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PEF engages President-Elect on Strategy for Private Sector Development

Mr. Chairman, 
Your Excellency The President-Elect Of The Republic Of Ghana, NANA ADDO DANKWA AKUFO-ADDO,
Your Excellencies, The Ambassadors of the United States of America, France, Switzerland, Spain and Brazil. 
Your Excellencies, The High Commissioners of Canada and the United Kingdom.
Honorable Members of Parliament & Parliamentarians-Elect
Members of The Diplomatic Corps & COUNTRY REPRESENTATIVES OF INTERNATIONAL ORGANIZATIONS,
Nananom,
MEMBERS OF THE PEF GOVERNING COUNCIL AND THE DELEGATES ASSEMBLY,
Titans of Industry,
Distinguished Invited Guest,
Members of The Media,
Ladies And Gentlemen
Good Afternoon.

It is a great opportunity today for the entire private sector in Ghana to be the center of attention and focus as our President-Elect chooses to unveil his Vision and Strategy for the private sector in the development of Ghana. We at Private Enterprise Federation and its 15 member associations and chambers cutting across from manufacturing, mining, oil and gas, agricultural production and export, construction, banking, insurance, telecommunications and commerce including the Association of Small Scale Industries (ASSI), who together pay the majority of corporate taxes in the country; are delighted and honored to host the President-Elect this afternoon.

Your Excellency, The President-Elect, the private sector constitutes the largest employer in the Ghanaian economy with 93% plus jobs creation consisting of the formal private sector employing 6.8% of the working population and the informal sector employing 86.2% of the population totaling 93% as against only 6.2% by the public sector, according to the 2010 National Population Census. This indicator emphasizes the relevance and catalytic role of the private sector in jobs and wealth creation in pursuit of a well-functioning economy, towards the development of a prosperous Ghana. It is also documented from research that private sector investments have larger positive impact on growth than public investment.

Your Excellency, as you assume office and leadership of the country on January 7th 2017 and usher in a new frontier to find solutions to the multiplicity of problems in the economy, we at the Private Enterprise Federation commit ourselves to fully engage your government as partners not only on policy formulation but to lead in the implementation of the directives, programs and opportunities that would come out of these policies.

Sir, from the data stated earlier, there is no doubt that the private sector is the vehicle to create jobs.

Today is not a day to enumerate on the ills in the economy that has constrained the private sector from operating at any meaningful levels, especially the domestic indigenous private businesses, the local Micro, Small and Medium Enterprises(MSMEs). Rather, we are here to listen to you Sir, your vision and strategies to lift the domestic private sector out of its predicament. But before that Sir, we humbly offer ideas for your consideration on issues and areas of prime importance to the domestic MSMEs:

First, we request structured and functioning meetings between the Federation, its members and other private sector players with Your Excellency and His Economic Management Team(EMT) within the month following the end of each quarter during your presidency, to review the performance of the economy and its impact on the operations of the private sector, at each quarter end.

In the short term, to boost the confidence of investors and the local business operators, we envisage the President-Elect to address the issue of removing some of the numerous taxes that are stifling the ability of the domestic MSMEs to become competitive and profitable, to create jobs and wealth. i.e.

  • The Special Petroleum taxes(SPT)
  • VAT on financial services,
  • Reinstate the VAT Refund account to accrue funds to pay off VAT credits owed to businesses.
  • Pay off arrears to contractors and other local service providers whose finances are severely constrained by these arrears threatening their survival.
  • For our financial institutions to provide the needed liquidity to fuel domestic production, we request that an ASSET RECOVERY INSTITUTION is created to buy out the bulging portfolio of Non-Performing Loans(NPL) of the universal banks at fair discount, to allow them room to service the financial needs of our MSMEs with strict guidelines.
  • We request that you review the operations of the EXIM Bank to fully resource it to become an effective source of funding to the private sector.
  • We are also seeking for you to prioritize domestic capital mobilization to create a substantial pool of long term capital to finance our domestic private sector investments.
  • Currently, our Pension funds are virtually 100 % invested in Government Treasuries. In your effort to boost private sector investments, we request not more than 40 % of these pension funds be invested in Government debt, freeing a greater % of the funds for private sector financing.
  • Whilst on the pension issue, we will be grateful to locate the whereabouts of the 5% allocation in Tier II pensions, that were transferred from SSNIT to the National Pension Regulatory Authority (NPRA) years back.
  • We request Government to commit to only borrow from the capital markets when there is a need, to avoid crowding out the high risk private sector from the banking system.
  • Ensure competitive procurement processes limiting the use of sole sourcing, violation of which should result in punitive measures to officers who violate the law.
  • To enable local investors including our member associations, AOMCs, GLiPGOA and BDCs participate in investments in the upstream of the oil and gas industry, we would be submitting proposals to that effect. The prevailing and almost institutionalized back door(illegal) importation of refined petroleum products into the country is stretching the very existence and survival of our local Oil Marketing Companies and must be halted with utmost urgency. Definitely, the culprits of this illegal activity must be brought to justice, Your Excellency.
  • Insurance coverage in the oil and gas industry should be engaged through our local insurance industry to bring on board foreign partners where necessary. Not the other way around.
  • “Sym boxing” an illegal interception of foreign calls to Ghana perpetrated by foreign agents is adding extra cost to consumers as well as depriving our local telecom operators income on which they can pay taxes to the government. We request an immediate action on it by Your Excellency.

Under your administration Sir, we envisage a private sector led economic development by a fully engaged domestic private sector actors for a globally competitive and thriving private sector operations in Ghana, where the scales are currently not in favor of our MSMEs and local investors.

  • Let’s review a scenario where 2 investors one from overseas and the other local, are engaged in similar competitive business in Ghana and see the undue constraints that is disadvantaging the local investor.
  • LOAN FINANCING a) local borrows at 30% b) foreign at 3% from home state
  • Margin of 27% cost to local investor which does not affect the foreign
  • TAX EXEMPTIONS & INCENTIVES ,
  • a). Local at 0   b). foreign 25% corporate taxes exemption, additional advantage of 25% to the FDI
  • total of 52% competitive advantage to the FDI

 

Your Excellency, PEF and its members seek a level playing field and a competitive and stable investment climate for all where smart regulations will be the order of the day. However, in view of the prevalence of the above scenario, we solicit support that seeks out the local private sector first, before considering foreign parties, an investment climate that is mandatory for foreign direct investments who are beneficiaries of tax exemptions, to enter into a partnership with local businesses, on at least 30%-40% equity participation by indigenous domestic investors or float equivalent percentage of equity shares in the capital markets for the benefit of local investors.

Transfer of technology can only be effected in a partnership business operations, not in a solo equity investment.

  • We request a review of the Economic Partnership Agreement(EPA) and how it is going to affect both our exports and our infant domestic industries in view of BREXIT, one of our biggest trading partners in the EU.
  • We request the removal of the 1% tax on income from agriculture investment which is further curtailing investment and growth of the sector that employs 44.3% of our population.
  • Incentivize the establishment of nationwide Warehouse Receipts System(WRS) in grains, similar to the CoCobod structure for cocoa. But also, as a prelude to establishing a viable commodity exchange.
  • Agriculture is key to Ghana’s industrialization so all efforts to incentivize value addition to manufacturing and processing of various foods and products, will immediately reduce our postharvest losses that run between 35-55% in various commodities with a high propensity for numerous jobs creation.
  • To galvanize private sector investment in the sector that can sustain at least two (2) season agriculture instead of the single season we have, we commit to partner the government in a PPP to create a Water Pipeline across the entire nation, from ADA (where millions of clean water flow freely into the sea) to the remotest part in Upper East and West regions. Turn this free-flowing water into an instrument of immense transformation. First to guarantee every Ghanaian clean drinking water, secondly for irrigation to guarantee 2 or 3 seasons in agriculture to increase yields for food security, and third, to be used to provide mini-hydroelectric dams where applicable, to fully power businesses in various locations across the country, including the one district one factory vision, your Excellency announced during the campaign.

The Private Enterprise Federation realizing the ineffectiveness of MSMEs in the districts and various communities, started a program to create Districts Business Coalitions(DBCs) in selected districts to aggregate all business players in the locality into a single movement where they engage duty bearers, District, Municipal and Traditional rulers to identify business opportunities for the benefit of the local businesses. With support from Good Governance Africa, the Federation in June 2016 started the establishment of pilot DBCs in three (3) localities, Techiman in the Brong Ahafo region, Mampong and Ejura in the Ashanti region to be replicated across all districts in the nation in the near future. PEF is currently engaged with our sponsors Good Governance Africa, Konrad Adenauer Stiftung and others to continue the program in all the remaining districts in a 3-year duration.

With the right incentives, these local DBCs will serve as the investors and business group in the respective districts, to invest and run the district factories either solo or through PPP arrangement: this is the key to the ONE Factory per District program that can create jobs and wealth in our localities, to also stem the migration of our young people to the various metropolis, where housing and other amenities are so stretched, turning our cities into “container cities” 

Your Excellency, the Federation pledges its full commitment to engage your administration to drive the implementation of this program. We trust this program will be private sector driven to create jobs with meaningful salaries and wages. Research from various organizations has indicated that Ghana needs to create at least 400, 000 (four hundred thousand) jobs per year for the next five to seven years to accommodate the young generation entering the job market. These new jobs will offer decent salaries and wages, unlike the current situation where wages for these young people selling at the traffic lights are below subsistence level which is eroding the purchasing power of the country as a whole.

Sir, the purchasing power of government has a tremendous impact and pull on private sector businesses. It is important that public sector expenditure should be streamlined including servicing of the huge government debt. However, this should not lead to severe austerity. It is our sincere wish that the huge public debt load both local and foreign will be negotiated and restructured to allow for a period of moratorium of not less than eight to ten (8-10) years to enable you use private sector tax payments to execute your programs which will offer a lifeline to the business community.      

Your Excellency, we would not have done justice to our nation today, without committing our full support to your directive to appoint a functioning Special Prosecutor, independent of both CHRAG and the Attorney Generals to tackle the immense corruption in our system and remove the incessant demands and extortion on private sector, for contracts and other services. 

Sir, due to the numerous constraints on the domestic private sector, we could go on and on but we are here to listen to you, Your Excellency, on your Vision and Strategy for the private sector.

 The Private Enterprise Federation and its members are honored for this privilege to host the delivery of your maiden address on private sector development.  

For that, we thank you very much Sir!

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