Government is finalising a revised Value Added Tax (VAT) bill to broaden the base of the tax, which could include extending it to financial services. Financial services, whose share of GDP has risen from 3.8 percent in 2008 to 5 percent in 2012, are currently exempted from VAT -- except professional advice and consulting services provided by accounting and investment firms. The list of VAT-exempted supplies also includes books, newspapers, postage stamps, live animal products and medical equipment. The International Monetary Fund (IMF), whose last staff mission to the country ended in April, gave hints of the extension of VAT to financial services in the next fiscal year in its June Ghana Country Report. But Deputy Minister of Finance Cassiel Ato Forson, who confirmed to the B&FT that the upcoming VAT legislation will expand the base of the tax, said he would “not speculate†on the additional goods and services to be covered because Cabinet is yet to give its approval. “We are in consultations to broaden the base of the VAT. We have a draft bill and we’re doing the final consultations before Cabinet approves it. Then we will have it laid before Parliament. Hopefully, we will get approval next week from Cabinet as to what should be added to the VAT.†Many countries exempt a broad range of financial services from VAT, partly due to complexities in delineating and assessing liability. This is because while some financial services are explicit, others are not quite so. A few countries, such as South Africa, collect VAT on explicit financial services. A VAT on financial services would likely be applicable to payments for services such as maintaining a current account with a bank, using a cheque book or debit card, issuing money transfers or orders, buying cover from an insurance company, and raising a bank draft to pay for various supplies. One problematic area for tax authorities worldwide is how to tax the provision of credit, and it is not certain whether Ghana will steer clear of this area. Based on a sector GDP of GH¢3.4billion in 2012, a 15 percent VAT on the full range of financial services could raise around GH¢0.5 billion annually. Mr. Forson said Government will also push ahead with the proposed windfall profit tax on the mining industry despite the current downturn in commodities, with spot gold prices shedding more than 25 percent in the first half of this year. According to the IMF, both the new VAT law and the windfall profit tax are expected to become effective in 2014, but Mr. Forson declined to provide a timetable. Ghana’s economic vulnerabilities have been heightened and short-term stability risks are significant, mainly due to the fiscal slippage in 2012, and immediate fiscal consolidation is necessary to improve the outlook, the IMF said. Last week, Parliament enacted a fiscal stabilisation levy and special import taxes which will add GH¢400million to the fiscal coffers over the next six months, needed to plug a shortfall in state revenues in the first four months of the year. With the budget for wages, the main cause of the fiscal slippage in 2012 -- projected to be overspent by 14.8 percent this year -- Government is axing GH¢1.8billion (60 percent) from Ministries, Departments and Agencies (MDAs)’ budget for goods and assets to secure its 9 percent of GDP deficit target. By Leslie Dwight MENSAH
The Ghana Chamber of Telecommunications has expressed surprise at the passage of the amended Communication Service Tax (CST) bill, and says it is reviewing the law to assess its impact on the telecom industry. The CST Amendment Bill, which was passed by Parliament last Tuesday despite opposition from the Chamber, will avert the loss of about GH¢45million that would have been occasioned by the controversy over interconnectivity charges, Government officials said. The amended bill clarified the interconnectivity tax on telephone calls as an excise, not VAT, and will make it compulsory for the service providers to resume payment of the tax. “The amendment will hurt both subscribers and Government,†said Kwaku Sakyi-Addo, Chief Executive Officer of the Telecoms Chamber. “Our understanding was that the bill was withdrawn for further consultations, but there has not been any consultation with us.†The Communication Service Tax, introduced in 2008, was fixed at an ad valorem rate of 6% on a one-minute call charge. In addition, an interconnectivity charge was added to raise revenue for services rendered by mobile operators to each other when they are dealing with calls of customers from other networks. However, service providers, who initially remitted the charges to government, went to court to challenge the aspect of the law relating to interconnectivity charges. After winning the ruling over the matter, the companies stopped paying the tax pending the outcome of an appeal by Government. The amended bill seeks to clarify aspects of the original Act thought to have ambiguities regarding interconnectivity-related levies, said Finance Minister Seth Terkper. It however excluded a second controversial clause, which proposed an additional 6% interconnection fee on incoming international calls and emails. Even as telecoms companies consider their options, Deputy Finance Minister Cassiel Ato Forson has said there should not be any justification for call rates to go up on condition of the amendment. By Richard Annerquaye ABBEY
The Securities Exchange Commission (SEC) is setting up an Investor Education Fund to provide a financing base to enable the Commission meet its mandate to educate people on securities investment. The Director-General of SEC, Adu Anane Antwi, explained that establishment of the Fund is necessary to resolve one of the three major challenges inhibiting trading activities in the securities market. Mr. Anane Antwi observed at the launch of the Ghana Investment Awards in Accra that the other challenges stakeholders in the securities industry are trying to address, to boost trading activities in the country, include liquidity issues as well as the listing of more companies on the bourse, which he said is inadequate. “We recognise that we cannot do investor education on a sustainable basis if there are no funds. It costs money to undertake educational programmes on the various media platforms and also during our capital market week, which has been set aside to educate people on securities matters. “We don’t have the resources to do all. So the idea is to set up an Investor Education Fund whereby we can appeal to the corporate world for contributions toward building the Fund. “But we need some regulations and Legislative Instruments (LI) to back it, so we are working to establish the Fund through an LI before we can appeal for the investor community to contribute to the Fund so we can move frequently to do the investor education,†he said. Mr. Anane Antwi said SEC will not be able to estimate the seed money needed for the Fund until the LI, which forms part of the review of the SEC law, has been passed by Parliament. “All the financial institutions depend on clients. If people understand investments, then they can put their money into the banks for them to get deposits. So it is for all of us to come together to help build the Investor Education Fund,†he said. He said SEC is throwing its weight behind the Ghana Investment Awards, which is in its third year, to help in its mandate to promote the orderly growth and development of an efficient, fair and transparent securities market in which investors and the integrity of the market are protected through proactive implementation of the Securities Laws. This year’s Awards event scheduled for the August 3 is on the theme “Promoting Investor Education and Awareness for a Sustainable Investment Driveâ€, and seeks to recognise excellence among the 88 licenced Investment Banking Firms in the country. In all, 13 categories of awards will be presented on the Awards and Dinner Night: including two new awards, Advertising Campaign of the Year and Deal of the Year. By Evans Boah-Mensah
Electricity supply from renewable energy sources will rise 40% from 2012 to 2018 as developing countries expand capacity, according to the International Energy Agency’s (IEA) latest medium-term renewable energy market report. As the cost of generating power from wind, solar, hydro and other sources falls, renewables will account for nearly 25% of global electricity production by 2018, up from about 20% in 2011, according to the IEA's report. Developing countries outside the Organisation for Economic Cooperation and Development (OECD) are expected to account for two-thirds of the global increase, with Africa and Asia showing some of the strongest gains. China, with Government backing and access to cheap capital, is well ahead of other countries and is expected to increase its renewable capabilities by 750 terawatt-hours (TWh) between 2012 and 2018. The United States (150 TWh), Brazil (130), India (95) and Germany (70) are also expected to show large increases. In terms of percentage growth, however, smaller economies are seen making the largest strides, with Morocco (25%) and South Africa (20%) leading the list. Much will depend on Government policies and regulations to encourage renewables-growth. Uncertainty about renewable policies may hamper investment and growth in the sector, the IEA says. "Policy uncertainty is public enemy number-one," says IEA executive director Maria van der Hoeven. Global investment in renewables fell 12% in 2012, according to the report -- driven by a drop in European spending as the economic crisis lingers. In the United States, boom and bust cycles are hampering development of renewable sources, especially wind, Paolo Frankl, head of the IEA's renewable energy division, says. Esi Africa
Scores of entrepreneurs and technology enthusiasts across the continent are expected to meet tomorrow at the Kofi-Annan ICT Centre in Accra to design a model to build more than 20,000 weather stations to help address challenges of climate change using mass-produced consumer electronics and the extensive mobile phone coverage in Africa. This is the first of two events to be held in Africa, with the final leg fixed for Senegal later this year. The initiative to get the weather stations established is at the instance of the Delft University in the Netherlands in collaboration with Africa Gathering to help design a network of affordable weather stations in Africa through the Trans-African Hydro-Metrological Observatory (TAHMO) initiative. In an interview with DW, Professor Nick van de Giesen, an engineer at Delft University of Technology and initiator of the project noted: “The number of measurement stations in Africa are just very, very limited. “From a technical point of view this is feasible, and the value to be produced by this network will be high and the benefits immense.†Mr. Giesen said there is a need to ensure that the system to be designed is financially sustainable, and also adapt the technology to local needs in order to guarantee the success of a locally-designed system. “Africa is huge. I’ve spent a lot of time here and you cannot compare Lesotho with Chad -- these are just completely different environments. So we need this large network of people on the ground that are willing to think about this, work with us, test things, etc.†In line with this, the initiative is involving African students in a competition to design cost-effective systems. Thus, the programme plans to bring to the fore a good model to establish and operate a network of 20,000 stations through brainstorming sessions and a contest wherein entrepreneurs, innovators, creators and technology enthusiasts will be actively invited to share their ideas during two separate events to be held in Ghana and Senegal. The best business model will be presented with a prize of 5,000 euro for designing a system that has an appropriate pricing scheme for stations’ owners and caretakers to provide security, minimal maintenance and to ensure good data delivery. Michel Jarraud, Secretary General of the World Meteorological Organisation (WMO), said during a UN Climate Change conference that “Weather monitoring systems in Africa are deteriorating and require improvement if we were to meet the challenges of climate changeâ€. By Evans Boah-Mensah
Adler Technology Systems, an intelligence security systems delivery firm, has introduced three new electronic gadgets -- the “Amigo 3i†and “Amigo 7s†Smartphones and the Adler 10-inch tablet -- onto the market. The Amigo 3i Smartphone is a cutting-edge handset that operates on the latest Android software OS-Jelly Bean, plus other competitive features including a 3.5-inch touch-screen, radio, Bluetooth, a 512 Random Access Memory (RAM), Wi-Fi, a rear camera, a four- gigabyte hard disk drive, and a 32-gigabyte memory card slot. The gadget gives users access to over 700,000 applications on the Android platform. The Amigo 7s comes with the aforementioned features plus a screen-grabber function, one- gigabyte RAM, 3G phone function, dual standby, a 1.2 GHz processor and a seven-inch capacitive touch-screen. The Adler ten-inch tablet has a one-gigabyte RAM, 16-gigabyte hard disk drive, a five- megapixel back camera and three-megapixel front camera, radio, Global Positioning System (GPS), wireless frequency, Bluetooth and Android OS. Mr. Vincent Yaw Preko, Chief Executive Officer of Adler Technology Systems, speaking at the official launch in Accra, said the products have carefully-selected user-friendly features for an exciting experience. He said Amigo, which literally means “friend or companionâ€, reiterates the relationship the company seeks to establish between users and the various devices, stressing: “We want to establish a relationship built on trust and reliability. “With the launch of these products, we are offering two things at the same time: competitive pricing and quality. Our products boast some competitive features which other brands on the market do not have. “Users of our tablets, for instance, can watch television on the move and use the gadget as a projector because it has a high-definition multi-purpose interface. This gives the product an edge over existing brands on the market,†Mr. Preko told B&FT in an interview. He said the products have been on trial on the local terrain for the past two years. “These products have been piloted for two years in the country. Over the period, we have solicited relevant feedback and improvements.†By Patrick PAINTSIL
At a time when there is much policy-talk about local content in the mining and petroleum sub-sectors; at a time when housing is becoming yet another Ghanaian problem; and at a time when the number of young people who are without jobs is large and growing, diminishing local content in the home and office-building industry should be of interest to policymakers. This essay makes the argument that for the construction industry to meet the housing needs of Ghanaians (both in quantity and modernity), to stimulate light manufacturing of building accessories, and to be a catalyst for job-creation, what Ghana needs is non-partisan, comprehensive and far-sighted public policy on construction and the economy. Anecdotal evidence from the construction industry is not encouraging. For every new house built in cities across the country, the imported components are sharply on the rise. Some people would perhaps argue that this trend is inevitable. What we see is as much due to evolution of the industry, as it is to the rational choice of builders and the willing owners who pay for the homes and offices. But how far should we go in “importing†our homes and offices? At what cost? When homes and offices are “importedâ€, Ghana’s trade balance worsens, local job-creation suffers, cost escalates, and home prices soar beyond the reach of the average Ghanaian for any decent accommodation. How far we should go then becomes a question partly of modernity, partly of public policy for job-creation, and of meeting housing needs for a growing population. The Fundamental Problem A visit to a new home or office construction site reveals how little there is of local content. Except for the basic lower-paying labour, local steel binders, cement, water, pipes, electricity and other minor building accessories, the containers on the building site are most likely full of high-value imported building components. Except for the ever-enterprising women who sell food at low margins to workers on site, the high-value backward linkages are few -- and so are the opportunities for domestic job-creation. Increasingly, doors and windows are ready-made imports; so are the locks, hinges, door stoppers, floor and wall-tiles, toilet bowls, bathroom and interior finishing accessories, ceiling fans, air-conditioners, kitchen cabinets -- and of late, shingles and other roofing materials. The diminishing local content of the construction industry, of the finishing accessories and furniture in homes and offices, is strikingly apparent. The Benefits and Costs There are both micro-benefits to builders and homeowners and macro-benefits to the Treasury through home “importsâ€. Most industry experts and builders point to quality, durability, and reliability in delivery of imported building materials and home accessories. Government collects duties on the imported building components and accessories to boost revenues if the imports are not covered under the wide range of exemptions. But the diminishing local content in the home and office-building industry has far-reaching consequences once we begin to think about what the industry means to a modern economy. Here are a few: First, from housing to non-housing, from private to public construction, and from the formal to informal sector, construction industry output is an integral part of the national output. For the non-agricultural sector of the Ghanaian economy, construction ranks third after transportation, storage, and manufacturing in its contribution to national output. Second, the industry is important for its direct and indirect job-creation potential. The greater the imported components in the industry, the fewer the number of jobs created at home. The contribution of local artisans -- carpenters, masons, plumbers, electricians, wood processors and furniture manufacturers -- is diminishing, with the result that the contribution of construction output to national output is not matched by its contribution to domestic job-creation. Third is the loss of opportunities for light manufacturing that could be linked to the construction industry. Construction stimulates many small specialty activities which further add to the industry’s job-creation potential. The supply of building accessories -- from floor and wall tiles to ceramics, plumbing, electrical accessories, kitchen and bathroom fittings to name a few -- has no local origins, and therefore provides no linkages in light manufacturing. Industry experts point to the high cost and unreliable supply of energy, to the lack of clarity in industrial policy when it comes to housing, and to the lack of desired fabrication skills as the key impediments to locally manufacturing some of the basic building components, including toilet-roll holders. Fourth and closely related to the lack of linkages is the lost opportunity for ‘learning-by-doing’ in a sector capable of advancing simple technological know-how, and a sector driven by demographic trends. In the several small specialty components of the industry, learning-by-doing (which delivers innovation and quality) is a major reason for a greater public-policy push for local content in the construction industry. Construction as a dynamic sector Construction ranges from road and infrastructure works to the basic demographic needs for housing and other public and commercial needs. One of the most dynamic sectors of the economy, construction growth or otherwise in many ways reflects the pulse of economic growth or slowdown. Warren Buffet, the American billionaire, recently remarked that the American economy “will only come-back big-time on employment when residential construction comes backâ€. Whether it is in the residential or non-residential sub-sectors, the growing dependence on imported building components does not augur well for the contribution of the sector to job-creation. The demand for housing is driven by demographic and lifestyle changes. The changing taste of housing needs reflects both urbanisation and rising average household income. The average middle-income household seeking to renovate a home signals the demand for a higher brand of housing. Remodelling requires a pool of skillful artisans, new toilet bowls, bathroom and kitchen basin, towel-racks, tiles, doors and windows. These kinds of items fill the street-side hardware stores. The immediate benefits from a brisk trade in these building components are in the income transfers from homeowners to the retailers and importers. But they offer no long-term benefits to growing the base and to transforming the structure of this economy. Most people would probably not admit that -- with no counterpart exports -- the growing imports of building accessories contribute strongly to Ghana’s trade and current account imbalances, as well as to the ever-growing demand for foreign exchange, as another source of pressure on the exchange rate. What should Government do? In the 1970s, when South Korea’s development strategy called for transforming the construction sector, the country responded by creating specialised institutes to quickly develop a cadre of skilled construction workers and local manufacturing of building accessories. When it began building the Seoul-Busan expressway, critics, including the World Bank, doubted the capabilities and feasibility. The project was completed ahead of schedule using Korea’s own trained expertise and resources. Later, when the economy hit a recession, Korea deployed its construction labour force (with experiential skills that come from learning by doing) to the Middle East, earning valuable foreign exchange. Today, South Korea’s construction industry is generally well-developed as an exportable industry. What is needed to meet Ghana’s housing needs and for the construction industry to become a catalyst for job-creation is non-partisan, comprehensive and far-sighted public policy attention that draws on the best capabilities in society. Public policy actions are needed to promote the construction industry to meet three principal objectives: for the necessity to meet housing needs of a growing population, both in quantity and modernity; for the potential to stimulate light manufacturing in building components and accessories; and for its job-creation potential. While the push for local content may not necessarily be a great idea in all areas of economic activities, local content for the construction sector is particularly vital. Unlike the mining and petroleum sectors where resource depletion is inevitable, construction is a dynamic sector of the economy. Perhaps it is time to debate local content properly. A nation that fails to learn to build for its own -- by tapping on local enterprises, skills and resources -- sooner or later risks excessive dependency; denies itself important avenues for job-creation; risks high cost of housing; and worse, risks the emergence of slums in its urban centres. Renting or owning, the high cost of urban housing -- significantly beyond the reach of the average salaried worker -- is an indication of the growing supply-demand imbalances in a growing economy. Looking forward, the thinking that must go into this must begin with a national policy on how to meet the demographic needs of a growing population. Second, the nationwide supply of housing must be tied into an industrial policy for the construction sector of the economy. A comprehensive policy must look at the potential for light manufacturing of the low-technology and widely-used basic components of housing. The third leg of the tripod is the skills and manpower training required to meet industry needs. Training skillful carpenters, masons, bricklayers, metal workers, plumbers and electricians should not be left to the road-side informal sector apprenticeship...if only to enhance public safety. Sadly, polytechnics have turned their back on training these much-needed middle-level skills and artisans. The manufacturing of floor and wall tiles, kitchen cabinets from pressed wood, toilet bowls, and bathroom accessories have the potential to provide a greater anchor to growth in job-creation using low to medium technological know-how. All of these can beneficially expand the tax base of the economy. Dr. Joe Amoako-Tuffour The writer is a Senior Advisor, African Centre for Economic Transformation Accra, [email protected]
The Minister of Water Resources Works and Housing, Alhaji Collins Dauda, has said that his Ministry will hold discussions with the Chartered Institute of Building (CIOB) Ghana, which could lead to the formation of a Regulator for the Construction Industry. The Minister said this when Executives of CIOB Ghana paid a courtesy call on him to present a communiqué issued after a two-day workshop on Sanitising and Regulating the Construction Industry in Ghana held in April this year. The workshop had presentations from twenty speakers on various topics and concluded that there was a need for the country to have an apex body such as a Construction Industry Development Authority. Such a body, according to the communiqué, would regulate the entire industry to ensure sanity and professionalism, build the capacity of construction firms and built environment professionals, as well as fashion-out policies to ensure sustained development of the Construction Industry. Addressing the delegation from CIOB, Alhaji Dauda said the Ministry is committed to the development of the Construction Industry. He therefore urged CIOB Ghana to work closely with the Ministry to understudy similar regulatory bodies in other countries to see how one can be formed in Ghana. Former Ghana High Commissioner to Malaysia Dan Abodakpi who chaired the Workshop shared the example of Malaysia, which has a Construction Industry Development Board, and spoke of how that institution has substantially transformed and continues to shape the industry in that country. He supported the move for CIOB Ghana to work with the Ministry to realise the formation of a similar body in Ghana. Chairman of CIOB Ghana and Vice President for Africa, Rockson Dogbegah, disclosed that the Business Sector Advocacy Challenge (BUSAC) Fund is interested in supporting the process that will lead to passage of an Act to establish the envisioned Regulatory Body. He was therefore thankful to the Minister for the show of support and pledged to work with the Ministry to achieve the objective. Mr. Dogbegah mentioned that several other African countries including South Africa, Malawi, and Tanzania have agencies regulating the industry, stating that Ghana cannot remain an island. He said the current fragmented form of regulating construction works does not augur well for the country, and accounts for the numerous instances of shoddy work. Other members of the delegation were former President of the Ghana Institution of Surveyors, Mr. K.H. Osei-Asante and Peter Quartey, an executive member of CIOB Ghana.
The Minister of Trade and Industry, Mr. Haruna Idrissu, has said government may, in the future, consider taking measures to discourage the importation of flour into the country in order to reinforce local production. The Minister made the comment at the end of a familiarization tour of Olam’s 500 metric tonnes per day wheat mill at Kpone, near Tema. “It is too early to impose an administrative ban on these imports now, but in the long term, we will need to access whether local manufacturers have the capacity to meet local demand and consumption of flour; once that is established, government will take steps to discourage the importation of flour into the country and encourage the use of what is produced here locally,†Mr. Idrissu said. He stressed that if local producers of flour showed a strong capacity to meet local demand, some cost benefit analysis will have to be done on the pricing of imported flour as against flour produced by local manufacturers and if the price of locally manufactured flour proved favourable, the government will adopt necessary strategies to protect local producers. The Olam Wheat Mill is a US$55 million investment commissioned in February 2012, which employs some 200 workers and produces six popular brands, including the Royal Gold, a premium bread flour and First Choice Gold, a bakers’ favourite, very popular as a pastry flour. After being conducted through the various milling processes and the quality control regimes of the mill, the Minister for Trade said he was highly impressed with the employment opportunities offered to Ghanaians by the factory and by the fact that wheat was being produced locally by a local manufacturer instead of being imported from overseas. The Minister later visited Olam’s state-of-the-art tomato paste factory, reputed as being the largest tomato processing plant in West Africa, where Tasty Tom, a leading brand of tomato paste, is produced by a largely Ghanaian workforce of over 250. Mr. Idrissu appealed to the Management of Olam to work with government and the Ministry of Food and Agriculture to explore the possibility of developing local tomato varieties for processing. He stressed that it was essential that all manufacturers endeavoured to maintain acceptable quality standards and that exporters especially must comply strictly with the minimum standards set by the Ghana Standards Authority so that Ghanaian exports may have ‘an easy flow’ into the international market. Citing the introduction in Ghana of the latest technology in the tomato processing and cannery industry and the application of world class safety and quality control standards, Managing Director of Olam , Mr. Amit Agrawal, said Olam is extremely proud of its investments in the economy. “We are happy that the government acknowledges the contributions of Olam’s investments, particularly in the context of local employment generation and value addition. We look forward to continued support from the government to make the manufacturing sector viable and thereby encourage Olam to continue to invest more in the economy,†said Mr. Agrawal.
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