It is my great pleasure to welcome you all to Ghana, and to the third, 2017 Development Finance Forum. As we say in Ghana, “Akwaaba!” You are amongst a people who pride themselves on their sense of hospitality. I hope that, by the end of your visit, you will agree with this claim.
With the first two meetings of the Development Finance Forum having been held in Europe, – Rotterdam (2015) and Dublin (2016) – I believe that the choice of Ghana to be the first to host this Forum outside Europe has something to do with the special place it holds as a beacon of stable, democratic governance in Africa, as well as the proverbial warm hospitality of the Ghanaian people. Indeed, this forum about unlocking private investment in African markets cannot find a better venue than in our vibrant capital city of Accra.
It is also very significant that this Forum is being held in Africa, where the challenge of raising finance for development to address critical investment needs in infrastructure, education, health, industry and agriculture, amongst others, is probably the greatest, relative to incomes. In a 2010 report, the World Bank estimated that the “overall cost to build new infrastructure, refurbish dilapidated assets, and operate and maintain all existing and new installations in Sub-Saharan Africa is estimated at almost $93 billion a year for 2006 through 2015” with roughly 40% of this required in the power sector alone.
Ghana’s infrastructure finance gap is estimated to run between 3.9 and 5.5 billion US dollars per year through 2026. In other words, more than 40 billion US dollars in total. What is true is that we cannot meet this demand without financing at a much larger scale through significant additional private involvement. That is true for Ghana, and true for the entire West African region and beyond.
We understand the role that international development finance institutions play in helping to de-risk and attract private capital into infrastructure development in Africa. While this conference deliberates on these issues, I will like you to address also the issue of how African countries can, by themselves, take action to de-risk their economies and attract low-cost private capital.
My government, which has been in office barely five months, inherited a very difficult economic situation. I should add, however, that one would not have thought so going by the reports of the IMF, which were largely at variance with the reality experienced by Ghanaians. As a result of the situation we inherited, we have set for ourselves a long term agenda for a “Ghana Beyond Aid”, requiring far-reaching reforms in:
- economic governance: involving fiscal responsibility and discipline
- political governance: addressing corruption and unresponsive bureaucracies
- focus on productive sectors: addressing agriculture and industry, and
- improving the business environment: addressing bottlenecks and formalising the economy
Ghana is a land of opportunity for private capital. More importantly, Ghana is “Open for Business” and has taken it upon herself to build a business-friendly economy that will enable her get to the stage where the opportunities available here will help her build an optimistic, self-confident and prosperous nation. Beyond Aid.
Fundamental to attracting private sector investment is maintaining a stable macroeconomic environment in the context of a growing economy. This is why, since assuming office, my government has established a macroeconomic framework with policies that seek to restore fiscal discipline and macroeconomic stability.
We have put in place measures to reduce the fiscal deficit bequeathed to us from 9% in 2016 to 6.5% this year. Government has created fiscal space by capping earmarked funds to 25% of government revenue, and realigning expenditures to government priorities. This is a policy that successive governments have tried over several years to implement, but were unable to do.
To boost growth, we have re-oriented fiscal policy from a focus on taxation to a focus on production. In this regard, we have undertaken the following tax reforms:
- abolished the 1% Special Import Levy
- abolished the 17.5% VAT/NHIL on domestic airline tickets
- abolished the 17.5% VAT/NHIL on financial services
- abolished the 17.5% VAT/NHIL on selected imported medicines, that are not produced locally
- abolished the 5% VAT/NHIL on Real Estate sales
- replaced the 17.5 VAT/NHIL rate with a flat rate of 3 % for traders
- granted Capital Gains Tax Exemption on stocks traded on the Ghana Stock Exchange or publicly held securities approved by the Securities and Exchange Commission
Furthermore, effective September 1 this year:
- clearance of goods from Ghana’s ports will be 100% paperless
- all internal customs barriers in the country will also be removed to facilitate the movement of goods.
As part of the process of formalising the economy, we will implement a digital property addressing system for Ghana this year and also issue biometric National Identification cards to residents this year, so that every resident will have a unique identification number.
My Government has also moved quickly to address the energy supply constraints, by tackling the financial challenges of the sector, as well as defining a policy framework that would encourage private sector investment. We will very soon issue a $2.5 billion energy sector bond to retire the legacy debt of the energy sector, and create space for increased investment in the sector. We have encouraged majority Ghanaian private sector participation in the Electricity Company of Ghana (ECG), the main distributor of power in Ghana, under the Millennium Challenge Compact with the U.S. Government. The Government has reviewed existing Power Purchase Agreements (PPAs). Our policy is to move Ghana from a reliance on thermal towards renewable energy. We have, thus, decided that new PPAs will only be signed for renewable energy.
We have, furthermore, ushered in a new regime of accountability. All ministers have declared their assets, and a Special Prosecutor’s Office is being set up to prosecute corruption in a depoliticised manner. In addition, we have established a value for money unit within the Public Procurement Authority. This unit will review all contracts to ensure that value for money information is provided on time.
Our focus in the real economy is to promote investment both in the industrial and agricultural sectors. In agriculture, we have instituted a programme that we have dubbed “Planting for food and jobs”. It provides farmers access to affordable inputs, extension services and improved irrigation infrastructure. We are embarking on a private sector led industrialisation programme through a “one district, one factory initiative”, and a $100 million stimulus package for the revival of distressed companies.
My government has also decided, as a matter of policy, to seek more private sector equity financing for infrastructure projects, rather than the historic resort to borrowing and more borrowing that has resulted in the ballooning of our debt stock. It is a policy underpinned by our commitment to the private sector, and by our desire to maintain debt sustainability.
We are implementing a policy of re-profiling our existing debts to extend the maturities, reduce the interest burden and create space for the private sector. About six weeks ago, Ghana issued, for the first time, a 15-Year local-currency bond, raising in that cycle more than US$2 billion. That is evidence of the returning private investor confidence in Ghana. Because investors make decisions on the basis of their perception of risk and uncertainty, this transaction sends a clear message to the markets that this new government, my government, has started on a sound footing and that Ghana is on a path of fiscal consolidation, debt sustainability and growth.
Our actions are only a part of the equation. We need risk reallocation instruments from the multilateral developments banks, like guarantees and insurance, to be deployed to trigger additional investments. For example, a 700 million US Dollar World Bank Group guarantee enabled us mobilise 7.9 billion US dollars of private investment. These are the kinds of deals that should happen more often in Africa, as development finance institutions partner with private capital.
It brings into sharp focus the subject matter of this conference: leveraging development financing and partnerships to attract private capital to finance infrastructure development in mainly developing and distressed countries in line with the new thinking, referred to as “From Billions to Trillions: Transforming Development Finance”.
Ladies and gentlemen,
I am pleased to see that this event has a regional design. Similar events took place in Freetown and Abidjan earlier this week. I commend the World Bank Group for designing this novel format to convene experience and knowledge from across West Africa and beyond. It underscores the importance of regional cooperation in the agenda of transformation.
The failure of one country will negatively affect the success of all. This is why my government applauds the members of the International Development Association, IDA, for a strong replenishment that scales up support to countries in fragility, and invests in private sector through their bold move to establish a 2.5 billion US dollar Private Sector Window. Through the Window, public finance will be used to catalyse private investments in low-income countries, and, in particular, in economies that are under stress of conflict and fragility. Several of these countries are in this region of West Africa. As a Minister for Foreign Affairs of Ghana a decade ago, I was involved in efforts to bring back stability to the countries of the Mano River Union. The peace agreements and peacekeeping interventions in Sierra Leone and Liberia between 1999 and 2003 have led to stability in the region. We have seen how these interventions paved the way for some pioneer investments.
I have talked about what the public and private sectors, development finance institutions and multilateral development banks can do in order to catalyse additional private finance for development. Each can contribute through their instruments, whether it is through legislation such as our PPP law, or the Private Sector Window of the World Bank Group. There is one thing that the public and private sectors need to do more of and where we are all equally responsible: to mobilise the good power of finance, we need to cooperate more and we need to cooperate smartly. Amidst all the complexity of the 21st century world, our interdependence requires such cooperation.
This spirit is captured in the adinkra symbol associated with this conference: ‘Boa Me Na Me Mmoa Wo’, representing co-operation and interdependence. The public and private sectors need each other, need to understand each other and adapt their strategies in order to contribute to each other’s success. ‘Help me, so I can help you”. That is the literal meaning of the adinkra symbol.
Moreover, I should note that multilateral development banks such as the World Bank Group can help facilitate these partnerships and create the platforms that generate ideas and nurture these to success, just like you will do here in Accra. Building partnerships takes time and commitment, and their rewards often only show after a long time has passed. The World Bank Group, African Development Bank and other multilateral financing institutions can help lower the transactional costs for the public and private sectors to enter into partnerships and alliances. As a shareholder and a client of the World Bank Group, I ask you to continue to invest and improve in that role.
We are at a juncture in the history of our continent, where a new generation of leaders is emerging: leaders who are committed to governing their peoples according to the rule of law, respect for individual liberties and human rights, and the principles of democratic accountability; leaders who are looking past commodities to position their countries in the global marketplace; leaders who are determined to free their peoples from a mindset of dependence, aid, charity and hand-outs; leaders who are bent on mobilising Africa’s own immeasurable resources to resolve Africa’s problems; and leaders who recognise the connectedness of their peoples and economies to those of their neighbours. We must embrace this forward march, this welcome development, with all our strength and with the best of intentions.
I truly hope that this Forum will help produce powerful new ideas, partnerships and alliances for Africa.
I wish you all good luck, and it gives me pleasure to declare the Third, 2017 Development Finance Forum of the World Bank Group officially opened.