Interview: Alan Yarrow
How can the UK collaborate with Ghana to help stimulate Ghanaian financial markets?
ALAN YARROW: The capital markets in Ghana are not very deep, as there is limited institutional structure. There is certainly room for improvement, particularly in terms of the participation of insurance firms and pension funds, both of which pursue long-term investments that are spread over periods as long as 30 years. This is different from other types of instruments, such as mutual funds, which tend to sell more when the market is at its highest, and from individual investors, which typically sell when the market is low. However, those long-term funds are very important; you need them to ensure value investing. They are the sorts of strong financial institutions that can ensure a balance in the market and increase liquidity.
Ghana’s financial markets offer lots of opportunities but they are still in their infancy, particularly in terms of the variety of tools available to investors. Increasing the participation of value investors is central to changing this. However, in the short-term, first you need to strengthen the currency and then eventually you need to have market makers.
What can be done to encourage UK-based small and medium-sized enterprises (SMEs) to expand their presence in Ghana?
YARROW: Where the UK excels is in working with public-private partnerships (PPPs). This is, of course, on the advisory side, but also in architecture and project management. Equally, on training and qualifications, the UK is the premier country for professional qualifications, and as the country which hosts the financial centre of the world, we need to have qualified workers. Ghana needs to have global services; increasingly they need to go outside of their country to raise money, and people who want to lend to Ghana want to make sure that global standards are implemented there. My concern is that we need to think about the bribery problem, which affects a number of countries and to some extent the Ghanaian economy as well. This is a problem particularly affecting construction projects or big infrastructure projects. The UK does more PPP projects than most other countries, and Ghana can learn from the expertise that the UK can provide in this regard. So, the UK is definitely well-equipped to support Ghana in its economic development strategy. However, Ghana must also help itself. Ghana has done well in the last 10 years, but the corruption issue does affect international perceptions about the progress and the reality of Ghana.
What policy measures can help increase investor participation in Ghana’s development strategies?
YARROW: The British government has been good at giving tax incentives to enhance returns on investments. Yet in Ghana you have quite a different business environment, and there is not always a clear understanding about the tax structure. Nonetheless, there is an interesting push, led by the government, to get big contracts, to guarantee the inclusion of SMEs and to improve the skills base that is still missing in certain sectors of the Ghanaian economy.
What do you see as the major constraints to increasing UK-Ghana trade in services?
YARROW: What people should keep in mind is that people don’t always buy something because of its value; they often buy because they think it’s cheap. Ghana needs to find the best way to increase and maintain its competitiveness, otherwise money will go to neighbouring countries like Côte d’Ivoire. That’s what Ghana should focus on to help attract investments. But there is actually quite a lot being done already in this regard. There are quite a number of small infrastructure projects that are in the pipeline, for example, and exports are benefiting from the currency’s competitiveness with the US dollar.
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