Investor interest soars

- Ghanaian German Economic Association

President of the Ghanaian-German Economic Association (GGEA), Stephen Antwi, has said that lots of foreign investors fro m the Euro-zone have expressed interest in doing business in Ghana.

Speaking to the Financial Intelligence in Accra last Friday, Mr Antwi explained that the GGEA has received a higher number of investors showing interest in doing business in the country this first quarter of the year than it recorded for even a half year period in 2008.

According to him, lots of businesses in Asia and Europe are seeking to relocate as a result of the global recession and have seen Ghana as a desirable destination since the recession has not had much impact on economic activities here.

He said the government’s agric policy has been welcome news for many of these investors who seek opportunities in the agro processing sector. The GGEA boss stated that a major factor that has sparked the mad-rush for business opportunities in the sector is the current low cost of capital goods on the European market due to the recession.

Mr Antwi noted that interest rates are also very low in the Euro Zone and businesses want to take advantage of that to expand their operations in virgin territories.

“Whilst interest rates hover around 35% in the country following the recent adjustment in prime rate, the European Central Bank has slashed rates, and banks are charging a little over 1%”.

Mr Antwi pointed out that this presents an air of opportunity for local businesses as well, saying that, his outfit has been exploiting ways to assist local businesses in the wake of the current challenges.

He said the GGEA would be taking a number of Ghanaian business executives to Germany on April 21 this year, to meet German businesses to explore opportunities for partnership.

…but local businesses still nag

Accelerating inflation and accompanying high interest rates which have been ascribed to the political transition and the global recession are forcing several Ghanaian establishments out of business, a Financial Intelligence survey has revealed.

After the gruesome December elections that nearly wrecked macro-economic gains, local political sentiments continue to feed into investor perceptions, delaying expected resuscitation of the local economy. Inflation climbed to a five year high of 20.34% in February, and interest rates are in the region of 30 – 36%.

With the central bank tightening monetary policy, and the fiscal authority outlining measures to curtail deficit, investor confidence is bouncing back slowly, but businesses say they still feel the pinch from earlier disruptions.

The survey revealed that businesses across all sectors of the economy are going through challenging times, with businesses into importation witnessing serious dislocations as a result of a sharp depreciation in the local currency.

In the financial services sector, banking institutions, many of whom posted impressive performances in the past year, complain of going through tough times.

Several banking chiefs interviewed commented that as a result of the surge in inflation and interest rates, many have favoured going for Government securities, reducing deposit levels at banks. Gains from fixed term loans offered earlier have been slashed, they say.

Frank Brako Adu Jnr, Managing Director of CAL Bank Limited, told this reporter that to deal with the challenges, banks have had to cut down credit supply and resort to charging very high interest on credit facilities.

He added that the risk of lending has been on the up-side, an d investing in government securities has been a safer option for most banks. “The banks do not have a bottomless pocket”, he said, adding that “banks have thus been cautious of how they lend out in view of the current challenges”. Businesses dealing in imports also complain bitterly about the difficulty in getting foreign currency for transactions and the sharp increase in cost of freight as a result of the depreciation in the cedi.

Businesses engaged in the importation of used vehicles and vehicle parts had other concerns. Sales volume s have been low and gains from sales are unable to replace stocks.

Emmanuel Abobilah, Managing Director of Sekoma Company Limited at Abossey Okai, told this reporter that aside these challenges, the activities of large motor companies dealing in brand new vehicles is seriously affecting their operations.

According to Mr Abobilah, these companies offer better payment terms to clients, allowing them to pay for vehicles purchased over a long period of time.

Construction activities have similarly slowed. Dealers in construction materials claim demand for their wares have been on the lower side since January. Suppliers of cement, iron rods and wood say business has not been worthwhile.

Stephen Antwi, President of the Ghanaian-German Association (GGEA), on his part notes that the global recession has affected the operations of European establishments doing business in Ghana.

According to him, businesses of European origin are having challenges as a result of the intensification of the recession in their home country. Pointing to clear evidence in support of this fact, Mr Antwi said euro transfers to subsidiaries in Ghana has been pointing downwards in recent times.

He further explained that demand for items which are considered non-essential by the European community has fallen significantly, affecting businesses engaged in the export of such non-traditional commodities in Ghana.