Business24 Newspaper (May 27, 2020)

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WEDNESDAY MAY 27, 2020

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Ghanaians occupy 86% of upstream petroleum jobs Real estate industry to be sanitised under new bill → Brokers (‘agents’) to be licensed → Transactions to be reported to a Council MORE ON PAGE 3 Caption: While Ghanaian workers dominate the oil and gas industry, local companies have to settle for crumbs in major petroleum contracts due to lack of capacity

BY NII ANNERQUAYE ABBEY

More roles in the country’s developing oil and gas industry are increasingly opening up for Ghanaian employees as they emerge as the dominant workforce driving the multibilliondollar industry.

A report published by the Finance Ministry shows that as at end of last year, out of the 5,950 persons employed in the upstream petroleum sector, 5,124 were Ghanaians and 826 were expatriates. The jobs were categorised into management positions, technical roles, and “other relevant roles”.

Out of the 721 management positions available in upstream oil companies licensed by the Petroleum Commission, Ghanaians occupied 612, with the rest going to expatriates.

The 2019 Reconciliation Report on the Petroleum Holding Fund submitted to Parliament further revealed that under

technical core roles, Ghanaians employed in the hydrocarbons sector numbered 2,714, representing almost 76 percent of all employees with such job functions.

Regarding “other relevant roles” in the industry, Ghanaians accounted for nearly 100 percent of positions available.

The increasing role of Ghanaians in the oil and gas sector comes on the back of a number of legislation and policies pushed by the government to ensure the country’s resources benefit its nationals the most.

The report said that to further government’s local content agenda, the Petroleum Commission’s Accelerated Oil and Gas Capacity Programme trained five Ghanaian welders in Canada who have since passed their knowledge on to 20 other welders in Takoradi.

50,000 rice farmers GCNet shuts down to benefit from JAKF, Monday, June 1 GRIB and Alluvial partnership MORE ON PAGE 9

MORE ON PAGE 5

MORE ON PAGE 2

We cannot defer plans on AfCFTA -Ayorkor Botchwey urges African leaders MORE ON PAGE 3

Set up special fund to transform agric sector—WACCI boss

ECONOMIC INDICATORS *EXCHANGE RATE (INT. RATE)

USD$1 =GH¢5.6153*

*POLICY RATE

14.5%*

GHANA REFERENCE RATE

15.12%

OVERALL FISCAL DEFICIT

6.6 % OF GDP

PROJECTED GDP GROWTH RATE PRIMARY BALANCE.

1.5% -1.1% OF GDP

AVERAGE PETROL & DIESEL PRICE:

MORE ON PAGE 5

GHc 5.13*

INTERNATIONAL MARKET BRENT CRUDE $/BARREL

36.01

NATURAL GAS $/MILLION BTUS

1.79

GOLD $/TROY OUNCE

1,708.45

CORN $/BUSHEL

329.50

COCOA $/METRIC TON

2,394

COFFEE $/POUND:

+5.70 ($108.30)

COPPER USD/T OZ.

220.15

SILVER $/TROY OUNCE:

17.07

Copyright @ 2020 Business24 Limited.

All Rights Reserved.

Tel: +233 030 296 5297 editor@thebsuiness24online.net

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NEWS/EDITORIAL

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EDITORIAL

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Wash your hands 2

Cover your cough 3

Time for structured agric financing to cushion food security Desperate times call for desperate measures they say. The cut in supplies from our highly dependent Asian countries for almost every consumable thing as a result of the coronavirus pandemic must be seen as an eyeopener and a warning signal.

As an agrarian economy, agronomists and concerned stakeholders within the agriculture value chain, especially the smallholder farmers who make up the chunk of the sector, have long decried underinvestment to the dominant economic area.

The country’s food systems are highly susceptible to shocks and the Covid-19 pandemic is just another warning signal because there could be more devastating shocks in the future, according to the founding director of the West African Centre for Crop Improvement, Prof.

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Editorial Team Dominic Andoh: Editor Eugene Kwabena Davis (Head of Parliamentary Business & Commodities) Benson Afful (Head of Energy & Education) Patrick Paintsil (Head of Maritime & Banking) Nii Annerquaye Abbey (Online Editor) Marketing Alexander Lartey Agyemang (Business Development Manager) Ruth Fosua Tetteh (Dept. Business Development Manager) Gifty Mensah (Marketing Manager) Irene Mottey (Sales Manager) Edna Eyram Swatson (Special Projects Manager ) Events Evelyn Kanyoke (Snr. Events Consultant) Finance/Administration Joseph Ackon Bissue (Accountant)

agronomist of international repute.

Deemed as a risky area for investors, inadequate funding to farming activities remain the bane of the country’s agricultural landscape.

We acknowledge the success story of key interventions such as the government’s flagship Planting for Food and Jobs and we believe that with the right and sustained financial direction the sector, the agric sector will attract the needed youthful expertise and investments.

That’s when we can talk of a robust and revamped sector that can underpin the national socioeconomic advancement.

Ghanaians occupy 86% of upstream petroleum jobs (…CONTINUED FROM COVER )

Wear a mask

Eric Danquah.

“These are not normal times. Given that the Covid-19 pandemic is just a warning signal and there could be more devastating future events.

Ghana should take its future in its own hands and transform its agriculture to secure the future of the country as well as drive socio-economic development,” he advised.

If there is anything positive from the Covid-19 pandemic, it will be the re-awakening to the fact Ghana must leverage its vast arable resources to feed its people.

A specialised fund to serve as the financial muscle of the agrobusiness is therefore a plausible recommendation from an

Local content According to the report, the country’s effective implementation of the Petroleum (Local Content and Local Participation) Regulations 2013 is yielding the right results as the Petroleum Commission has seen a significant increase in domestic companies registered to participate in the upstream industry.

As at the end of 2019, about 800 indigenous companies had registered with the commission to supply goods and services to companies in the oil and gas industry, while the total value of contracts awarded to indigenous companies amounted to US$72.7m, and to joint ventures US$360.5m, in 2019.

Commenting on further developments in government’s quest to deepen local content in the sector, the report said a draft operational guideline for the administration of the local content fund is currently under review and is expected to be rolled out by the first half of this year.

In 2019, the local content fund, which was established by the Petroleum (Exploration and Production) Act 2016 to provide resources to support local content initiatives, accrued US$2.77m, representing 1 percent of contract sums approved by the commission in consonance with the law.

The report cited some challenges with operating the fund, which include delays

in payment of fund contributions as well as non-payment by some contractors who point to stability clauses in their petroleum agreements.

Petroleum revenue The total petroleum receipts of the country in 2019 was US$937.58m, compared with US$977.12m in 2018, representing a 4.1 percent decrease. This was due largely to a 10.2 percent decline in the achieved

price of US$63.19 per barrel in 2019 compared to US$70.34 per barrel in 2018.

The 2020 budget projected total petroleum receipts of US$1.57bn this year, but a March 30 statement to Parliament by the Finance Minister cut the estimated revenue by US$1bn in view of the crude oil price collapse following the outbreak of the coronavirus pandemic.

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Real estate industry to be sanitised under new bill

BY EUGENE DAVIS A new bill meant to sanitise the real estate industry and ensure that standards are met has been laid before Parliament for consideration and approval.

When passed into an act, the Real Estate Authority Bill 2020 will regulate real estate agency practice, the conduct of real estate practitioners, commercial transactions in real estate including the sale, purchase, rental, and leasing of real estate, as well as other real estate transactions.

It will also establish the Real Estate Agency Council to license real estate brokers, issue real estate transfer certificates, and monitor the performance of the brokers.

The bill’s memorandum said there is a need to regulate real estate agency services to rid the industry of fraud, laundering of illegal income, and tax evasion so as to minimise the effect of these vices on the national economy and the international image of the country.

The law would require a real estate broker to submit within three months after the end of each calendar year to the Council a report

covering the real estate transactions undertaken by the real estate broker and the agents of that broker in the previous year.

A person who fails to submit annual reports to the Council or fails to conspicuously display the licence issued in accordance with the law would be liable to pay to the Council an administrative penalty of 1,000 penalty units.

Criminal sanctions, of up to 10

years’ imprisonment, are also provided for document falsification and engagement in a real estate transaction without a licence.

According to the secretary to the Executive Council of the Ghana Real Estate Developers Association (GREDA), Sammy Amegayibor, the proposed law will help sanitise the sector, ensure genuine businesses flourish, and weed out charlatans.

He added that government would

be able to improve revenue from real estate transactions “because [presently] people sell houses but the requisite taxes that are supposed to be paid, such as stamp duty, are not being paid.”

If the real estate sector is well regulated, he said, then the government could mobilise more resources to address other constraints in the industry, such as land issues and weak regulations.

This is not the first time a bill to regulate the real estate sector has been presented to Parliament. In 2014, the erstwhile NDC government presented the Real Estate Regulatory Bill to regulate the industry, but the law did not see the light of day at the time.

The current bill is, however, expected to get the green light from Parliament in this current meeting of the House to bring the needed sanity to the sector.

The government expects the bill’s passage to strengthen the anticorruption initiatives in the country and curb money-laundering and other financial malpractices in the sector.

We cannot defer plans on AfCFTA -Ayorkor Botchwey urges African leaders

BY EUGENE DAVIS The Minister for Foreign Affairs and Regional Integration, Shirley Ayorkor Botchwey, has underscored the need for Ghana and other African countries to work towards the operationalisation of the Africa Continental Free Trade Area (AfCFTA) despite the impact of the COVID-19 pandemic.

Presenting a statement on the floor of Parliament on Tuesday, May 26 to mark the occasion of Africa Day, she maintained that: “We must move ahead with the most ambitious steps toward pan-African integration with the creation of the Africa Continental Free Trade Area ensuring it is operationalised as soon as possible” The 2020 Africa Day has been marked in the shadows of the novel coronavirus pandemic, which has swept across the world. Even in the era of a challenging pandemic, Africa remains confident and dynamic in the pursuit of its aspirations for a better future for its citizens, Ayorkor Botchwey noted.

Implementation of the free trade agreement is expected to commence

Shirley Ayorkor Botchwey does not expect the coronavirus to affect the plans and programmes of the Africa Union, including AfCFTA.

on July 1 this year, however, due to the disruptions occasioned by the coronavirus pandemic, analysts have suggested it be deferred to next year.

According to the Foreign Affairs Minister, COVID-19 presents another

major test of the resolve of the African Union and its member states to grow intra-Africa trade.

“While dealing with the pandemic and saving lives, Africa cannot defer urgent action on plans and programmes that will advance

continental trade and development.

Ghana was selected to host the secretariat of AfCFTA, giving the country a pivotal role in overseeing the implementation of the agreement. The country has committed US$10m for the operationalisation of the secretariat.

AfCFTA provides the opportunity for Africa to create the world’s largest free trade area, with the potential to unite 1.3bn people in a US$2.5 trillion economic bloc and usher in a new era of development.

The main objectives of AfCFTA are to create a continental market for goods and services, with free movement of people and capital, and pave the way for creating a customs union.

It will also grow intra-African trade through better harmonisation and coordination of trade liberalisation across the continent. AfCFTA is further expected to enhance competitiveness at the industry and enterprise level through exploitation of opportunities for scale production, continental market access, and better reallocation of resources.

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Set up special fund to transform agric sector—WACCI boss

BY REUBEN QUAINOO Founding Director of the West Africa Center for Crop Improvement Prof. Eric Danquah is calling for the establishment of a National Agriculture Development Fund into which funding to the tune of at least 1percent of Ghana’s GDP will be invested to finance development of the agricultural sector.

“The private sector will be encouraged to contribute to the development of the nation through that fund,” he said.

He observed that food systems are highly susceptible to shocks and the Covid-19 pandemic is just another warning signal because there could be more devastating shocks in the future.

“These are not normal times.

Given that the Covid-19 pandemic is just a warning signal and there could be more devastating future events, Ghana should take its future in its own hands and transform its agriculture to secure the future of the country as well as drive socioeconomic development.

A well-funded National Agriculture Authority to be established by law with independent powers is certainly the way to go,” he said.

Prof. Danquah was speaking during a webinar session organised by the Alliance for a Green Revolution in Africa (AGRA) on the impact of Covid-19 pandemic on the agricultural sector in Ghana.

He is also proposing the establishment of a National Agriculture Authority (NAA)

Prof. Eric Danquah, Founding Director of WACCI is pushing for a specialised fund and authority to instigate the growth of the dominant agriculture sector

to regulate and oversee the transformation of agriculture for socio-economic development under the Ghana Beyond Aid Initiative.

The authority will be responsible for oversight of agricultural education, research, innovation and development, as well as modernize agriculture through the development of commodity value chains,” he said.

The University of Ghana professor wants the fund and authority to be established by an act of parliament.

Prof. Danquah proposed that the fund to be established must be managed by the National Agriculture Authority and a Scientific Advisory Committee with representation from various science organisations.

“It is important that the composition of the NAA which should have representation from the sector Ministries of Agriculture, Education, Finance and Environment, Science, Technology & Innovation is carefully reasoned and should not sacrifice

meritocracy,” he said.

The webinar by AGRA was under the theme; impact of Covid-19 on Agriculture in Ghana: Response of the seed industry.

“We should develop strategies to be self-reliant in research, innovation and development. We should ensure that our national research institutions including the universities (which should be hubs for innovation) and their partners are well set up to deliver an uninterrupted scheme to get improved, nutritious and resilient varieties to farmers and markets.

Modern storage technologies to reduce food spoilage are also urgently needed to build reserves to ensure optimal long-term storage.

“Agriculture driven by science and technology should underpin our national development agenda.

We cannot await the passage of the Plant Breeders Bill to drive a more competitive seed industry for food and nutrition security,” he added.

He called for increased funding and public and private sector collaboration to accelerate the development of the country.

Executive Secretary of the National Seed Trade Association of Ghana (NASTAG) Mrs. Augusta Nyamadi Clottey who participated in the webinar observed Covid-19 will push the players in the seed industry further to work harder towards encouraging local production of quality seeds.

Dr. Solomon Gyan Ansah who is a Deputy Director of Agriculture and Head of the Seed Unit at the Directorate of Crop Services of the Ministry of Food and Agriculture noted agricultural extension is important if farmers can be encouraged to adopt improved seeds like hybrids.

He called for smart methods of extension in the light of Covid-19 including electronic methods that uses tools like mobile phones.

Josiah Wobil, who is chairman of the National Seed Council Ghana, called for a re-positioning of the agricultural sector so it can play better role in the development of the country. Mr. Benjamin Adjei who is Assistant Representative to Ghana for the Food and Agriculture Organization of the United Nations (FAO) said it is important that every nation works towards enhanced seed security.

He called for the development of capacities and establishment of more infrastructure locally to ensure a sustainable seed system in the country.

GCNet shuts down Monday, June 1 There is a letter from government instructing the two trade facilitation vendors at the country’s ports, GCNet and WestBlue, to wind down their operations by May 31, 2020.

This means Ghana Link/UNIPASSICUMS will be the sole system used for all trade facilitation at the country’s ports.

However, given challenges encountered a month ago when GCNet shut its system for UNIPASS to be deployed fully at all ports of entry, including the busy Tema and Takoradi ports, questions have been raised about the new system’s readiness.

The deployment of the UNIPASS system at the Takoradi Port were fraught with challenges. The Freighters on Thursday May 7, picketed at the Customs Office of the Ghana Revenue in Takoradi to call for the immediate suspension of UNIPASS system until the operators are able to fix the problem with the supposedly new system.

Initial attempts to roll out UNIPASS fully at Tema Port, at a time when GCNET had shut their system as directed by government, faced many challenges.

GCNet/WestBlue earlier this month shut their systems to allow UNIPASS deploy its system fully per directives received from the Senior Minister, Yaw Osafo Maafo.

However, for over two days freighters were unable to clear their goods. An Imani Africa analysis show that Ghana earns about GHC 33million per day at its ports. Thus about GHC 66million was lost due

to the challenges with the ICUMS/ UNIPASS. The situation necessitated an emergency meeting between government and all stakeholders.

At the end of the meeting GCNet/ WestBlue were made to turn their systems back on to salvage the situation.

Ghana Link, the local partners of

UNIPASS (ICUMS), however, say enough consultations have been done and their system is ready to be deployed fully on June 1.

Ghana Link told Business24 that they have the capacity to successfully manage trade facilitations at the ports and allayed fears over possible disruptions should GCNet shut down.

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BoG May 2020 MPC Statement Public debt higher than BoG’s 59.3 Percent SETH E. TERKPER FORMER MINISTER FOR FINANCE The Bank of Ghana (BOG) Monetary Policy Committee (MPC) Report for May 2020 curiously puts the end-March 2020 public debt at 59.3 percent. Since the 2019 Debt Report and the IMF show the end2019 debt level as 63 percent, it is unlikely to decline substantially to 59.3 percent. BOG’s itself observes a revenue shortfall, higher expenditures, high borrowing (e.g., US$3 billion bond; loans of US$230 million and domestic bonds), and slowdown in GDP. The fiscal section of the MPC Statement reads verbatim as follows.

“Provisional data for the first quarter on the execution of the budget show a widening of the deficit relative to what was observed for the same period in 2019. As at the end of the first quarter, a deficit, equivalent to 3.4 percent of GDP has been recorded compared with a deficit target of 1.9 per cent of GDP. “The larger deficit is explained by shortfalls in tax revenues—on the back of shortfalls in international trade taxes, taxes on goods and services and taxes on income and property in response to unfavourable external and domestic conditions—and higher pace of spending, which included some unbudgeted COVID-19 related expenditure.

The expanded deficit led to an increase in the debt stock to 59.3 percent of GDP at the end of March 2020” (emphasis added).

The Public Debt CANNOT be 59.3 percent at end-March 2020 unless GOG is keen to continue the controversial “parallel” fiscal reporting that it denies. The MPC statement may not include the “exceptional” expenditures that Ministry of Finance (MOF) now includes in only footnotes. However, it is worth discussing in a banking context, even if the fiscal data and text are from MOF since they relate to the Consolidated Fund and other Public Accounts at BOG—unless some MOF records do not form part of the Treasury Single Account (TSA) initiative and, therefore, not visible to BOG. The issue is key since it affects “financing” of the Budget that Parliament approves—as an outcome of the budget deficit, borrowing and amortization of debt. Other sections discuss BOG “zero-financing” and “fiscal dominance” rules, which were performance criteria under the 2014-2019 Enhanced Credit Facility (ECF) Program. At the time, the background of sustained global crisis (2008 and 2014), disruption in gas supply from Nigeria, and singlespine wage (budget) overruns did

not seem to matter.

1.Why public debt cannot defy gravity A key aspect of fiscal reporting since 2017 is exclusion of “exceptional” expenses from the budget deficit (or fiscal balance) and public debt but adding “exceptional” receipts. The main items omitted are bank bailout costs and energy sector arrears, payable from ESLA levy proceeds and bonds. Thr GOG “exclusion” rule is the only plausible explanation for public debt decreasing between end-December 2019 and end-March 2020.

1. 1Public debt at 60 percent at end-2019 Table 1 (all-inclusive) and Table 2 (exclusion) bases show GOG’s parallel numbers, as compared with the IMF positions in recent Article IV (2019) and Rapid Credit Facility or RCF (2020) Reports. Table 1 shows the “all-inclusive” rule for debt-to-GDP ratio that Ghana has in its fiscal framework since the 1980s.

Table 2 shows the debt stock in Table 1 but on current GOG’s “exclusion” rule or basis, without the banking sector bailout cost and energy sector arrears.

A comparison between IMF and GOG after 2020 is not possible since only the Fund gives estimates of energy arrears and bank bailout costs to 2025. Nonetheless, some figures are derived, to help make the case that BOG’s end-March 2020 debt stock is very conservative.

•

•

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GOG has no projections from 2020 but its end-2019 “allinclusive” outcomes for end2019 exceed 60 percent.

Even under the “exclusive” basis, GOG’s loans from January to March 2020 exceed the conservative 1.3 percent (59.3 less 58 percent) increase in the debt stock.

For example, the February US$3 billion Sovereign Bond alone [at US1=Ghc5.75] is 4.24 percent of GDP [2020 = Ghc385.3 billion].

Even assuming half of the Bond value was for refinancing (replace old debt], the other half increases the debt stock by 2.24 percent, not 1.3 percent.

As Table 3 shows for only FY2019 and FY2020, IMF’s provisional debt stock for end-2019 and elevated projections for end-2020 make the conclusions credible.

1.2BOG’s MPCs narrative does not support a decrease BOG’s own narrative of slow growth rate, falling revenues, and higher expenditures, and conclusion of a wider budget or deficit does not support a decline.

On the contrary, the rational conclusion from the narrative from

Table 1: Comparison GOG and IMF (all-inclusive) debt positions

Table 2: Comparison of GOG and IMF fiscal positions

Table 3: IMF (enhanced) estimates of Public Debt

Section 1 points to a higher debt stock in 2020 (Qtr 1) against the benchmark 60 percent for 2019.

The elements point to lower GDP (denominator) and higher borrowing pressures on debt (numerator).

The IMF’s Article IV and RCF [COVID-19] Reports, which GOG approved, give better guidance on the likely future impact (on deficit or fiscal balance and debt) of the banking and energy sector costs, and warning on contingent liabilities (GOG quasi-fiscal guarantees).

1.3 Government’s 2020 (Qtr 1) borrowing does not support a decline The significant early COVID-19 “front-loading” of known borrowing in Quarter 1 of 2020 and macrofiscal factors (section 2.2) suggest elevated risk of public debt distress.

2020 Sovereign Bond: as noted, February 2020’s US$3 billion Sovereign Bond alone [at US1=Ghc5.75] is 4.48% of GDP [2020 = Ghc385.3 billion].

• Net Bond proceeds: Assuming half of the Bond refinanced or replaced older debt, the balance increases the debt stock by 2.24 percent, not 1.3 percent.

• Standard loans: Parliament approved about €1.27 billion and US$207 million loans (equivalent to Ghc9.22 billion)—adds to debt stock and disbursements to the Budget.

• Domestic Bond Calendar:

GOG planned to “issue a gross amount of Ghc19.09 billion, of which Ghc15.69 billion is to rollover maturities and the remaining Ghc3.40 billion is fresh issuance to meet GOG’s [Budget] financing requirements.

The Further, GOG and IMF agree to classify the RCF (COVID-19) quotafull US$1 billion concessional loan approved in April 2020 as budget, not BOP, support. Together with other loans, this will elevate the frontloading and debt situation and worsen the risk of debt distress.

1.4 Debt could exceed 70 percent of GDP The trajectory for public debt at the end of 2020 is worrisome as the Corona Virus crisis merely adds to existing financing pressures. A prolonged COVID-19 crisis will add to borrowing pressures, worsen the large financing gap, and push the ratio beyond 70 percent.

IMF estimates: in the RCF (COVID-19) Report in March 2020, the Fund puts the debt-to-GDP ratio at 68.7 percent (all-inclusive basis) and 65.5 percent (exclusive) basis.

Fitch’s more gloomy estimates: The ratings agency forecasts the 2020 debt ratio at 76.8 percent, “owing to the combination of a wider fiscal deficit and cedi depreciation … debt would equal 535% of government revenue, twice the ‘B’ median of 214%”.

The fiscal gap exists with three (3) oilfields, not one (1), from 2017;

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(…CONTINUED FROM PAGE 7 )

output is up from 70,000 barrels per day (bpd) to nearly 190,000 bpd; price increase above US$60 pbl from sub-US$40s pbl; and gross revenue quadrupling o above Ghc4 billion from less than Ghc1 billion.

2. Conclusion The projection for public debt is an increase from 56.85 percent to 76.8 percent from end-2016 and end2020—on new rebased GDP (2013) and revenues rising from one (1) to three (3) oil fields. The BOG MPC Statement notes: “Preliminary assessments show that the financing gap that was estimated at the time of applying for the IMF RCF in March 2020 has widened significantly, resulting in a large residual financing gap. Current market conditions, in the wake of the pandemic, will not allow the financing of the (fiscal) gap from the domestic debt capital markets without significantly increasing interest rates.

Hence, BOG seems motivated to intervene with fiscal management with extraordinary powers in the BoG Act, 2002 (Act 612), as amended, on the basis of high interest rates only. Under section 30, it proposes to “increase the limit of BOG’s purchase government securities in the event of any emergency to help finance the residual financing gap.” Unlike the RCF, the MPC does not differentiate between the preCOVID-19 and post-COVID-19 fiscal gap.

BoG seems to finance the 2020

Budget directly: “Today, under the BoG’s Asset Purchase Programme (APP), the Bank has purchased a GoG COVID-19 relief bond with face value of Ghc5.5 billion at the MPC rate with a 10 year tenor and a moratorium of two (2) years (principal and interest). The Bank stands ready to continue with its APP up to Ghc10 billion in line with the current estimates of the financing gap from the OVID-19 programme”.

In deficit-financing terms, the Bank’s option is likely to have been newer (not existing or old, as is financial crisis practice) Ghana COVID-19 Relief Bonds with generous debt service terms.

In subsequent articles, we will explore and discuss the “fiscal gap” and argue that a large percentage existed before COVID was declared a global emergency.

Transformation Leadership Panel (TLP) to discuss policy priorities for Africa’s Post Covid-19 recovery The Transformation Leadership Panel (TLP), an initiative of the Africa Center for Economic Transformation (ACET), will meet on the 27th of May to review COVID-19 interventions in Africa, share lessons from their own institutions and consider new avenues for more collaborative action in support of Africa’s governments.

The Panel of 17 eminent persons, from the public, private, academic and charitable sectors in Africa and beyond, is chaired by H.E Ellen Johnson Sirleaf, former President of Liberia. At its last meeting in February 2020 in Addis Ababa,

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the panel committed to charting a coordinated path to addressing Africa’s urgent economic challenges and this third meeting will be an opportunity for panelists to do just that.

“In my view, the COVID-19 crisis provides a real opportunity to collaborate around that mandate and demonstrate the full potential of the TLP,” said Dr. K.Y Amoako, Founder and President of ACET, and member of the TLP. Topics will include government effectiveness, resource mobilization and management, business and investment, and digital innovation and entrepreneurship.

The discussion will be guided in part by a recently published ACET paper, “Ten Policy Priorities for Africa’s Recovery, Growth, and Transformation,” now available on acetforafrica.org. The paper offers a different perspective from most other COVID-19 analysis to date in that its recommendations focus on actions for the longer term that should be taken regardless of the pandemic. The suggestions are now more important than ever for economies that will be struggling for recovery.

“Countries need emergency measures now to save lives and preserve livelihoods, but they must also protect their future,” Dr. Amoako said. “Our intention is to specifically target forward-looking policies to help ensure Africa’s progress is not permanently lost.”

Albert Zeufack, World Bank Chief Economist for Africa, will join the meeting and lead a discussion on mechanisms for achieving policy

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reform goals.

The inaugural meeting of the TLP was held in Accra, Ghana in 2019.

The members of the TLP are Acha Leke, McKinsey and Company’s Africa Region Chair; Ann Cotton, OBE, Founder and Trustee of CAMFED International; Agnes Kalibata, President, AGRA; Bineta Diop, Africa Union Special Envoy on Women, Peace and Security; Charles Boamah, Senior Vice President of the African Development Bank; Dolika Banda, CEO of African Risk Capacity; Gayle Smith, President and CEO of the ONE Campaign; and Hafez Ghanem, World Bank Vice President for Africa.

The other members of the panel are Ibrahim Hassane Mayaki, former prime minister of Niger & CEO, AUDA-NEPAD; James Mwangi, Managing Director & CEO of Equity Group Holdings; Masood Ahmed, President of the Center for Global Development; Ndidi Nwuneli, Co-founder and Managing Partner, Sahel Capital; Reeta Roy, President & CEO of the Mastercard Foundation; Stefano Manservisi, former Director-General, DEVCO, European Commission and Vera Songwe, Executive Secretary of the UN Economic Commission for Africa.

The African Center for Economic Transformation (ACET) is an African “think and do” tank with an overarching goal of helping equip African governments with the knowledge and tools to transform their economies. In the long term, ACET wants African governments to achieve economic transformation and improved human well-being

50,000 rice farmers to benefit from JAKF, GRIB and Alluvial partnership

BY REUBEN QUAINOO The John A. Kufuor Foundation has signed a memorandum of understanding with Alluvial Agricultural Limited and the Ghana Rice Interprofessional Body (GRIB) to provide support to about 50,000 rice farmers in the country.

As part of the agreement, Alluvial Ghana will provide mechanization, as well as credit and input services to members of GRIB to help them expand on production. Planting and harvesting services, as well as seed and agro-input supply will also be provided.

Chief Executive Officer of the John A. Kufuor Foundation Prof.

Baffour Agyeman-Duah signed the agreement on behalf of the foundation. Von Kemedi who is Chief Executive Officer of Alluvial Agricultural Limited signed on behalf of the company and Nana Adjei Ayeh who is president of the Ghana Rice Inter - Professional Body signed on behalf of GRIB. The objective of the agreement is to provide easy and affordable

access to the above listed services which are currently scarce and too costly for smallholder rice farmers to afford.

Talks with financial institutions to provide concessionary financing so farmers can procure agro-inputs and mechanization services are also ongoing.

The John A. Kufuor Foundation is expected to play a facilitating and coordinating role in ensuring that the parties to the agreement work towards the stated goals.

The initiative falls within the foundation’s socio-economic development goal which focuses on agriculture led growth and

job creation. In view of this, the foundation consistently seeks to build broad based partnerships with public and private institutions both locally and internationally to deliver needed socio-economic reforms.

This support for rice farmers is coming at a time when the industry is struggling with various challenges along the value chain, including low mechanization. According to the Ministry of Food and Agriculture, Ghana has a deficit of 27, 133 tractors.

The agreement will go a long way to alleviate the burden of rice farmers who are in dire need of these services to boost Ghana rice production, supply and consumption.

In keeping with modern agricultural trends, the introduction of the stateof-the-art mechanization equipment will aid proper land preparation and planting protocols which will drastically improve yields.

Additionally, the mechanization services will reduce pre-harvest and post-harvest losses.

The Alliance for a Green Revolution in Africa (AGRA) is a major partner in this project.

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WEDNESDAY MAY 27, 2020

WEDNESDAY MAY 27, 2020

Feature

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Perpetual Bonds could save the European Union By issuing perpetual bonds – or “Consols,” as they have been called historically – the EU can address both the pandemic and climate change. Such bonds represent a credible alternative to raising the EU budget and would provide relief funds that could be targeted at member states hardest hit by the public-health crisis.

By embracing perpetual bonds – or Consols, as they are known in the United Kingdom and the United States – George Soros believes the EU can address the dual crises of COVID-19 and climate change currently threatening the world. In this Q & A, he argues that Consols present a preferable alternative to raising the EU budget. The European Commission should accept them as an interesting idea that deserves further consideration.

PROJECT SYNDICATE: Will the negative impact of the coronavirus on the eurozone economy be longlasting?

GEORGE SOROS: Longer than most people think. One of the problems is that the virus itself is rapidly evolving and changing the way it attacks human organs. This will make it much harder to develop a reliable vaccine.

PS: Some people have proposed that the EU issue so-called coronabonds. You have promoted the idea of perpetual bonds. Why are perpetual bonds better and what risks do they entail?

SOROS: The European public and their political leaders are not familiar with perpetual bonds or Consols, as I now like to call them, but Consols are well-known in the UK and the US. They have a long history in both countries. In the UK they were used, among other things, to finance the wars against Napoleon and the First World War. In the US, they were introduced in the 1870s.

Interestingly, a Dutch water board issued a perpetual bond in 1648 to repair a dike. This makes the Dutch the originators of the idea. More than 350 years later, that bond is still paying interest, but the general public is not aware of this. At that time, the Netherlands faced an existential threat from flooding.

Today, the combination of the COVID-19 and climate change poses an even greater threat.

As its name suggests, the principal amount of a perpetual bond never has to be repaid; only the annual interest payments are due. A €1 trillion bond would cost €5 billion a year, assuming an interest rate of 0.5%. The Consols would not need to be sold all at once; they could be issued in tranches and they would be snatched up by long-term investors like life insurance companies who are looking for long-term bonds to match their liabilities.

As the markets familiarize themselves with the new instruments, later tranches would attract a larger set of buyers and

eventually the bonds would fetch a premium. This is a good time to issue long-term bonds. Germany has recently sold a 30-year government bond with a negative yield.

Unfortunately, my suggestion for perpetual bonds has been confused with “coronabonds” and this has poisoned the debate. The two have nothing to do with each other.

Coronabonds have been decisively rejected, and with good reason, given that they require a degree of mutualization that is simply not acceptable.

That is why I now speak about Consols. The only mutual obligation is the payment of the annual interest, which is negligible. A sum of €5 billion annually secures an urgently required €1 trillion – an amazingly low cost-benefit ratio of 1:200! That degree of mutualization should be easily accepted by the member states acting either unanimously or through a coalition of the willing.

Understandably, the so-called Frugal Four (Netherlands, Denmark, Sweden, and Austria) want to keep their contribution to the European budget to a minimum. However, they are now faced with a choice: they can continue opposing Consols and accept a doubling of the budget.

Or they can become enthusiastic supporters of Consols and, if they succeed, increase their contribution to the budget by 5%. I urge the Hanseatic League and the Dutch public to ponder which alternative is preferable.

PS: Are there legal issues associated with the issuance of Consols, as you call perpetual bonds?

SOROS: Yes, there are, and they are seemingly insurmountable. The EU must maintain a AAA rating, otherwise the bonds would be unsaleable. That requires the EU to have what is called sufficient “own resources” – taxes that can be levied to cover the cost of servicing the bonds. Imposing taxes is a long, drawn-out process, because each country has its own rules and in some of them, like Belgium, the rules are very complicated. The process would take several years and that is why I said that the legal obstacles are seemingly insurmountable.

But there is a solution. The taxes only need to be authorized; they don’t need to be implemented.

Authorization should take a few weeks, not a few years. Once they are authorized, the EU could go ahead and issue perpetual bonds or Consols.

Perpetual bonds have a tremendous advantage over bonds that have a termination date. As their name implies, the principal never has to be repaid; only the annual interest is payable. As I mentioned earlier, that amount is so minimal that it should be easily subscribed by the member states.

It should be particularly attractive to the Hanseatic League, led by the Netherlands. That is why the Hanseatic League ought to

become enthusiastic supporters.

In Germany, Angela Merkel is still Chancellor, and she is the only person who can overrule the ordoliberal establishment.

With their support, the European Commission can accept Consols as a desirable alternative to be explored, but time is extremely short. A previously totally unknown instrument needs to be understood and adopted.

PS: If perpetual bonds are rejected, then what do we do?

SOROS: Exceptional circumstances require exceptional measures.

Perpetual bonds or Consols are such a measure. They should not even be considered in normal times. But if the EU is unable to consider it now, it may not be able to survive the challenges it currently confronts.

This is not a theoretical possibility; it may be the tragic reality.

The coronavirus and climate change are threatening not only people’s lives, but the survival of our civilization.

The European Union is particularly vulnerable, because it is based on the rule of law and the wheels of justice turn proverbially slowly. By contrast, the coronavirus moves very fast and in unpredictable ways.

That is why the EU needs to issue perpetual bonds. Issuing bonds with a cost-benefit ratio of 1:200 opens up an amazing amount of fiscal space. The money raised does not have to be distributed according to the so-called fiscal key (member states’ shareholding in the ECB).

It can be allocated to those in the greatest need. Most of the money would go to the southern European countries, because they were the hardest hit, and within those countries they could assist people who are most in need and who are most needed, like unregistered agricultural workers. Some of this is already happening, but the amount of money available would be greatly increased.

PS: Turning to the UK, was Brexit avoidable? What can or should the EU do to stop other member states from leaving?

SOROS: There is no point crying over spilled milk. But the question of how to prevent other countries from following the UK is an important one.

I am particularly concerned about Italy. Matteo Salvini, the leader of the Lega party, is agitating for

the country to leave the euro and the EU. Fortunately, his personal popularity has declined since he left the government, but his advocacy is gaining momentum.

What would be left of Europe without Italy? Italy used to be the most pro-European country.

Italians trusted Europe more than their own governments, and with good reason. But they were badly treated during the refugee crisis of 2015. The EU enforced the so-called Dublin Regulations that put all the burden on the countries where refugees first landed, and did not offer any financial burden-sharing.

That is when Italians decide to vote for Salvini’s Lega and the Five Star Movement in a landslide. More recently, the relaxation of state aid rules, which favor Germany, has been particularly unfair to Italy, which was already the sick man of Europe and then the hardest hit by COVID-19.

PS: Have you given up hope?

SOROS: Not at all. As long as I can come up with ideas like perpetual bonds, I don’t give up hope.

Postscript: I don’t want to be critical of the non-paper published by the Frugal Four countries, because it was written without awareness of the merits of perpetual bonds or Consols. The Spanish government proposed the idea on April 23 at the virtual meeting of the European Council, but it was dismissed without consideration because perpetual bonds were confused with coronabonds.

That is why I now prefer to talk of Consols. One of the merits of Consols is that the funds raised can be distributed not according to the fiscal key, but allocated to those that need them the most. Another merit is that Consols can help to fight not only the virus, but also climate change. That would allow the EU to fulfill the expectations of its citizens.

If member states pursued only their own interests, the EU would disintegrate and we would all be losers. Fortunately, the nonpaper only expresses the views of governments which have not been debated and approved by parliaments – and the governments may change their views when they consider the merits of Consols.

Consols would give them what they are looking for, a budget that is increased only by a few percentage points and avoids all the complications regarding grants or loans with which the non-paper has to struggle. Consols would also give the Frugal Four something they seem to have forgotten about: the strengthening of the EU instead of its disintegration. The EU needs a powerful demonstration of solidarity.

George Soros is an investor, hedge fund manager, author, and philanthropist. Copyright www.project-syndicate.org.

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Tourism

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Why tourism matters in Africa Tourism is dubbed a “sunrise” sector that can switch on for inclusive socio-economic growth. It cuts across societal challenges and upheavals. The continent of Africa recognises tourism as one engine of sustainable development, including positive effects on environmental preservation, effective resources management and job creation.

Tourism contributes 1 in 11 jobs in the continent. Before the novel corona virus pandemic, it was predicted that by 2023, tourism could contribute over 20 percent of the continents Gross Domestic Product (GDP).

Despite progress made, the sector continues to experience increased and unpredictable shocks from global terrorism; political instability; health pandemics; natural disasters and negative media. More so, poor air connectivity; lack of infrastructure; lack of capacity at the hospitality industry, and strict visa regulation have proved to be cogs. Strict visa regulation stirs negative socio-economic spin-offs.

UNWTO report of 2018 shows that apart from increasing cost of doing business in the continent, the share

of intra-Africa total travel is behind those of the other continent. Lesser intra-Africa travels stems from restricted movement of people, goods and services.

But Africa’s enrichment with diverse heritage and natural assets: landscapes, unique flora and fauna keep sustaining growth. In addition, harmonization of policies and programmes in the continent, such as the Continental Free Trade Area (CFTA) and action plan for Boosting Intra-African Trade (BIAT) has played important roles. These programmes and policies are fundamental to enhancing statebusiness relationships, through public-private partnerships and dovetailing of the operationalization of Open Skies for Africa; the African Common Passport; the AU Agenda 2063, and the UN Sustainable Development Goals (SDGs).

Continental bodies such as the African Union Development Agency (AUDA-NEPAD) has been at the forefront of enacting policies and pushing the tourism agenda. One of the state-business collaboration is the NEPAD-led Program for Infrastructure Development in

Africa (PIDA). It encourages regional cooperation as means of building common infrastructure. PIDA helps to strengthen the ability of countries to establish regional value chains for increased competitiveness, trade and the free movement of African citizens. PIDA projects spread across four sectors of: energy, transport, Information and Communication Technology (ICT) and transboundary Water.

Though the novel corona virus pandemic is an enormous set back

to progress made, this sunrise sector would rise again and lead economic recovery across the continent. It is pertinent to keep building partnerships in the continent for increased investment in the tourism, robust coordination and alignment of Africa’s recovery efforts, including positioning the continent as the preferred tourism destination.

Author: Vincent Oparah (Tourism Advisor, AUDA-NEPAD)

Dubai Tourism, stakeholders discuss revival strategies Dubai’s Department of Tourism and Commerce Marketing (Dubai Tourism) held a virtual meeting with key aviation and hospitality partners to discuss current and post-pandemic strategies and joint initiatives aimed at ensuring the tourism industry’s gradual return to normalcy.

The meeting also discussed global efforts to minimise the transmission of Covid-19 and precautionary measures deployed to safeguard the health of communities across the UAE, said a Wam news agency report.

Presided by the Director General of Dubai Tourism, the meeting was attended by key executives of hospitality groups including Jumeirah, Emaar Hospitality Group, Marriott International, Millennium, Accor, JA Resorts and Hotels, Kerzner International, Al Habtoor Group, Wasl and Rotana, in addition to aviation sector players like Emirates, flydubai and Dubai International Airport.

The partners were briefed on the phased approach being adopted to reopen the tourism sector in Dubai, and the marketing communications and activities in progress across key markets to reinforce Dubai’s high global profile including the ongoing #Till We Meet Again digital activation.

With the hospitality sector being a key pillar of Dubai’s economy, the discussions between Dubai Tourism and partners focused on the steps being taken to pave the way for the reopening of hotels and other tourism facilities across the city, while ensuring adherence to the

strictest guidelines and providing opportunities to revive domestic market demand.

As part of overall efforts to create a positive perception and a conducive environment aimed at instilling confidence among travellers who plan to visit Dubai, the meeting also looked at various precautionary measures that have been implemented, both at a citywide level and across specific sectors including tourism, which represent critical touchpoints for visitors and residents during their stay.

One of the key priorities from a marketing perspective is to emphasise the safety and security that Dubai provides, and the clear stringent health and safety protocols issued by the Dubai Health Authority based on international standards and best practices aimed at containing the contagion.

The meeting also discussed the mechanism to ensure adherence to the guidelines, practical solutions to scan and monitor passengers at Dubai International Airport and the effective management of contact

tracing in compliance with privacy standards, following the resumption of air travel.

Industry executives at the meeting also agreed that the postponement of Expo 2020 was prudent and well-received. It provides the opportunity to hold the event in a more normalised global environment where all countries can actively participate, making it a more representative Expo for the world in 2021. The businesses also reiterated their support to Dubai Tourism to kick-start the sector with collaborative development of promotional programmes and strong customised packages that take into account the current realities of the global market. The stakeholders were unanimous that there was positive sentiment surrounding Dubai as a key destination in the international circuit thanks to the city’s world class health infrastructure, and protocols and processes deployed during the management of this pandemic.

Helal Saeed Almarri, Director

General, Dubai Tourism, commented: “Our regular meetings with stakeholders reflect the longstanding collaboration between Dubai Tourism and its partners, and this latest industry engagement has even greater significance since it allowed us to discuss recent developments and explore ways of restoring tourism confidence and accelerating growth. It must be emphasised that the health and safety of our residents and guests will always remain our top priority as we continue to work with the industry and our government partners not just during this critical period but beyond, to develop innovative approaches, real-time responses, and proactive yet prudent initiatives to ensure that Dubai remains at the forefront of the world’s leading destinations in line with our strategy.”

“As we look ahead to a gradual reopening of tourism, we will focus on the key elements that have ensured the industry’s success over the past decade – creating unique value and delivering an uncompromised guest experience.

To achieve this, we rely on the solidarity of our stakeholders who have always played a pivotal role.

We hope they will continue to lead from the front in positioning Dubai as a must-visit destination.

Indeed, it is imperative in these unexpected times to harness our collective strengths and design effective solutions that ensure Dubai’s prominence on the global tourism industry stage. Together we can redefine the future of travel,” Almarri added. (TradeArabia News Service)

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COVID-19: An opportunity for Africa to do things differently

BY IFESINACHI OKPAGU & SOMACHI CHRIS-ASOLUKA, TONY ELUMELU FOUNDATION As of May 26, over 118,535 people in Africa have reportedly been infected by Covid-19. Beyond these numbers, it is hard to tell how many more have been indirectly affected, through poverty, hunger, job loss and security-related incidents. Data in Africa is relatively hard to come by, still little pockets of information here and there suggest that beyond Coronavirus, hunger may be a deadlier virus on the continent, if not tackled now.

At a recent virtual roundtable hosted by the New York Forum Institute, Tony Elumelu, Chairman of the pan-African bank, United Bank for Africa Plc (UBA), highlighted what might not have been obvious.

According to him: “The pandemic presents an opportunity to reset Africa, create employment and eliminate poverty”.

His statement is backed by his experience as an economist, a philanthropist, and more importantly, an investor through his investment vehicle, Heirs Holdings, in Africa’s key sectors – power, financial services, oil & gas, hospitality, real estate, and healthcare. While he has been an avid investor, his hard work, and bet on the continent’s potential to generate a worthy return on investments, do not come without its own challenges. For decades, the private sector has worked with the hope that business necessities, including electricity, infrastructure and security would be fixed by African governments; sadly, the hope is yet to become a reality.

Yet the private sector holds firm in its belief. In 2015, Tony Elumelu committed $100 million through

his Foundation’s Entrepreneurship Programme to empower 10,000 young African entrepreneurs to validate his conviction in the potential of the private sector to catalyse transformation. In 2019, Tony Elumelu’s Transcorp Power invested an undisclosed amount into acquiring Afam Power station in the hope that, combined with its existing assets, it would raise the standard of living in Nigeria, by contributing 25% of the total power generation capacity in the country.

He replicated this same conviction across several of his businesses including Transcorp Hotels Plc with an upgrade worth billions of naira, and a recent commitment in a yet to be disclosed energy deal. Many more private investors like Tony Elumelu have exhibited the same faith in the future of the continent.

The Importance of a PrivatePublic Sector Partnership The private sector continues to play its part, backing words with action. However, it recognises that a mutually beneficial partnership with the public sector is needed at this time. As stated by Tony Elumelu at the recently concluded virtual roundtable involving African business leaders, there was a consensus that the pandemic is indeed the reset that Africa needs to catalyse the much-needed transformation on the continent.

This stance was corroborated by Mrs. Ngozi Okonjo-Iweala, Nigeria’s former finance minister, Tidjane Thiam, African Union Special Envoy on Covid-19, and moderator Vera Songwe, Under-Secretary-General for the United Nations, as they jointly discussed the topic “Resilient World: An African Call for a New World Order,” at the New York Forum Institute Virtual Roundtable.

Okonjo-Iweala emphasised the need to diversify the economy through strengthening the

manufacturing sector, Thiam harped on the need to create more jobs on the continent, and Songwe stated that the African Continental Free Trade Zone may just be the policy needed to kickstart the transformation – this is the best time to achieve it. For Elumelu, prioritising the youth, ensuring access to electricity and stabilising the macroeconomic environment are additional focus areas needed at this time.

A Task to Reset Africa Calls for a Marshall Plan In the near future, African currencies will depreciate significantly, and servicing our external debts will become even more of a challenge. Today, many African countries already spend more annually on debt servicing than on education, healthcare and social welfare combined. Therefore, mobilising the level of finance that will give Africa room to begin this hard task of resetting, will require a Marshall plan, akin to America’s Marshall Plan for Europe after World War II. This Marshall Plan for Africa will be in collaboration with the World Bank, IMF, G20 countries and all other relevant agencies but must be led by African multilateral financial institutions as in the case of AFREXIM under the leadership of Prof. Okey Oramah, whose efficient and immediate deployment of US$3 billion to finance and support trade and SME business through African banks, is commendable and deserves emulation.

The Covid-19 pandemic presents a bittersweet moment of clarity and reflection which we must seize to reset our continent. It provides the opportunity to finally place Africa on the right path of sustainability built on the bedrock of competitiveness.

Sustained Investment in Infrastructure

We can engender African competitiveness by sustained investment in basic infrastructure, electricity, internet access and digital connectivity, and most importantly by enabling and encouraging entrepreneurship.

This combination will provide economic hope and opportunity that will productively engage our young Africans who account for over 60% of our 1.3b population.

This is the only way we can reset the economy, create employment, eliminate poverty, generate revenue and attract capital to the continent.

Be Ready for Disruption Africa must embrace the new normal. The disruptions we have seen across sectors (healthcare, logistics, supply chain, digital economy, IT) are here to stay. This presents a unique opportunity for a united Africa, a strong regional bloc acting in a coordinated fashion in response to this new era. As globalisation, trade and foreign policy adjusts in response to these times, Africa will only enjoy more traction, increased leverage and more influence by forging a united front. This is the time for the continent to fully leverage its competitive advantage in agriculture, through focused investments in mechanisation, storage facilities, logistics, pest control, quality assurance, and processing, while strengthening our expertise in textile, manufacturing, supply chain etc.

In truth, disruption is here. It may not be ideal, but disruption, in the many facets it presents itself, has heralded new eras, and economic powers. If Africa treats this pandemic as a warning and begins to put in place the systems to ensure economic stability, this could be the beginning of the next global economic power, all business leaders agreed.

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WEDNESDAY MAY 27, 2020

WEDNESDAY MAY 27, 2020

Mining

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Parliament to ratify 14 mining agreements Parliament is expected to give legal backing to 14 mining firms that have been operating for some time without the requisite legal authorisation.

This follows the submission of mining lease agreements between government and entities under the Asaase Royalties Limited special purpose vehicle associated with the Royalty Monetisation provision of the Minerals Income Investment Fund Act,2018 (Act 978).

The Minerals and Income Investment Fund Act, 218, (Act 978), is to establish a fund to manage the equity interests of the Republic of Ghana in mining companies, to receive mineral royalties and other related income due the Republic from mining operations, to provide for the management and investment of the assets of the fund and for related matters.

The Act was assented to by the President on the 3rd of December, 2018, after it was passed into law by Parliament.

The agreements are being worked on by the Mines and Energy and

leadership of the Finance Committees for consideration and report.

These under-listed entities consist of AGA Miradani Lease granted to Ashanti Goldfields Company Limited, Lima South Lease granted to Abosso Goldfields Limited,Abirem Lease granted to Asanko Gold(Gh) Limited,Julie Lease granted to Phoenix Resources,Kunche/ Bepkong Lease granted to Azumah Resources(Ghana)Limited,Datoko Lease granted to Cardinal Namdini Mining Limited,Mampon Lease granted to Golden Star(Bogoso)Limited.

Others are Akanko Lease granted to Adamus Resources Limited,Opon Lease granted to Golden Star(Begoso/ Prestea)Limited, Akoti Lease granted to Chirano Gold Mines Limited,Ajopa Lease granted to AngloGold Ashanti Ghana Limited,Ajopa South Lease granted to Ghanaian Australia Goldfields Limited,Adubea Lease granted to Asanko Gold(Gh)Limited and Abore Lease granted to Asanko Gold(Gh)Limited.

Emmanuel Akwasi Gyamfi – Chairman of Mines and Energy Committee

AngloGold Ashanti Mponeng mine records 196 Covid 19 cases

AngloGold Ashanti have announced that it has completed the full processing of tests from the COVID-19 testing initiative at its Mponeng Mine with 651 tests completed and processed, yielding 196 positive cases.

This was contained in a press statement issued by the mining firm, indicating that in the vast majority of these cases, the individuals were asymptomatic, with the balance showing very mild symptoms.

The initiative was undertaken following the detection of a positive COVID-19 case at the mine last week, after which a comprehensive screening, contact tracing and testing programme was embarked upon. All positive cases continue to be isolated in line with national health protocols, with on-site isolation facilities available for those who may need them.

Operations at Mponeng Mine continue to be voluntarily

suspended to enable contact tracing, further engagement with all relevant stakeholders, and deep cleaning and sanitisation of workplaces and key infrastructure.

The Department of Health, Department of Mineral Resources and Energy, regional health authorities and labour unions continue to be fully engaged in the process. The management of the mine and its medical team are working closely with the regional health authorities in our joint efforts to slow the rate of infection and to protect those who may be most vulnerable.

Mponeng’s COVID-19 risk management plans and protocols remain in place and include: appropriate screening of staff arriving at work; social distancing measures; a cleaning schedule for designated infrastructure; hand-sanitising facilities at the appropriate locations on site, and availability of Personal Protective Equipment for

employees, including gloves and face masks.

While the Company is wellplaced to detect infections and to manage the social and medical responses required, it recognises that it needs to continue to play a proactive role in the community in which it is located. To this end, AngloGold Ashanti continues to support a range of initiatives to provide resources for healthcare providers and communities.

This includes making two hospitals available to the health departments in the North West and Gauteng provinces for public use; a partnership to provide bulk sanitiser to state hospitals; providing handwashing stations in high traffic areas and major taxi ranks in Gauteng; distributing care parcels to vulnerable members of its host communities; procuring ICU beds; and contributing R20 million to South Africa’s Solidarity Response Fund.

South Africa’s mining production to fall 8-10% this year - Minerals Council South Africa’s mining production is likely to fall between 8% and 10% this year due to the COVID-19 pandemic, the CEO of industry body the Minerals Council said on Tuesday during a virtual panel discussion.

Mines across South Africa, the world’s biggest producer of platinum and chrome and a leading producer of gold and diamonds, were forced to shut temporarily when a COVID-19 lockdown started in late March.

Harmony Gold CEO Peter Steenkamp said it would take a month for its mines to fully ramp up from June 1 when the country further eases its lockdown, allowing all mines - including deeplevel operations - to work at full capacity.

Steenkamp said he did not expect Harmony’s acquisition of AngloGold Ashanti’s Mponeng mine to be completed before the end of July. Some 196 workers at Mponeng have tested positive for COVID-19, causing the mine to shut down.

Source: Reuters South Africa’s mining production is likely to fall between 8% and 10% this year due to the COVID-19 pandemic, the CEO of industry body the Minerals Council said on Tuesday during a virtual panel discussion.

Mines across South Africa, the world’s biggest producer of platinum and chrome and a leading producer of gold and diamonds, were forced to shut temporarily when a COVID-19 lockdown started in late March.

Harmony Gold CEO Peter Steenkamp said it would take a month for its mines to fully ramp up from June 1 when the country further eases its lockdown, allowing all mines - including deeplevel operations - to work at full capacity.

Steenkamp said he did not expect Harmony’s acquisition of AngloGold Ashanti’s Mponeng mine to be completed before the end of July. Some 196 workers at Mponeng have tested positive for COVID-19, causing the mine to shut down.

Source: Reuters

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COVID-19 worsens pre-existing financial vulnerabilities

BY TOBIAS ADRIAN AND FABIO NATALUCCI

M

uch the same way COVID-19 hits people with pre-existing health conditions more strongly, so is the pandemictriggered economic crisis exposing and worsening financial vulnerabilities that have built up during a decade of extremely low rates and volatility.

Our recently released chapters 2-4 of the Global Financial Stability Report focus on three potential weak spots: risky segments in global credit markets, emerging markets, and banks. Should the ongoing economic contraction last longer or be deeper than currently expected, the resulting tightening of financial conditions may be amplified by these vulnerabilities, causing more instability or even a financial crisis.

Risky corporate credit markets Risky segments of credit markets have expanded rapidly since the global financial crisis. Potential fragilities include borrowers’ weaker credit quality, looser underwriting standards, liquidity risks at investment funds, and increased interconnectedness.

On the positive side, risky corporate credit markets our analysis finds that investors’ use of borrowed funds to finance their investments in these markets is less prevalent and that banks’ are not as heavily exposed to leveraged loans and high-yield bonds as in the past.

Both factors contributed to the global financial crisis a decade ago.

The risk of investor runs have also lessened in some segments because of a prevalence of long-term, locked-in capital in the private debt and collateralized loan obligation markets.

In a severely-adverse scenario, overall bank losses in risky corporate credit markets should be manageable, although they could be substantial at a few large banks. Losses at nonbank financial institutions, however, could be more significant. Given that nonbank lenders have taken a more prominent role in these markets, this could hurt credit provision and lead to a longer and more severe recession.

Policymakers should act decisively to contain COVID-19’s fallout and support the flow of credit to firms.

In only a couple of months through late March, prices in risky credit markets dropped by about twothirds of the declines experienced during the entire global financial crisis (a portion of the losses were since reversed). At the same time, interconnectedness across risky credit markets has likely contributed to market turbulence. A broadbased demand for cash has triggered selling pressures, and mutual funds have experienced large outflows

(even though they have declined or reversed more recently). Regulators should encourage asset managers to be prudent and use all available liquidity management tools to address such risks.

Once the crisis is over, a comprehensive assessment of the sources of market dislocations and underlying vulnerabilities it unmasked should be conducted.

For example, policymakers should consider whether including nonbanks in the regulatory and supervisory perimeter is warranted, given their expanded role in risky credit markets. In particular, a framework for macroprudential regulation of nonbank institutions, taking into consideration the global nature of these markets, should be developed and the macroprudential toolkit should be expanded.

Managing volatile portfolio flows Since the beginning of the pandemic, emerging markets saw capital outflows of over $100 billion, nearly twice as big (relative to GDP) as those experienced during the Global Financial Crisis.

While outflows have since subsided, this dramatic swing underscores the challenges in managing volatile portfolio flows and the risks this may pose to financial stability.

The prolonged period of low interest rates encouraged both

borrowers and creditors to take on more risk. The resulting surge of portfolio inflows into riskier asset markets contributed to the buildup of debt and in some cases resulted in stretched valuations in emerging and frontier markets. As a result, they have become more reliant on foreign portfolio flows since the global financial crisis.

Our analysis suggests that both bond and equity flows are much more sensitive to global financial conditions during periods of extreme flows than in normal times, while domestic fundamentals (such as economic growth, external vulnerabilities, domestic financial market depth) matter incrementally more for equities and local-currency-denominated bond flows. Furthermore, greater foreign investor participation in local currency bond markets that lack adequate depth can greatly increase the volatility of bond yields.

Emerging markets should manage external pressures by allowing their exchange rate to depreciate. If exchange-rate movements become disorderly, authorities should consider intervening in foreign exchange markets. Temporary capital flow management measures may also have to be used in the face of substantial outflows. Sovereign debt managers should prepare for longer-term funding disruptions by putting contingency plans in place to deal with limited access to external financing.

Banking: low rates, low profits?

Profitability has been a persistent challenge for banks in several advanced economies since the global financial crisis. While very accommodative monetary policy was crucial to sustain economic growth during this period, providing support to bank profits, extremely low interest rates have also compressed banks’ net interest margins—the difference between interest earned on assets and interest paid on liabilities. Our analysis shows that, beyond the immediate challenges associated

with the COVID-19 outbreak, a persistent period of low interest rates is likely to put further pressure on bank profitability in the coming years.

Healthy banks play a key role in any dynamic economy, and are crucial for financial stability. When unable to generate profits, banks are less likely to provide loans and other financial services to households and firms, starving the economy of much needed credit. A simulation exercise conducted for a group of nine advanced economies indicates that a large fraction of their banks, by assets, may fail to generate profits above their cost of equity in 2025.

The COVID-19 outbreak is an additional test to banks’ resilience.

Once immediate crisis-related challenges recede, banks could resort to fee income increases or costs cutting to mitigate pressures on profits, but it may be challenging to fully allay such pressures.

Meanwhile, taking excessive risks to recoup profits may sow the seeds of future problems. It is therefore crucial that policymakers rapidly find a balance that safeguards financial stability and financial institutions’ soundness, while supporting economic activity.

Various strategies to preserve and strengthen capital should be considered, including restricting dividend payouts and share buybacks.

In the coming years, authorities will need to take on some of the “structural” challenges banks face. For example, financial sector authorities should incorporate the potential impact of low interest rates in their decisions and risk assessments. Supervisory capital planning and stress testing should include “lower-for-longer” scenarios, and the strength of business models in such an environment should be evaluated.

Supervisors should also remain vigilant and prevent any buildup of excessive risks that could reduce the banking sector’s resilience.

(Source: imf.org)

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WEDNESDAY MAY 27, 2020

Maritime

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IMO industry alliance intensifies efforts to cut ship emissions The Global Industry Alliance (GIA) to Support Low Carbon Shipping – ​ a key International Maritime Organization (IMO) initiative supporting ship decarbonization – plans to intensify its work on the ship-port interface to reduce emissions from ships.

This was decided at the recent GIA task force meeting, which took place over videoconference on 14-15 May. During the meeting, 21 participants from the industry and the IMO Secretariat discussed progress on a number of ongoing projects and set tangible goals for the GIA up to 2023.

Participants agreed to continue work under the existing workstreams, including alternative fuels and validating the performance of energy efficiency technologies, and to expand these even further.

They also agreed to embark on an entirely new workstream aimed at creating a “holistic approach to reducing emissions in the ship-port interface”.

This will support implementation by ports of regulatory, technical, operational and economic actions to help reduce greenhouse gas (GHG) emissions from ships, such as providing onshore power supply and safe and efficient bunkering of

alternative low-carbon fuels.

The new workstream will also identify additional measures that could be taken to reduce emissions in the ship-port interface. It builds on the work undertaken by the GIA on the “Just-in-Time” ( JIT) Arrival of Ships.

JIT operation allows ships to optimise their speed so they arrive at their destination port when their berth is ready for them – cutting the time ships spend waiting outside ports with their engines on, thereby saving energy and cutting costs and emissions.

The group further discussed as to how it could support the financial recovery of the maritime sector to COVID-19. The GIA also considered in detail the aims and objectives of the IMO-Norway GreenVoyage2050 Project and discussed ideas for collaboration, in particular, how to catalyze demonstration and trialing solutions in the GreenVoyage2050 pilot countries.

It was the first meeting of the GIA task force since it became part of GreenVoyage2050, an IMO-executed project, funded by Norway, to initiate and promote global efforts to demonstrate and test technical solutions for reducing ship emissions. The project also

aims to enhance knowledge and information-sharing to support the IMO GHG reduction strategy.

The GIA is a public-private partnership initiative of IMO that brings together maritime industry leaders to support an energyefficient and low carbon maritime transport system.

The alliance was set up as part

of IMO’s Global Maritime Energy Efficiency Partnerships (GloMEEP) project in 2017 but is now running under GreenVoyage2050 following a new agreement, signed earlier this year by 14 companies which have committed to financial and in-kind contributions, such as sharing expertise until 2023. worldmaritimenews.coma

APL boxship loses about 40 containers in heavy weather APL England, a 5,780 TEU containership sailing under the Singapore flag, lost around 40 containers in heavy weather while underway off Sydney, Australia, on May 25.

The ship reported a loss of main engine power, leading to heavy rolling and a collapse of container stacks, the Australian Maritime Safety Authority (AMSA) informed.

APL England was travelling from China to Australia when the incident occurred.

AMSA boarded APL England at the Port of Brisbane anchorage on Tuesday morning, and a surveyor conducted a seaworthiness inspection to establish the structural and operational condition of the ship following the collapse of container stacks on the deck.

“The outcome of this inspection will help inform if, and how, the ship might be brought safely into the Port of Brisbane in conjunction with Maritime Safety Queensland,” AMSA said.

“While it is still unclear exactly which containers have fallen overboard, initial indications are that the affected stacks contained a wide range of goods like household appliances, building materials and medical supplies. “ AMSA said that no dangerous goods appear to be in cargo in the affected areas.

The authorities are working closely with the ship’s cargo agent to confirm exactly which containers went overboard.

AMSA expects to have the outcome of the seaworthiness inspection and confirmation of the next steps by tomorrow morning.

“Once the ship is safely in port, we will begin our investigation which will focus on the safety of the ship including whether cargo was appropriately stacked and secured on board the ship, and any potential

breaches of environmental pollution regulations.”

AMSA has received a report of some medical supplies, such as face masks, washing up between Magenta Beach and The Entrance.

“This information has been passed on to NSW Maritime. These correlate to drift modelling of debris and are consistent with items listed on the

ship’s cargo manifest,” the authority added.

Modelling suggests that debris such as this could continue to wash-up over the coming days.

The NSW Government is expected to lead response for shoreline cleanup, with support from AMSA. www. worldmaritimenews.com

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Feature

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America’s delisting threat could pay off

BY SHANG-JIN WEI

A

fter passing unanimously in the US Senate on May 20, 2020, the Holding Foreign Companies Accountable Act is heading for the House of Representatives, and US President Donald Trump is expected to sign it into law. The law requires that all companies listed on US stock exchanges submit to audits reviewable by the US Public Company Accounting Oversight Board (PCAOB), and non-compliant firms can be delisted after three years. This has generated talk that all Chinese firms could disappear from US exchanges.

Some observers might question the wisdom of such legislation, on the grounds that it could hurt returns on US household savings, financial-sector profits, and the global competitiveness of US stock exchanges. While these are legitimate concerns, a US threat to delist Chinese firms could be worth the risk, leading not only to more credible disclosures, but also, perhaps surprisingly, to more listings by high-quality Chinese private-sector firms.

Truthful disclosure and severe punishment for noncompliance constitute the bedrock of sound capital-market governance. The US applies the same criteria to all firms that seek a listing on a US stock exchange, and oversight by the PCAOB is a key element of enforcing the rules. When a listed firm makes a questionable disclosure, the PCAOB reserves the right under the 2002 Sarbanes-Oxley Act to inspect the underlying accounting documents of its auditing firm. If deficiencies are found, the auditing firm must amend its report and take steps to improve its procedures and practices. This enhances investors’ confidence in the listed firms’ disclosures.

But the Sarbanes-Oxley Act does not apply to other countries, some of which have laws or regulations that prohibit local auditing firms from turning over accounting documents to foreign regulators like the PCAOB. China is one of those countries. Belgium and France also make it difficult for the PCAOB to audit their local auditing firms, but the PCAOB expects to be able to resolve the access problem by negotiation.

There are about 150 US-listed firms that are headquartered or operate principally in China. A few are majority state-owned – including China Life, PetroChina, China Telecom, China Unicom, and China Eastern Airlines – but around 90% of them are private-sector firms.

Among these are dynamic and highly profitable companies such as Alibaba, Baidu, Bilibili, Jingdong, and Ctrip.

In the past, the PCAOB has presumably tried to negotiate with Chinese authorities for access to auditors’ work product in China.

But trying to compel China to grant such access has not been a policy priority because US stock exchanges, investment banks, and money-management firms like to maximize the US listing of Chinese firms.

After all, over the past 15 years, Chinese firms have dominated global initial public offerings, and US stock exchanges have been competing fiercely with those in London, Singapore, Hong Kong, Shanghai, and Shenzhen for these listings. As the number of IPOs

by US-headquartered companies declines steadily (from around 300 per year in the early 1990s to fewer than 100 per year more recently), Chinese companies have become even more attractive to US stock exchanges.

Similarly, US investment banks earn fat commissions by taking firms public, and they have a home-field advantage when those listings occur on a US stock exchange. Indeed, cajoling by US investment banks is the main reason why so many Chinese companies have come to the US in the first place. And, for their part, money-management firms (or their clients) prefer – or, in some cases, are mandated – to hold US-listed stocks.

While one can see how delisting Chinese companies could reduce these US entities’ profits or global competitiveness, the potential impact on American investor interests is less clear-cut. On one hand, excluding firms that commit accounting fraud is obviously good for US investors. On the other hand,

accounting fraud is rather rare, and the risk of it tends to be outweighed by the sustained, sometimes marketbeating returns that many US-listed Chinese firms offer investors.

Delisting them therefore could mean foregoing sound investment opportunities for US investors.

Moreover, PCAOB oversight is not the only way to discover accounting problems. Many shortselling companies specialize in investigating and uncovering fake profits or bogus growth figures, and they sometimes are more thorough and creative than the PCAOB. For example, the short seller Muddy Waters recently uncovered accounting fraud committed by Luckin Coffee, a US-listed Chinese company, by sending investigators to visit its physical stores. Luckin’s bosses are now under criminal investigation in both China and the United States.

Given that the US has a vibrant short-selling industry to keep listed companies in line, it is understandable that some observers would object to a forceful and disorderly delisting that could inflict big losses on those holding US-traded shares. But the choice is not between doing nothing and delisting all Chinese firms. The more likely outcome of the new US law is that it will strengthen the PCAOB’s bargaining position vis-à-vis foreign authorities.

Because many US-listed Chinese firms are a dynamic part of China’s economy, one should not discount the possibility that the country’s regulators will accede to their US counterparts’ requests for accounting documents sometime over the next three years, before the first delisting under the law

could begin. China may withdraw its majority state-owned firms from the US market, but many privatesector companies would likely remain. Better yet, many more Chinese firms may opt for a US listing precisely because it enables them to signal the credibility of their financial disclosures.

A US listing has always been attractive to firms seeking visibility and foreign currency. The new law won’t diminish this. By enhancing the perceived quality of financial disclosures, listed firms may command a higher stock price, thereby reducing their costs of capital. When that happens, US investors, financial institutions, and Chinese private-sector firms will all stand to gain

Shang-Jin Wei, a former chief economist at the Asian Development Bank, is Professor of Finance and Economics at Columbia Business School and Columbia University’s School of International and Public Affairs.

Copyright: Project Syndicate, 2020. www.project-syndicate.org

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