Investment climate very tough - Databank Group CEO

The drop in disposable income levels as a result of rising inflation and other economic factors vis-à-vis the non-corresponding increase in salaries and non-availability of jobs in the economy has made the investment climate very tough, Kojo Addae-Mensah, Group Chief Executive Officer of the Databank Group has said.

He told the B&FT on the sidelines of the annual general meeting for Databank’s five funds in Accra: “The current investment climate is tough, I must admit. It is a very tough environment we find ourselves in trying to convince people to part with disposable income, which is what investment is all about.

“As it stands,disposable incomes are dropping because inflation is catching up on with us but salaries have not been going up and jobs are not even being created. Also, the economic situation and market factors have made the cost of doing business very high.”

According to the investment banker, reversing the situation will require the fundamentals of the economy to be set right as the dilly-dallying of the cedi and rising inflation does not favour investments since they have left investors doubtful and hard for fund managers to predict and plan.

He indicated: “The major thing to be addressed to smoothen the investment climate will be to stabilise the exchange rate and keep it predictable. Inflation has to be controlled to be within the lower double digits bracket so that the cedi value of investments will not be eroded as a result of depreciation.

“It is very worrying to spend months upon months convincing people to come and invest and when finally, they come to invest, things get volatile; and it is very difficult to convince them again.”

The Databank boss said controlled inflation and the subsequent reduction in interest rates will boost the stock market and equity because people will be more willing to take risks for returns.

He acknowledged the fact that the average Ghanaian investor will have to meet the basic needs of food, clothing and shelter before thinking of how much is left to save for the future but advised the public to embrace a strong investment culture.

“At Databank, what we always say is that investment is a habit that must not be stopped; no matter how small a person earns, he/she must try to apply the principle of tightening.”

Mr. Addae-Mensah said Databank is now reaching out to tertiary and second-cycle institutions in the country to educate students who are the future of the job market to ensure that they start their working life with culture of investment.

Performance of Databank’s funds

Databank’s money market fund, MFund, ended the year with an annualised yield of 21.94 percent which was slightly lower than the benchmark 91-day Treasury Bill average annual yield of 22.90 percent; and at a share price of GH¢0.6960.

The fund’s investor base saw a 34 percent increase to 80,135 shareholders and that reflected in the growth of assets under management from GH¢133.11 million to GH¢182.39 million.

Equity mutual fund, Epack, increased its price by 0.65 percent, ending the year under review at GH¢2.6373 with assets under management surging to GH¢134.73 million despite the turbulent investment climate.

The two balanced funds—BFund and ArkFund—recorded 13.08 percent and 18.28 percent returns on investment with assets under management surging to GH¢16.27 million and GH¢6.71 million, respectively.

The educational fund, EdiFund—which is in two tiers—recorded 18.52 percent on the short term fund and 16.70 percent on the long term fund.

Mr. Addae-Mensah told the B&FT that the performance of the funds was a reflection of general economic situation in the country as well as conditions on the capital market where equity funds are struggling a bit while money market funds are doing great.

He said: “The money market funds which play in the fixed income markets where interest rates are generally high are doing great; Mfund is doing great, Arkfund performed its best in a while in the year under review but statistics show and research has proven that ultimately it is the equity funds that end up performing best.”