BoG advocates policy to increase local stake in multinationals

BY: Enoch Darfah Frimpong

Dr Henry Kofi Wampah -BoG GovenorThe Bank of Ghana (BoG) has added its voice to calls for a strategic national policy that will ensure increased Ghanaian ownership in multinational companies operating in the country.

That, the bank believes will help reduce the prevailing situation where profits are repatriated from the country to the foreign owners of the companies.

Given that these rampant transfers help widen the country's current account deficit, BoG is of the view that increased local participation in these multinationals will help reduce the substantial revenue outflows.

"If we do that it will help stabilise the current account position and in the long run impact positively on the economy," a member of the bank's Research Department, Mr Zakariah Mumuni, said in an interview.

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He spoke to the paper after a presentation on the theme; 'Managing the current account deficit' on the opening day of a two-day advocacy forum on the 2013 budget in Accra.

The forum, which run from August 6 to 7, was organised by the Institute of Financial and Economic Journalists (IFEJ), a grouping of financial and economic reporters in the country, with support from Star Ghana; to help educate and update the media and the general public on government's performance as far as the issues captured in this year's budget were concern.

The forum was on the theme 'Tracking the performance of the 2013 budget and expectations for 2014.

Earlier in his presentation, Mr Mumuni said various factors, including the large liquidity outflows from the country, accounted for the imbalances in the current account which, intend, leads to the annual posting of deficits.

Current account

The current account measures the country's revenue state in the form of export earnings vis-a-vis the inflows and the import costs.

This aspect of the country’s account has been in the negative for years as a result of heightened imports in the midst of dwindling export earnings.

The deficit was US$4.9 billion in 2012, up from the US$3.54 billion recorded in the year before.

The 2012 current account deficit was 12.3 per cent of the value of goods and services produced in the country, measured by GDP, compared to the 2011 one which was nine per cent of that year's GDP.

Mr Mumuni said the government needed to implement measures that would boost capital inflows while limiting capital outflows from the country to correct the imbalance in the system.

His call comes on the heels of similar concerns raised by other institutions and individuals in the recent past.

Securities and Exchange Commission

The Securities and Exchange Commission (SEC) and the Ghana Stock Exchange (GSE) had, on separate occasions, advocated for a new regulation that will compel multinationals to float part of their stakes on the local bourse after five years of operations.

That, they argued, will give locals the opportunity to own stakes in these companies and subsequently profit from their incomes.

Although the GSE and the SEC had directed much of their attention on the telecommunication companies, none of which is publicly owned, Mr Mumumi said the call needed to be widened to cover other multinationals.

“The capital flight affects all sectors and getting more locals to own part in all these resident companies will help reduce the trend,” he noted

A former minister of Finance and Economic Planning, Dr Kwesi Botchwey, who opened the forum, said the call was in the right direction as it was one of the measures that could be used to stabilize the current deficit in the current account.

However, Mr Mumuni and Dr Botchwey both admitted that a current account deficit was not, in itself, as bad as it could be made to appear. GB