VZCZCXRO3172
RR RUEHMA RUEHPA
DE RUEHAR #2484/01 3381428
ZNR UUUUU ZZH
R 041428Z DEC 07
FM AMEMBASSY ACCRA
TO RUEHC/SECSTATE WASHDC 5785
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 02 ACCRA 002484 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ECON EFIN EAGR ENRG GH
SUBJECT: Ghana - Economic Round-up 
 
Ref: Accra 2169 
 
¶1.  (U) Summary:  this cable provides a summary of notable 
developments in the economic sector in October and November:  -- 
Parliament Passes Anti-Money Laundering Bill; 
-- Central Bank Proposal to Raise Banks' Capital Base; 
-- Bank of Ghana Monetary Policy Committee Increases Prime Rate; 
-- Cocoa Production Set to Increase in 2007/2008; 
-- GUTA Demonstrates Against Foreign Retailers; 
-- Telecom Privatization Updates 
Cable on 2008 budget presented November 15 will follow septel. 
 
Parliament Passes Anti-Money Laundering Bill 
-------------------------------------------- 
 
¶2.  (U) On November 2, 2007 Parliament passed the Anti-Money 
Laundering bill, which broadly prohibits money laundering.  The bill 
is awaiting the President's signature to become law.  Most notably, 
the bill creates a Financial Intelligence Unit that will gather and 
analyze intelligence to help in identifying proceeds of unlawful 
activity.  The new law strengthens Ghana's only money laundering 
law, the Narcotics Drugs (Control, Enforcement and Sanctions) Law, 
1990 (PNDCL 236), which criminalizes money laundering only as it 
relates to narcotics.  A related law that deals with the proceeds of 
unlawful activity including money laundering is being drafted. 
 
 
Central Bank Proposes to Raise Banks' Capital Base 
--------------------------------------------- ----- 
 
¶3.  (U) The Bank of Ghana in October 2007 proposed an increase in 
the minimum capital base for banks in Ghana from the current 
requirement of 7 million Ghana cedis (about USD 7.4 million) to 50 
to 60 million Ghana cedis.  The aim of the proposal is to enable the 
financial institutions to take on bigger transactions in areas such 
as infrastructure and to absorb increased risks.  Currently, no bank 
is able to lend more than $10 million to a single borrower. 
According to the Deputy Governor of the Bank of Ghana, the total net 
worth of all the banks in Ghana is about 749 million Ghana cedis 
which is less than the $900 million borrowed by only COCOBOD for the 
2007/2008 season cocoa beans purchase from farmers. 
 
¶4.  (SBU) This measure may force some consolidation among the banks 
as not all will be able to raise the necessary capital.  In order to 
avoid a chaotic transition, the Deputy Governor said that banks that 
cannot meet the new requirement will be able to remain in business 
but will not have access to direct clearing with the central bank. 
They will need to do that through a bank that meets the new higher 
capital requirement.  The banks are expected to present their 
capitalization plan to the central bank by December 31, 2008 and 
meet the requirement by January 2009, but there is discussion of 
offering an additional six months grace period. 
 
¶5.  (U) Currently, the increase can easily be met by the foreign 
banks and two local banks.  Ten smaller local banks feel threatened 
by the central bank's proposal and have formed an association of 
indigenous Ghanaian banks.  The banks are in discussion with the 
central bank to ensure that they are not marginalized. 
 
 
Bank of Ghana Monetary Policy Committee Increases Prime Rate 
--------------------------------------------- ---------- 
 
¶6.  (U) The Monetary Policy Committee (MPC) on November 2, 2008 
increased the Bank of Ghana prime rate to 13.5 percent from 12.5 
percent, where it had been since December 2006.   The last change 
occurred in December 2006 when it was decreased from 14.5 percent to 
12.5 percent.  According to the MPC, the decision to raise the prime 
rate is due to the increase in core inflation (core inflation 
excludes energy and utility prices and selected food items subject 
to volatility) by 0.7 percentage points from September to October 
2007, bringing it to 8.2 percent in following several months of 
decline in the single digit range.  This signals the underlying 
pressures from the year long energy crisis and rising food and fuel 
prices in the economy.  The bank is also worried about fiscal 
slippages, increasing liquidity and the potential labor demand for 
pay increase in 2008, which is an election year. 
 
¶7.  (U) One bank has already increased its base lending rate by one 
percent to 20.5 percent.  Other banks can be expected to follow 
suit.   Bank lending rates are minus two or plus six of their base 
rate.  Some experts believe this may not be the MPC's last increase 
since this may not have the desired effect of slowing the growth in 
liquidity. 
 
 
Cocoa Production Set to Increase in 2007/2008 
--------------------------------------------- 
 
¶8.  (U) The Ghana Cocoa Board forecasts cocoa production to be about 
650,000 metric tons for the 2007/2008 season which is about 36,000 
metric tons above 2006/2007 season output.  A private research 
 
ACCRA 00002484  002 OF 002 
 
 
company also forecasts 700,000 metric tons.  Favorable rainfall has 
improved the prospects for cocoa production for the main crop which 
began in October 2007.  However, prolonged rainfall in some areas 
threatens the increase because of the rise in the incidence of black 
pod disease. 
 
¶9.  (SBU) There is concern among buyers over the improper use of 
pesticides on the plants, particularly in Cote D'Ivoire.  This has 
led to a decision by one major buyer to shift all its purchase to 
Ghana. 
 
 
GUTA Demonstrates Against Foreign Retailers 
------------------------------------------- 
 
¶10.  (U) Members of the Ghana Union of Traders Associations (GUTA) 
on November 14 closed their shops and marched in Accra to protest 
what they term as unfair competition from foreign retailers.  GUTA 
says the Ghana Investment Promotion Center (GIPC) is not 
implementing the GIPC provisions that require trading companies 
either wholly or partly-owned by non-Ghanaians to have a minimum 
foreign equity of USD 300,000 and employ at least ten Ghanaians. 
Foreign investors, including Chinese, Nigerians, Indians and Turks 
have also set up retail shops after registering with the GIPC to 
operate as import and distribution businesses. 
 
¶11.  (U) The GIPC has recently taken enforcement actions against 18 
firms, either by closing them or requiring compliance with the terms 
of their registration (i.e., to operate only in the wholesale 
market).  GIPC is also considering a proposal from GUTA to increase 
minimum capital requirement to between one million dollars and 1.5 
million dollars and employment of Ghanaians to 25. 
 
¶12.  (U) GUTA is made up of the following associations; Abbosey Okai 
Spare Parts Dealers Association, Odaw River Spare Parts Dealers 
Association, Ghana Electrical Dealers Association, Ghana Electronics 
Dealers Association, Fishing Nets Traders Association, Kantamanto 
Hardware Traders Association, Kantamanto Second Hand Clothes Dealers 
Association, Sawing Accessories Sellers Association, among others. 
 
Telecom Privatization Updates 
----------------------------- 
 
¶13.  (U) There is uncertainty over whether government will be able 
to conclude the sale of its two telecom companies before the end of 
the year.  Failure to conclude this will worsen government's budget 
deficit position, as the 2007 budget included an expectation of 
about $500 million from the sale of these companies. 
 
¶14. (SBU) After the botched sale of Westel to Kinz Telecom (see 
reftel) government selected Celtel at an agreed price of $120 
million s opposed to the $250 million Kinz price.  According to the 
GoG, the Celtel price is without Wimax and 3G licenses.  It is now 
rumored that the Celtel deal is being held up because of tax 
exemption negotiations. 
 
¶15.  (SBU) For Ghana Telecom, it has been reported that out of the 
final three companies, France Telecom, Vodacom and Telecom Portugal, 
short-listed for the purchase of 51 percent of Ghana Telecom, France 
Telecom has been selected but has yet to negotiate a price with 
government.  However, we understand the initial bids were well under 
$500 million, which the government will probably reject as too low. 
The Chief Director of the Ministry of Communications said reports of 
any decision are untrue and that he believes a bid of $500-$600 
million would be far too low given GT's extensive infrastructure 
assets. 
 
Bridgewater