In recent a speech in preparation for the scheduled 'securities week' late next month, the Minister of Finance and Economic Planning indicated that it is the goal of this administration to catapult Ghana into the position of sub-region's financial hub.
The title of the story was a little bit misleading. The Minister's ambition was to be the dominant force specifically in the 'sub-region' and not the entire continent of Africa.
Republic of South Africa has already clenched that accolade. Regardless of the Minister's focus area, the idea is indeed a goal worthy of all strenuous efforts. But one wishes to know whether the Minister is not putting the horse before the cart here.
The NPP administration has unequivocally decided to use private enterprise as the main agent of development. They are in good company. Whether we are on the left or right on the political spectrum, most if not all the developed economies are capitalist countries. Most of these capitalist countries have accepted the fundamental concept of capitalism (free enterprise) and where necessary have modified it to suit their unique local environment and culture. Copious literature is available for the doubting Thomases.
Establishing a capital market is sine quo non for modern day capitalism. Just as voting does not ensure democracy, existence of capital markets per se also, does not ensure capitalism. Luckily we have a functioning stock exchange in Ghana. A stock exchange survives on investors. Though Ghana has an embryonic stock exchange, the knowledge of its functions and advantages are known only to a minute section of the general public.
According to recent news reports only 1.5% of Ghanaians are involved in the stock market. As if this is not bad enough, '75% of all shares are held by non resident foreign investors'. The Ministry of Finance in conjunction with the Ghana Stock Exchange should undertake an intensive education of the public. This exercise can be started in the high schools. In America here, students in certain high schools are introduced to the inner workings of stock market at an impressionist early age. Such students are given some make-believe funds to invest on Wall Street. They do research companies and make their selections. They follow the fluctuations of the prices of their assets and sell them when and where necessary. At the end of a session, the student with the most appreciation of assets is rewarded. Such students, before they graduate from high school, know the workings of Wall Street. Some become stock brokers or they manage their assets better in the real world When the average Ghanaian knows an enterprise is profitable he puts his heart into it.
Examine the phenomenal rise of the cocoa industry in Ghana about a century ago. The industry attracted peasants and illiterates to invest in that industry. During the era of Kutu Acheampong many Ghanaians went into rice farming in the north when they became convinced of its profitability. Until quite recently, Ghanaians knew nothing about treasury bills. It is not so anymore. Educate the Ghanaian of the stock market and he is likely to invest in that area. Society could also benefit. Societies, like individuals abandon traditions and bet on new ideas and sustain heightened levels of effort when they are educated and converted.
In countries with well patronized stock exchanges tribal and ethnic animosities are relegated. Such societies become 'future' oriented. But here again it needs education. Education without practice is useless. For Ghana stock exchange to prosper and be more dynamic, the government should, in partnership with the financial institutions, wean Ghanaians from our cash only commercial transactions. Checks and other drafts are the building blocks of financial markets. The relevant government agencies should find means of encouraging and offering incentives to Ghanaians to use checks more often. Government agencies like Ghana Electricity and Water and Sewer Corporation could offer discounts to customers who pay their bills on time. Ministry of Finance could also adopt such policies with taxpayers; those who pay their taxes with checks would get specified discount.
School should encourage parents and guardians to pay tuition fees with checks. When I started high school more almost five decades ago my guardian accompanied to school on the first day of school. She did not trust I could handle fifteen pounds cash commuting from La to James Town, Accra. I would not be surprised if parents and guardians are still having such apprehensions because of our cash only transactions. A single check could was all that was needed then and still needed today to pay a tuition fee. Commercial banks could offer interests to current account holders who pay their bills with checks without bouncing a check in one calendar year. Incentives work. Yes indeed, blanket usage of checks has its inherent risks. Everything venture in life has risks. Doing nothing is equally risky. Failure to act timely is also risky.
Besides the cost of cash only transaction to the general economy, excessive use of cash affects the life span of the Ghana currency. May be the with the exception of the Zimbabwean dollar, I have not come across a currency so filthy and mutilated in my life than the Ghana cedi. Some cedi bills even have cello tapes on them; many also stink. More frequent use of checks could extend the life of our currency at the margins thereby saving the government some funds. Ghana indeed could be the hub of sub-regional finance but we have at the same time take care of these seemingly imponderables and trivial.
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