Govt secures loan for promotion of local enterprises

Parliament on Tuesday approved a 10 million Euros loan agreement and grant facility of one million Euros from the Italian Government for the financing of the Ghana Private Sector Development Fund and for the setting up of a Project Management Unit.

The request was made by the Ghana Government to the Italian Government in 2001, for the provision of a soft loan to establish a credit facility for the promotion of the Small and Medium Enterprises (SMEs) to be known as the Ghana Private Sector Development Fund (GPSDF).

Mr Eugene Atta Agyepong, Chairman of the Finance Committee moved the Motion for the adoption of the Report and seconded by Mr Kwamena Bartels, Minister for Private Sector Development with contributions by members. The terms of the agreement are that there would be an interest rate of 0.5 per cent per annum, repayment period of 36 years, a grace period of 24 years and a Grant Element of 80 per cent.

The beneficiaries of the credit facility shall among others fulfil an eligibility criteria of the ownership of the enterprise must be one hundred percent private, the number of employees of the enterprise must be equal to or higher than five and lower than 300 and a turnover not lower than 30,000 euros. The Committee in its observations said that the credit facility is an attempt to solve the difficulty facing SMEs in accessing affordable long-term funds for machinery, equipment and working capital.

The Committee noted that the project amount will not be used to finance the project management unit. He explained that attached to the loan is 1 million Euros grant facility to set up the Unit to ensure speedy execution of the project.

Mr Agyepong said the committee expressed concern about the eligibility criterion that an enterprise must not have a turnover lower than 30,000 Euros equivalent in a fiscal year to be too high and that it would lead to many small and medium enterprises ineligible for the credit facility.

The Committee also observed that the agreement would be free from any taxes by Ghana for the grant component of the agreement and that the Ministry of Finance and Economic Planning gave notice that it would soon place before the House for Parliamentary approval, requests for tax exemptions on the grant component of the agreement.

Mr Modestus Ahiable, NDC-Ketu North said the agreement was not transparent in accessing the loan and that he was against the arrangement where procurement of materials were to be done only from the Italian government and not giving room for local purchases.

Mr Kiston Akomeng Kissi, NPP-Akwatia said most often beneficiaries of such facility fail to pay back the loans and urged the government to take a cue from the past mistakes committed by Government for not ensuring that local entrepreneurs pay for the huge loans disbursed to them.

Mr Abuga Pele, NDC-Chiana/Paga said a matter of concern is the method at which the committee came out with the agreement without stating the mode of interest and how the loan is to be paid.

He said there was no need for the setting up of another management unit since the Ministry of Finance and the Ministry for Private Sector Development already have mechanisms that oversees projects and that it would be waste of state funds in establishing another one.

Mr Nobert Awulley, NDC- Builsa South said his concern was that the loan agreement had a grace period of 24 years that indicates that the Implementation Unit would be operating for 36 years and that would defeat the purpose for the loan.

He said it was important that the Ministries of Finance and Private Sector Development take a critical look at the terms for setting up the Implementation unit and that Government needs to have a free hand in determining what to do with the loan and where to procure its items under the project.

Mr Felix Owusu-Agyepong, Majority Leader said the procurement process is in the right direction since it would allow the giver of the loan to determine the appropriate items to be purchased.

He advised local entrepreneurs to co-operate and ensure that items that are bought under the project are of high quality and to look out for suitable markets that would ensure the advancement and development of the private sector.

Mr Doe Adjaho, NDC-Avenor said the reservations complained earlier by the Minority side about the terms of the loan agreement has been explained by the Italian Embassy and urged all to support the approval of the loan.

Mr Alban Bagbin, Minority Leader said it is important for Government to access concessionary loans for the growth of the private sector but care should be taken that such loans are not abused.

He said since the loans come in the form of equipment and machinery and not in cash, government should assist such beneficiaries to utilise the machinery efficiently to be better placed for the beneficiaries to pay back the loans without any difficulty.

Mr Dan Abodakpi, NDC-Keta said the difficulties in the monitoring policy, need to be improved while the financial adequacy requirements by the banks are critically looked at.

He said the small and medium enterprises have problems that even the banks find it difficult to assist in solving and suggested the development of bankable projects to assist them to grow.

Mr Abodakpi cautioned the government about quickly signing some of the bilateral agreements since they are sometimes not favourable especially to the developing countries.

Mr Bartels gave the assurance that the Ministry was working to get donors who are prepared to finance the SMEs whose turnover in a fiscal year is below the 30,000 Euros.

He said provision has been made in the agreement to allow for 25 per cent of the items to be bought locally adding that many of the SMEs would be eligible if critical assessment is done on the issue.