VZCZCXRO6933
RR RUEHMA RUEHPA
DE RUEHAR #0225/01 0441302
ZNR UUUUU ZZH
R 131302Z FEB 08
FM AMEMBASSY ACCRA
TO RUEHC/SECSTATE WASHDC 6148
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 02 ACCRA 000225 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ECON EFIN EAGR ENRG GH
SUBJECT: Ghana - Economic Round-up 
 
Ref: Accra 2007 2484 
 
¶1.  (U) Summary:  this cable provides a summary of notable 
developments in the economic sector in December 2007 and January 
2008: 
-- December 2007 Inflation Rose to 12.7%; 
-- Central Bank Reprieve on Raising Banks' Capital Base; 
-- GoG to Give Cash Out to the Poor; 
-- Update on Telecom Privatization; 
-- Credit Reference Bureau to Begin Operation; 
-- Central Bank Begins Sensitization on National Switch 
 and Smart Card Payment System. 
End Summary. 
 
December 2007 Inflation Rose to 12.7% 
------------------------------------- 
 
¶2. (U) Inflation rose to 12.7 percent in December 2007 
from 11.4 percent in November 2007.  This is the third consecutive 
increase after declining to 10.2 percent in September.   According 
to the Statistical Service, higher consumer demand for food and 
non-food items during the Christmas season, increase in utility 
tariffs, and increasing price of petroleum products are major items 
driving prices upward.  Inflation may continue to climb upwards 
until June when the harvesting period begins. 
 
Central Bank Reprieve on Raising 
Banks' Capital Base 
----------------------------- 
 
¶3. (U) According to the Deputy Governor of the Bank of Ghana, the 
January 2009 deadline for the increase in the minimum capital base 
of banks in Ghana will be extended 
by a "couple of years" for existing banks.  The BoG made this 
decision after consultation with the banks, which asked for more 
time to meet the new requirement. 
New banks will, however, be required to meet the new 
higher capital requirement. The BoG has proposed an increase from 
the current requirement of 7 million Ghana cedis (about USD 7.4 
million) to 50 to 60 million Ghana cedis. 
 
GoG to Give Cash Out to the Poor 
-------------------------------- 
 
¶4. (U) The GoG, under a social protection program called the 
Livelihood Against Poverty (LEAP), will this year 
begin to give between 8.00 GH cedis (USD 8.33) to 16.00 GH cedis 
(USD 16.67) a month to 15,000 extremely poor households in Ghana. 
The implementation of the program in an election year has raised 
questions about the motives of the government but the minority 
political parties are being cautious in their comments out of 
concern about being labeled anti-poor. 
 
¶5. (U) The GoG expects to spend 2 million GH cedis (USD 2.08 
million) on the project in 2008 and 26 million Ghana cedis (USD 
27.08 million) on the entire project when it ends in 2012. 
According to the National Coordinator of the program, DFID and 
UNICEF supported the development of the strategy. 
 
Update on Telecom Privatization 
------------------------------- 
 
¶6. (U) The Westel deal is essentially done.  CelTel 
made a $115 m payment (out of a $120m price tag) in late December. 
The deal gives them a 75% stake but after 3 
years 5% of that will be floated on the stock exchange. 
 
¶7. (U) The Ghana Telecom deal is still pending.  Per the Chief 
Director at Min Communications, the three short-listed bidders did 
not offer acceptable prices to the government.  They have been told 
they can revise their offers and Portugal telecom is apparently 
doing so.  The government has also said it will look at offers from 
any other interested bidder. 
 
Credit Reference Bureau 
----------------------- 
 
¶8. (U) The Bank of Ghana will soon license the first two private 
credit reference bureaus (CRB) in the country.  The Credit Reporting 
law passed in 2007 allows the Bank of Ghana to establish public CRB 
and also authorizes the BoG to license private CRBs.  The 
requirements for establishing a CRB in Ghana include a minimum paid 
up capital of 500,000 Ghana cedis (USD 521,000), licensing fee of 
3,000 Ghana cedis (USD 3125), processing fee of 2,000 (USD 2083) 
Ghana cedis, and annual renewable license fee of 1,000 Ghana cedis 
(USD 1042). 
 
Central Bank Begins Sensitization on 
National Switch and Smart Card Payment System 
--------------------------------------------- ---- 
 
¶9. (U) The Bank of Ghana has begun a national campaign to sensitize 
 
ACCRA 00000225  002 OF 002 
 
 
Ghanaians on a national switch and smart card payment system that 
will be established in June 2008.  The $20 million National Switch 
and Smart Card Payment System, branded EZWICH, is being financed by 
the Bank of Ghana and banks in Ghana.  The switch is expected to 
provide a common payment platform for all banks in Ghana, attract 
the 80 percent of Ghanaians who are currently unbanked into the 
banking system and jumpstart the use of electronic payment systems. 
The system will work both online and offline, so can be deployed 
without power or telecommunications services. 
 
¶10. (U) Using its successful cedi redenomination campaign as a 
model, the BoG is running ads on radio and TV to educate and 
encourage acceptance of this new mode of payment and banking.  The 
Secretary of BoG, however, admits that this campaign presents a 
 
SIPDIS 
bigger challenge than cedi redenomination as acceptance requires 
behavioral change and understanding of new technology among the 
educated and uneducated populations.  The security of the system 
must also be explained clearly and implemented well. 
 
¶11. (U) The BoG has directed all banks to link their existing ATMs 
and point-of-sale devices to the national switch by June 30, 2008; a 
pilot with three banks will being in April.  All banks in Ghana are 
also expected to issue biometric smartcards to customers and ensure 
that all new switches, ATMs, point of sale (POS) cards or mobile 
phone payment products are EZWICH compliant.  Net 1 UEPS 
Technologies of South Africa is supplying and installing the switch 
and will supply biometric smart cards to banks.  According to BoG, 
the supply of cards, switches and the provision of mobile payment 
systems and other services is open to other providers provided the 
product is compatible with the UEPS technology. 
 
¶12. (U) Comment: Ghana is generally a cash-based economy with just a 
handful of people using ATMs.  Although Visa-branded debit ATM cards 
can be used for payment at some shops, they are rarely used. 
Widespread acceptance will probably take time, especially in rural 
areas.  In urban areas, uptake could be fairly rapid if the system 
is rolled out without major security or other glitches and POS 
equipment is affordable for vendors.  End comment 
 
 
Bridgewater