The Securities and Exchange Commission (SEC) is advocating the establishment of an infrastructure development company by Government, with equity participation by international financial institutions, to address the infrastructure gap.
“Let’s have an infrastructural development company. If Government accepts and takes the initiative, it can invite international financial institutions to hold equity in it. For example, if we need US$1billion as capital for this company, Government could contribute about 10 or 20 percent then allow those international financial agencies to take up the rest,” Adu Anane Antwi, Director-General, said.
“Because of the [Government] debts, the suggestion was that we could set up an infrastructure development company. If it’s infrastructure, we have to do it with long-term loans because it could pay for itself over the long-term. If we had used loans to build Tema Harbour wouldn’t we have finished paying a million times over?” he said.
Mr. Antwi was speaking to the B&FT on the sidelines of the annual post-budget forum organised by tax-advisory firm PwC Ghana in Accra.
Conservative estimates by the government indicate that the country’s huge infrastructure deficit requires sustained spending of at least US$1.5billion per annum over the next 10 years to address the shortfall.
The deficit covers all the main infrastructure areas: roads, energy, water, aviation, housing, and ICT. In the housing sector, for instance, the government estimates that the country needs to build about a million more units to bridge the demand-supply gap.
Approximately US$829million has been allocated for infrastructure development in the 2013 budget presented to Parliament last week. The key areas are water resources, works and housing, transport, roads and highways and communications.
In the water sector, Government has earmarked projects targetted at improving access to water and sanitation in the Upper West, Upper East, Northern, Brong-Ahafo Central and Western Regions.
There is also an allocation of US$5million for the completion and purchase of residential houses for public-sector workers The main fiscal challenge this year is the deficit, which was 12.1 percent of GDP in 2012 -- a level seen as unsustainable for the economy. Mr. Terkper’s 2013 budget promised to narrow the gap to 9 percent of GDP this year, and 8 percent in 2014.
Mr. Antwi said an infrastructure development company will ease the burden on the deficit when Government issues bonds, as its liability will only be limited to its share of investment in the company.
“Then this company would then be issuing its own bonds because it’s a strong company, owned by the government, IFC and others. When this company comes to the capital market and issues infrastructure bonds to do developments, it will use the money coming from the projects -- such as rents and tolls -- to redeem them,” he said.
