank Ghana said “the development is an interesting one as we all know the private sector has been calling for a cut for sometime now, because even for Ghana, our interest rate is one of the highest in Africa.”

But his concern is that “industries will not benefit immediately because there is market failure,” he said, adding that “the transmission mechanisms do not work and so we won’t see decline in lending rates of the commercial banks in line with the cut by the central bank.”

He said now that the prime rate is down and there is a reduction in treasury rates, the banks should reduce their lending rates, but that is not likely to happen anytime soon.

Mr. Akligoh acknowledged that the central bank is making efforts to remove the bottlenecks.

“We have a different situation now, we have treasury bills declining, the prime rate coming down and inflation declining. When you combine all these you should see some reinforcement for lending rates to come down,” he said.

He said industry is happy and would like to see further cut in the interest rate. However, he warned that “we must be careful not to push the economy to real negative interest rate regime because that also has implications for the expectations of foreign investors who look at our medium to long term debts and the pressure on the domestic auction market.”

In another development, the Managing Director of Fidelity Bank Ghana, Mr. Edward Effah speaking at a Fidelity Bank/GJA Soiree in Accra Friday February 19, 2010, said commercial banks cannot cut their lending rates immediately in line with the cut in the prime rate, because their lenders will expect to be paid previous interest rates on their deposits.

He however said, interest rates offered by commercial banks will go down in about six months time following the cut in the central bank’s lending rate.

By Emmanuel K. Dogbevi

 Email This Post

 Print This Story

Bank of Ghana cuts policy rate to 16%

As widely expected the Bank of Ghana has cut its policy rate by 200 basis points from 18% to 16%.

 The Governor of the central bank, Mr. Kwesi Amissah-Arthur announced the new rate at a press conference at the bank Friday February 19, 2010.

 He said the Monetary Policy Committee of the bank took into consideration recovery of the global economy, steady diminishing inflationary pressures and growing business and consumer confidence in the domestic economy to determine the rate.

Details soon.

By Emmanuel K. Dogbevi

 Email This Post

 Print This Story

Bank of Ghana to cut interest rate today

The Bank of Ghana Monetary Policy Committee (MPC) started its quarterly meeting Monday to review the performance of the Ghanaian economy.

Today Friday February 19, 2010 the MPC will meet the press at a press conference and issue a statement. And for the first time, it is certain that the central bank will announce a cut in the prime rate.

The announcement of the prime rate, has always been the highlight of the MPC’s press conferences, often overshadowing all other issues in the economy.

Earlier this year, the governor of the central bank, who will be addressing the media for the second time since he took office has given the indication that because inflation has fallen, interest rates must be cut.

As predicted in December last year when Ghana’s inflation dropped for the sixth consecutive time to 16%, January inflation fell to 14.8%.

But before now, Ghanaian banks have been jostling each other trying to cut down lending rates. The current prime rate stands at 18%, but commercial banks charge around 32% interest.

The Bloomberg News however suggests that the expected cut in the prime rate today, will ease pressure on borrowers who have defaulted on more than one in 10 loans in Ghana.

By Emmanuel K. Dogbevi

 Email This Post

 Print This Story

AngloGold Ashanti earns $228m on higher gold price

AngloGold Ashanti says it would increase its final dividend after fourth quarter adjusted headline earnings rose to a record $228 million on higher gold price and increased production from the company’s mines in Africa and South America.

A press statement issued by AngloGold Ashanti Wednesday February 17, 2010 announcing the earnings and copied to ghanabusinessnews.com says the final dividend of 70 South African cents a share is 17% more than the interim dividend of 2009 and the total dividend declaration of 130 South African cents, a 30% improvement on 2008’s final declaration.

It added that adjusted headline earnings rose to $228m, or 62 US cents a share for the three months to December 31, compared with $162m, or 45 US cents in the previous quarter. The figure for the third quarter excludes the cost of buying back hedge contracts.

Commenting, the CEO of AngloGold Ashanti Mark Cutifani said “there’s a strong level of confidence in our ability to generate cash over the long term as we continue to make improvements to the operational side of our business.”

“The increased dividend is a sign of that growing confidence,” he said.

AngloGold Ashanti has over the past year reduced net debt by a third to $868m and cut its hedge commitments by more than two thirds to 3.9 million ounces in order to increase exposure to the gold price. Now, with the financial platform in place, the company is implementing its Project ONE business improvement initiative to lower costs and increase production in coming years.

AngloGold Ashanti is one of the major global mining companies operating in Ghana.

By Emmanuel K. Dogbevi

 Email This Post

 Print This Story

Ghana wants Globacom to start operations on country’s Independence Day

The Minister of Communications says the government of Ghana is working hard to enable Globacom to launch its operations in the country on March 6, 2010, the country’s Independence Day.

“Let me assure Globacom that government is doing everything within its reach to allow for your major launch to coincide with our Independence celebration,” Mr. Haruna Iddrisu said.

The minister was speaking during a ceremony at which Globacom presented a cheque of $250,000 to the national football team, the Black Stars.

He said he had personally ordered the National Communications Authority (NCA), the National Bureau of Communications and ZTE Corporation of China to allow the 800 spectrum which will be used by Globacom to be free for the mobile provider’s use within 14 days.

But a source close to Globacom has denied that the company was planning to start operations in March. He however, told ghanabusinessnews.com over the phone that the company was planning to launch its services this year.

Globacom is one of the six mobile phone companies licensed to operate in Ghana.

In August 2009, ghanabusinessnews.com broke the news that Globacom was laying fibre optic cables in Ghana for its broadband service.
Globacom received the license to operate in Ghana in June 2008 from the National Communications Authority (NCA) in Accra. But regulatory and permit challenges have slowed it from setting up its base stations to begin operations. Ghana’s Environmental Protection Agency (EPA) recently granted it license to that effect, paving the way for Globacom to begin building its cell sites.

When the company was issued its license to begin operations in Ghana, Globacom’s management announced the establishment of its Glo-1 Submarine cable to be laid through Europe, Accra to Nigeria.

The other mobile phone companies operating in Ghana are MTN, Tigo, Vodafone, Kasapa and Zain. MTN has the biggest market.

According to data from the NCA there are 15,108,916 mobile phone subscribers in Ghana as at the end of December 2009, and about 7.5 million subscribe to MTN, according to sources within the company. Ghana has a population of about 22 million.

Meanwhile, a report by a research company, Companies and Markets published in August 2009 has described Ghana’s mobile telephony industry as one of the largest in West Africa.

By Emmanuel K. Dogbevi

 Email This Post

 Print This Story

Kosmos awards seismic reservoir contract to OHM

Texas-based oil and gas company, Kosmos Energy and stakeholder in Ghana’s oil industry has awarded a seismic reservoir characterization study contract to OHM Rock Solid Images.

The Rigzone reports that the study will cover the Odum field, offshore Ghana on the West Cape three Points Block. A 3D seismic data volume covering 500km2 will be inverted for the reservoir properties and calibrated to the Odum-1 and Odum-2 discoveries it adds.

The two discoveries are approximately 18km east of Kosmos’ Mahogany-1 exploration well and the Jubilee oil field.

Senior Vice-President of Rock Solid Images, Gareth Taylor, was pleased with the deal, said “we look forward to the challenge of applying our robust and repeatable rock physics-driven seismic reservoir characterization workflows to the Odum oil discovery.”

Ghana’s nascent oil and gas sector is seeing a proliferation of major oil and gas industry players in the country, all seeking to have a stake in what is expected to be one of the very important oil indutries in the world in the next six years, according to sources close to the industry.

Commercial production of oil in Ghana is expected to begin by the end of the year.

By Emmanuel K. Dogbevi

 Email This Post

 Print This Story

Olam to invest $31.5m in Ghana wheat mill

Global agricultural products supply chain management and food products company, Olam says it will invest $31.5 million to establish a wheat mill in Ghana.

A report by Channel NewsAsia says the wheat mill will be situated in Ghana’s main port city of Tema.

Olam, which is headquartered in Singapore, expects to start building the 500 metric tonne per day mill in March 2010 and actual operation will start by September 2011. It aims to achieve 115,000 metric tonnes in annual production in the first three years, the report says.

Ghana, according to Olam is a large market for wheat flour in West Africa. Ghana consumes about 270,000 tonnes of flour annually, it added.

Olam, the report indicated also said wheat milling is an attractive opportunity because consumption is expected to increase by 7.5%  per annum over the next five years.

When established, Olam will be the third flour mill in Ghana. There are already in existence, the Takoradi Flour Mill and Irani Brothers Ltd.

While wheat is not grown in Ghana, bread made from wheat is a very big part of Ghanaian diet.

When ghanabusinessnews.com made phone calls to Olam’s office Friday morning for more details, the phone was not answered.

By Emmanuel K. Dogbevi

 Email This Post

 Print This Story

Private sector investment essential to bolster Africa’s infrastructure – Laing

The importance of private sector investment in expanding Africa’s infrastructure has been emphasized.

Speaking at the Africa Investment Forum in Accra, Ghana the CEO of CDC Group Plc, Richard Laing said Africa’s infrastructure needs in critical need of investment. He said private sector involvement is key to strengthening the continent’s infrastructure.

“Africa’s infrastructure requires around US$93 billion a year, when you realise the current spend is less than half that at around US$45 billion a year, you realise just how much scope there is for private sector investment and expertise,” he said.

He therefore called on African governments to create the atmosphere conducive for investment in the sector.

Africa continues to face challenges in infrastructure development. For instance, Africa requires about $46 billion to meet its power needs.

Writing in an article last year, the World Bank Vice President for Africa, Obiageli Ezekwesili said Africa’s economic growth and poverty reduction are closely linked with the quality of its infrastructure; its power, transport systems, water supply and sanitation, and its ICT networks.  In the current economic climate, finding the financial resources for Africa’s huge infrastructure needs is an enormous challenge. But without those resources, African governments will find it very difficult to catch up with other regions of the world. The continent’s institutions and international partners must work together to overcome this challenge and quickly.

By Emmanuel K. Dogbevi

 Email This Post

 Print This Story

Ghana inflation drops to 14.8% in January 2010

Ghana’s inflation continues to drop as predicted in December last year when the inflation dropped for the sixth consecutive time, making the latest drop from 16% in December 2009 to 14.8% in January the seventh consecutive time.

The business community in Ghana especially has been clamouring for a drop in the prime rate following drop in inflation. The current prime rate in Ghana is 18%. The community argues that the high cost of borrowing is crippling businesses in the face of the yet to be fully recovered from global economic crisis.

The Bank of Ghana Monetary Committee (MPC) announced it will start meeting Monday February 15 to review the economy and it is expected that at a press conference to follow on Friday February 19, a new reduced prime rate is expected to be announced.

The Bloomberg news citing an email from Razia Khan, Chartered Bank’s regional head of research for Africa said Slowing inflation is “reinforcing our view that the way is open for the MPC to cut interest rates by at least 100” basis points.

By Emmanuel K. Dogbevi

 Email This Post

 Print This Story

Ghana has not blocked Kosmos-ExxonMobil deal, but threatens to if…

Ghana is said to have denied blocking the deal between Kosmos Energy and ExxonMobil, but threatens to do so if the parties do not abandon the deal, the Reuters reported quoting unnamed government sources.

The report citing an earlier report by the Wall Street Journal Tuesday  which said that the government had blocked the deal, indicated that the government of Ghana has written to ExxonMobil about the deal but had not gone beyond repeating the threat.

ExxonMobil was reported to have offered $4 billion for Kosmos Energy’s 30% stake in Ghana’s largest oil field, the Jubilee oil field, but the approval of the government of Ghana which could have sealed the deal was never given, as the government expressed interest in buying the stake.

But a source close to the Ghana National Petroleum Corporation (GNPC) has told ghanabusinessnews.com that Kosmos Energy broke the law when it opened its data room secretly to ExxonMobil without the prior consent of all the parties in the agreement as the laws of Ghana stipulates.

According to the terms of the agreement for all the parties with stakes in the field, any one party that decides to sell its stake should give one party within the deal the first option.

Asked why he thought Kosmos Energy would breach the term of agreement, he said, “my understanding was that Kosmos did that to speculatively raise its bid higher, so that in case one of the parties shows interest in the stake, it couldn’t offer a lesser bid.”

The Jubilee oil field is the largest oil field to be discovered in West Africa in the last 10 to 15 years. According to Tullow Oil, the majority stakeholder, it has 17 wells.

Commercial production of oil in Ghana is expected to begin this year.

By Emmanuel K. Dogbevi

 Email This Post

 Print This Story