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Although energized by recent events and speckled with anticipated prosperity; the current business climate is still undergoing some stagnation due to capital and economic constraints. New and established businesses with no capital are finding it difficult sourcing funding due to constrained lending, reduction in trade, lack of demand for commodities and reduction in remittances. Despite this shadow of current global trends, Ghana commands an economic twist due to its ever growing business and investment opportunities, untapped resources , stable governance and strategic location; all of which are promised to overcome the under achievements of the economy.

 Auxiliary services to the oil and gas industry are evident and within grasp; Construction is still and will continue to be a promising sub-sector; Goods and Services to the Mining Sector represent a significant opportunity; ICT is simply wide open for opportunity and Agriculture, although still underrated and not fully exploited; arguably commands the most potential returns to entrepreneurs and to the economy as a whole.

Insurance companies are becoming more visible and it seems like finally the market is embracing the business culture of the insurance industry. Paying attention to economic cycles, the anticipated growth of the economy is keen on accommodating a boom in the Financial Services Industry. With approximately 75% of money circulating outside banking institutions there is much to re-consider when analyzing market and economic indicators and the untapped potential within the Financial Services industry. Despite risk factors associated with the SME industry, there is great investment opportunity with proper risk mitigation and management, taking into consideration; approximately 85% of economic operators in Ghana are SME’s. With opportunities evoking from all sectors, strategic investment and business setup is encouraged, nevertheless the utilization of Business Service Providers must be considered before engaging potential opportunities to save time and resources.

In our next edition The Bridge Report will focus on key opportunities in Agri-business with special interest in the Grain Industry in Ghana, its opportunities and also current land issues and the extent to which they affect businesses and investments in Ghana.

New securities market to rescue SMEs
Unrewarding struggles to acquire costly bank loans by small Ghanaian businesses will soon be history as the process of formalizing the country’s Over-the-Counter (OTC) markets makes steady progress.

The Financial Intelligence (FI) has been told that Compushare Afridaq Consultium, consultants to the project have submitted a final draft on rules and regulations for the new OTC market to the regulator of the securities industry, the Securities and Exchange Commission (SEC), for onward review.

Sponsored by the World Bank as part of the country’s financial sector reform programme, the process of streamlining, regulating, and formalizing activities on OTC markets, otherwise known as unlisted securities market, is meant to offer an alternative capital raising platform for SMEs and to formalize the conduct and regulation of the existing over-the-counter securities market

The OTC platform, a segment of the capital market, is also expected to groom businesses for eventual listing on the Ghana Stock Exchange (GSE).

The new platform will enable companies with or without a financial history to raise cheaper sources of finance via the capital markets.

For starters, all that will be required is a good business plan that clearly shows the prospects of a business idea. A team of accountants, finance and legal experts would study the business plan and develop a prospectus, after which the company will be permitted to raise capital from the public.

Venture Capital Finance Companies also stand to benefit immensely from the platform, facilitating their exit from companies they support.

The team of consultants, made up of capital markets experts from the United Kingdom, US, South Africa and Ghana are said to have been highly impressed by feasibility studies into the existing over-the-counter securities market, which is dominated by rural and community banks, saying that it provides the nucleus for the start of the new OTC platform.

“We have the Apples and Microsofts in Ghana”, one of the consultants is quoted as saying in apparent reference to the success story of US big shots that began their rise to success on a similar over-the-counter platform, the Nasdaq (National Association of Securities Dealers Automated Quoting System) that was set up to groom young companies for the New York Exchange (NYSE).

The Securities and Exchange Commission will soon hold consultative workshops with stakeholders including SMEs after which the final draft of rules and regulations will be prepared. Rural and Community Banks, Association of Ghana Industries (AGI) members, and several industry groupings that have more SME memberships are said to be key stakeholders whose participation will be sought.

The consultants, the FI has gathered, have rooted for the establishment of a demutualised, Self Regulatory Organisation (SRO) independent of the Ghana Stock Exchange (GSE), whose shareholders could include Government, Brokerage Houses, the GSE and individual investors.

Even though the OTC market would be allow listings by companies of various sizes and from varied backgrounds of activities, companies on the existing OTC platform will be the first to list as they already have a relatively organised shareholding structure.

The recent impressive showing of 20 of Ghana’s over 120 rural banks that got mention in the Ghana Club 100 indicates the huge potential these unlisted rural banks have, an opportunity to create wealth for its stakeholders, and companies such as Shell, National Investment Bank and Donewell Insurance have what it takes to push the market to greater heights.

The absence of a trading platform creates liquidity problems and does not allow for effective share price discovery mechanism.

The Securities and Exchange Commission has said it will issue new licenses to OTC market operators and this is expected to create more job avenues.

The FI can say that companies that have issued shares on the OTC market far outnumber those listed on the Ghana Stock Exchange, and the attraction has been that there are currently no regulations for compliance on the market, and their private offers are free from scrutiny by the regulators of the securities market. Investors are however losers as they have no protection and disposing off one’s shares is difficult.

Financial Intelligence (Charles K. Amoah)

Business entities engaged in productive sectors within Ghana’s economy are qualified for partnerships with investors in the Diaspora, under the Bridge Investment Development (BID) program.

The Bridge Investment Development (BID) program, an initiative of the Inter-regional Bridge Group (IBG), is aimed at supporting growth and development within the country; and actively engaging the African Diaspora in the development of the country. The program promotes entrepreneurship and innovation among Ghanaians by utilizing Diaspora Coalitions, strategic networks and resources, all in a bid to bring about transformational development within various sectors of the nation’s economy. It facilitates the use of fixed capital, information and technical expertise through its pool of members to partner potentially merited Small and Medium sized Enterprises (SMEs).

The World Bank’s recently launched initiative on Mobilizing the African Diapora for Development in support of the African Union (AU) called on the need for the “the Diaspora to build on ongoing efforts via a blended strategy of “virtual” participation; short, medium and long term placements; return and retention; and institutional partnerships and networks”.

The call by the World Bank supports the BID program, which utilizes existing multilateral relationships between African Diapora countries to jumpstart active participation in Ghana’s development.

Ghana has been selected as a Region of Focus (ROF) for this program based on available conditions in the country which are paramount in successful project implementation.  These conditions include economic stability, strong potential growth in exports and capital investment, ability to sustain business networks and strategic coalitions. Research conducted by the Inter-regional Bridge Group (IBG) into market opportunities across various sectors of the economy puts


Ghana ahead as a safe investment zone with tremendous opportunities for growth in projects, contracts and procurement.

The BID program also covers individuals with expertise in viable sectors of the economy through collaboration and knowledge sharing with other investors to grow their businesses. IBG exploits innovative and gainful projects; combining research findings and member assessment to initiate projects via the collaborative efforts of Private Sector Development (OPSD) under umbrella banking institutions.

As part of the program, IBG would provide advanced capacity building skills for local businesses within the country. This would enable local businesses acquire the relevant expertise that would ensure successful international partnerships.

Recent research published by the Centre for the Study of Financial Innovation (CSFI) in the Banana Skins report suggests vibrancy in the micro-finance sector with strong fundamentals and a solid, reliable and growing client base, in spite of inherent risks in rising non-performing loans, shortages of liquidity and funding.

“Remaining focused on longer term issues of strong management, governance and asset liability management capacity remains crucial for the future”, says Elizabeth Littlefield, Chief Executive Officer of the Consultative Group to Assist the Poor sponsors of the research.

To meet this future requirement, custom financing solutions that range from basic collateral to sophisticated capital incubator financing would be made available for local businesses as part of the BID program. Drawing from its expertise in contract management services; facilitation of procurement initiatives, business relationship management and project implementation services, IBG seeks to create strategic partnerships with Small to Medium-sized Enterprises (SMEs) within the productive sectors and Diaspora investors. The combination of these comprehensive management services would play a significant role in meeting the various needs under the program.

This is expected to solve problems of inadequate funding for projects, informational gaps, reduce the high cost and risk associated with doing business as well as meet the growing demand for project implementation capacities. The program seeks to add value to businesses using knowledge, technical expertise,


capital, transparency and accountability as keystones towards sustainable development within the country.

Chief Project Coordinator for IBG, Ato Kwame Bonnie explains that the business model under the SME partnership and funding stake “incorporates a strategy that measures the needs analysis of an SME business to the return expectations of the pool of members. We understand the need to balance risk and opportunity, which is why the BID program identifies itself with the appropriate crop of SMEs”, he adds.

“Our interactive website, includes standards-based web resources designed to provide information and enhance communication among our stakeholders. It provides an avenue for local businessmen to be a part of the program by exploring a collection of interactive resources”.

Mr. Bonnie believes “the BID program presents a unique platform for Ghanaians to respond to President Obama’s call for a responsibility that can only be met by Africans, one that would solidify Africa-Diaspora partnerships in building Africa’s capacity for transformational change”.

Investment projects under the Bridge Investment Development (BID) program are categorised under the variable tenure series which spans 12 to 36 months and the fixed tenure series which usually runs for 36-60 months.




Foreign direct investment (FDI) in its classic form is defined as a company from one country making a physical investment into building a factory in another country. It is the establishment of an enterprise by a foreigner. [1]Its definition can be extended to include investments made to acquire lasting interest in enterprises operating outside of the economy of the investor.[2] The FDI relationship consists of a parent enterprise and a foreign affiliate which together form a multinational corporation (MNC). In order to qualify as FDI the investment must afford the parent enterprise control over its foreign affiliate. The IMF defines control in this case as owning 10% or more of the ordinary shares or voting power of an incorporated firm or its equivalent for an unincorporated firm; lower ownership shares are known as portfolio investment.[3]

Well said! The question is to what extent is the contribution of FDI retained within the country as opposed to investments by a Diaspora Investor.


Creating Wealth- In a era of Recession
This is a very, very challenging time, an exhilarating time… Assuming you survive, we’ll all look back at this as one of the great, great times to be an investor.”
(Mark Patterson, Co-founder & Chairman of Matlin Patterson Global Advisors, USA, Reuters Report, cited in Daily Graphic 18 September Edition, p57 2008)

Recent reports quoted by BBC show that even the world’s richest and investment gurus like Warrent Buffet and Bill Gates have suffered significant losses in their investments, following the stock market meltdown on the Wall Street. The ICT magnate, Bill Gates’ has had his fortunes declined by $18bn to $ 40bn while Mr. Buffet, who until this year was the world’s richest person, lost over $25bn to $37bn! Consequently, he has slipped to the second position on the Global Billionaires’ Rich List.

The IMF Director, Dominique Strauss Khan was also reported in the same report cited above as saying that “The worst of the financial crisis may still lie ahead and more major financial institutions may face trouble in coming months.”

In the midst of the gloom, lull and losses in financial markets, it seems to go against the grain of logic to suggest that there could be any attractive opportunities for individuals to create wealth. Indeed, for many readers of this article, it may even sound paradoxical, if not absurd, to propose that the world will look back at the current global recession, sometime in the future and confess that it was “one of the great, great times to be an investor” as implied in the above quotation.

Global Markets Recession Since the middle of 2008, financial markets all over the world have seen a precipitous decline for reasons which are, perhaps, no longer a secret: Poor lending by banks (sub-prime mortgage lending crisis) to non-credit worthy individuals, leading to colossal bad debts on the books of many banks. This eventually translated into losses for investors, mainly in the developed markets. There have been several casualties since then - The notorious collapse of investment banking giants like Lehman Brothers and Merrill Lynch are too fresh on our minds to be forgotten. Millions of people in the developed markets have also lost their jobs and are a now living on the margin.

Consequently, financial markets across the world have been under enormous stress. Perhaps, the world has not seen such a crisis since the Great Depression of the 1930’s, during which the Wall Street fell by over 90%! As at the end of December, 2008, most capital markets in developed markets recorded negative performances (China,-48.71%; Italy, -54.13%; USA, -38.58%; Japan, - 13.64%, see Figure 1 below). In practical terms global markets lost over $ 30 trillion in 2008!

Fig. 1:

Source: Databank Research

African Markets in a Correction… In 2008, African stock exchanges were generally bearish, posting an end of year return of -15%). As at the end of December, 2008 only four African markets (Ghana, Tunisia, Malawi and Tanzania) out of 15 capital markets, made positive gains. Since the beginning of 2009 to date, all African equity markets are in the red, save for Tunisia and Morocco.

It is instructive to emphasize, however, that the current declines in African markets and, particularly, that of Ghana are largely the results of ‘market corrections’ (downward revision of prices of stocks in line with their perceived intrinsic value). Share prices on African stock exchanges have been on a consistent 'bull run' (upward movement) for the last 5 years until mid 2008. Thus, it can be safely asserted that most African markets are not yet in a recession. According to economists a ‘recession’ is marked by two quarters (6 months) of negative growth. But to the man in the street, it is a period of job losses, home repossessions, wide fluctuations in the stock markets etc.

Off course, it cannot be denied that the current downturn in African markets has been further accentuated by the global financial crisis: The fall in demand for shares by investors, especially, institutional fund managers from the developed markets, has in no small measure dampened ‘bids’ (demand) and increased ‘offers’ (supply) of shares. This imbalance in demand and supply, coupled with the overvaluation of most stock exchanges in 2008 have all conspired to bring about downward in slide African markets. Not surprisingly, most capital markets in Africa, including the Ghana Stock Exchange (GSE) have been on a decline with an average year- to- date (as at 13 March, 2008) fall of -18.2% in dollar terms (Ghana:-20.78%).

…And Stocks have Become Attractive From all indications, the market corrections in global markets are expected to continue up to the end of 2009. It may, however, interest investors to know that most stocks now have attractive valuations and are expected to become cheaper as prices continue to fall. The Price-to-Earnings (PE) ratio of African bourses, which is an indicator of the relative attractiveness of stocks, has fallen from an average of 18 in mid 2008 to 10 as at 13th March, 2009. In order words, the average prices of stocks have fallen by over 44%! In the specific case of Ghana, the PE of the GSE has declined from 21 to 12 over the same period. Interestingly, many investors are selling off their stakes in shares and investing in Fixed Income instruments, which are currently providing attractive yields.

Tips for Investing Conservative portfolio management philosophy dictates that it is prudent for investors to consider investments in Fixed Income securities, like Treasury Bills, as a complement to shares to reduce risk. But keeping all investments in short-term instruments or avoiding investments in the stock market for fear of losing funds is not always a smart investment decision. Without doubt, it is prudent to reduce investments in very high risk assets, but the timing of such decisions, and which assets are disposed off are crucial - We must avoid throwing the ‘baby away with the bathing water’! Moreover, one needs also to be careful where one invests. In general, industries which provide non-essential commodities and services have a tendency to under perform sectors which offer essentials like household items and food. For example, it is expected that sellers of basic and affordable foods and discount retail shops will make more money in a recession as demand for these items are relatively inelastic. Investor in real estates may suffer low return on investment as demand falls in a recession but it may be the best times to acquire landed property at lower prices.

Making Money in Stock Markets According to Benjamin Graham, ‘The Father of Value Investing’, value is obtained by buying assets at lower prices than their real value as captured in the quotation below: “Price is what you pay; value is what you get. Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”

Thus, in capital markets, wealth can be created when investors acquire fundamentally sound assets at prices lower than their intrinsic or fair value.

Some readers may acknowledge that shares listed on the GSE and equity mutual funds like Epack Investment Fund, whose prices are currently declining, have been in similar downturns before (1996, 1999, 2005), when Treasury Bill rates were higher but through it all, the capital market and Epack have proven to be better performers over the past twelve years, as shown in Figure 2 below.

Figure 2:

Source: Databank Research In particular, during the past twelve years, verifiable records show clearly that EPACK, an equity mutual fund investing in Ghana and 10 other African Stock Markets has far outperformed Government Treasury Bills by over 3 times! In addition, empirical market data in Ghana further supports the ability of good quality stocks to generate higher returns than short-term and less risky instruments like Government Treasury Bills and dollar substitution investments even in a 3-year cycle.

But Not All Stocks Generate Wealth! But it is equally correct to admit that not all stocks which dip during market declines recover well in time to compensate investors with a real return on investment. Indeed, records show that some investors elsewhere, in markets like Japan, France, Germany and Spain have had to wait for over 50 years to earn real positive return on their investments! And perhaps, one need not go far, some Ghanaian investors have not had any romantic experience with investments made in stocks like AngloGold Ashanti in the 1990’s.

Thus, to create wealth in the stock market, it is crucial to purchase GOOD QUALITY shares or funds at the lower end of their price trajectory. By good quality, I mean a stock or fund must have a high potential to generate high earnings, and not be burdened with too much debt. Unfortunately, most investors tend to move with the herd, and rather seek comfort in loss minimization rather than purchase under valued long-term assets which may have future prospects.

Contrarian Approach It is all well and good to cut losses in investments which have no future, but it is equally important not to ‘close the stable after the horses have bolted’: The ordinary investor may not know when to enter or exit an investment. But there are very simple qualitative indicators using insights from the social-psychology of the investment market - When you hear ordinary investors rushing to take positions in rising stocks and almost every body is interested in buying, it may be too late! Astute investors tend to watch the stampede of the herd, and take the opposite direction - Otherwise known as the CONTRARIAN APPROACH. This approach is obviously risky, but remember the faint-hearted never won a fair lady!

All indicators point to a very challenging year for the global economy. In particular, Africa and Ghana are expected to experience a slow down in donor inflows, export earnings and remittances. These could lead to instability, as local currencies depreciate, governments borrow more from domestic sources, and raise interest rates. Investments in Treasury Bills and currency substitution would become more attractive options in the short-term for most investors, but wealth is not created merely by holding funds in safer assets.

The current meltdown in global financial markets and the looming recession in Africa could, however, be fine moments for some smart investors to become millionaires as some good assets are trading at very steep discounts. These smart investors will be those who can tread the narrow path, opposite to direction where most investors are thronging, and seize strategic positions in undervalued but promising investments. Only a few may do this. And for these, I am very confident they can create wealth, even in a recession.

By: Dr Kwabena Frimpong The Writer is a Vice President of Databank Asset Management Services Limited.

Slower growth in developing world in 2009
As global economy deteriorates, World Bank predicts sharply slower growth in developing world in 2009; weak recovery in 2010

Washington, DC, March 31--- GDP growth in the developing world will slow to a projected 2.1 percent in 2009 from 5.8 percent in 2008, according to World Bank estimates released today. The Bank has more than halved its November 2008 projection of 4.4 percent growth in developing countries in 2009, reflecting the rapid deterioration of global financial and economic conditions.

The new Global Economic Prospects update also notes that global growth is expected to contract by 1.7 percent this year. This would be the first decline in world output since World War II. GDP is projected to decline by 3 percent in OECD countries and by 2 percent in other high-income economies.

The World Bank?s baseline forecast predicts growth momentum to turn weakly positive in 2010 as financial-sector consolidation, lost wealth and knock-on effects from the financial crisis continue to dampen economic activity. However, the pace and timing of the recovery is still highly uncertain.

?Across the developing world, we see that conditions of recession are affecting the poorest people, making them even more vulnerable than before to sudden shocks?but also reducing opportunities available to them, and frustrating their hopes,? said Justin Yifu Lin, World Bank Chief Economist and Senior Vice President, Development Economics "This could reverse years of progress, and is nothing less than an emergency for development.?

In the update, the Bank emphasized that even though growth should rebound?albeit slowly?economic activity will remain depressed, with unemployment and significant sectoral adjustment persisting for the next two years.,

?Even if global growth turns positive again in 2010, output levels will remain depressed, fiscal pressures will mount, and unemployment levels will rise further in virtually every country well into 2011,? explained Hans Timmer, Manager, Global Trends, in the World Bank?s Development Prospects Group.

World trade in goods and services is expected to fall 6.1 percent in 2009, a historic decline. At $47/bbl in 2009, oil prices are projected to be more than 50 percent below their 2008 levels. Non-oil prices are also expected to remain low, some 30 percent lower than in 2008.

Fiscal balances are projected to deteriorate sharply in developing countries in response to weaker revenues, higher borrowing costs, and larger transfers to maintain social safety nets. This could be particularly worrisome in developing Europe and Central Asia, where trade and production have severely contracted, the private sector is highly vulnerable, and social safety nets have broad coverage.

The developing world?s need for external financing is likely to increase to $1.3 trillion in 2009, including current account deficits and principal repayments on private debt coming due. With declining capital flows, this would generate a financing gap of between $270 and$700 billion. The largest funding gaps are in Europe and Central Asia, Latin America, and Sub-Saharan Africa.

World GDP growth is expected to increase to a modest 2.3 percent in 2010, but if a balance of payments crisis were to emerge within a developing region, it would prove difficult to contain and would hamper global recovery. Another risk is that the recovery in credit markets may proceed more slowly due to continued financial sector problems, which would prolong the period of capacity adjustment in the real sector and extend the global downturn.

Regional growth forecasts

Europe and Central Asia has been worst affected by recent developments. GDP in the region is expected to fall by 2 percent in 2009, compared with a 4.2 percent increase in 2008. The markdown in growth for the region as compared with the Bank?s November forecast is 4.8 percentage points, the sharpest revision among developing regions.

Latin America and the Caribbean will also likely see GDP contract in 2009, although at the country level outturns may be diverse. Overall, GDP is projected to decline 0.6 percent following gains of 4.3 percent in 2008.

East Asia and the Pacific is likely to be most affected by the falloff in global investment and trade. Already this has cut sharply into industrial production and capital spending. GDP growth is expected to ease to 5.3 percent in 2009, as growth in China slumps to 6.5 percent, and several smaller economies in the region, including Thailand fall into recession.

Prospects for South Asia have been marked down to 3.7 percent growth for 2009 from earlier forecasts of 5.4 percent for 2009?and down from 5.6 percent growth in 2008. Though terms of trade have moved in the region?s favor with lower oil prices, weaker export demand is being felt sharply.

Growth in the Middle East and North Africa appears least affected among developing regions, dropping just 0.3 points from earlier projections to 3.3 percent. Reduced oil revenues and cuts in oil output will restrain GDP among oil exporters to 2.9 percent from 4.5 percent in 2008.

In Sub-Saharan Africa, GDP growth in 2009 is expected to halve from 4.9 percent in 2008 to 2.4 percent, dropping 1.8 points below earlier projections. The dramatic shift in commodity prices will have strong effects across countries.

Kennedy Fosu Public Information Services World Bank Ghana Office Tel 233 21 214 142

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