The Chief Executive Officer (CEO) of the Savannah Accelerated Development Authority (SADA), Mr Charles A. Abugre, has welcomed plans by the government to establish a multibillion dollar development bank to provide long-term, patient capital for private sector growth.
He said if properly implemented, the idea could represent the game-changer project that the country’s industrial agenda so much desired.
Beyond serving as a ready source of finance for manufacturing businesses wishing to reinvest and retool, Mr Abugre said a national development bank would help solve the financial challenges that businesses in the agricultural sector also faced.
“If we want to move from peasant farming to doing a 100,000 hectares or 500,000 hectares of farming, you have to invest in equipment, irrigation systems, research and development and that takes time,” he told the GRAHIC BUSINESS on November 16.
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“So, if you cannot borrow for a minimum of five years, then you cannot do any serious agricultural business yet no bank in the country is providing affordable loans for five years,” he bemoaned.
Although some investors, mostly foreign, have thrived in the agricultural business, the SADA CEO said any due diligence on them would show that “most of them brought their money from outside.”
“So, if you want our local people to be able to do same, then you have to create a facility that will be able to provide this in form of finance and that is why the idea of a development bank is necessary,” he said, in reference to earlier announcements by the Finance Minister that the government was in the process of setting up a development bank to mobilise capital for agricultural and industrialisation transformation.
The minister made the announcement while presenting the 2018 budget and economic policy statement of the government to Parliament.
Savannah Dev’t Bank
Plans by the government to establish a development bank is in consonance with previous efforts by SADA, the body overseeing the transformation of the northern savannah, to establish a development bank for the zone.
In 2015, Mr Abugre told the GRAPHIC BUSINESS that his outfit was in the process of setting up a private-sector led development bank that could mobilise patient capital for investors wishing to invest in the area.
Since then, the CEO said the authority had been working underground to help actualise the plans.
He disclosed that stakeholders such as the Ministry of Finance, Bank of Ghana and the African Development Bank (AfDB) found the “idea exciting,” with the AfDB even agreeing to fund the prefeasibility studies into the project.
“In the prefeasibility studies, we will try to look at what will make such a bank work? First, such a bank should not be government-led although government should be part of it and so the understanding was that state institutions such as SSNIT and SIC can invest in it but the equity should be minimal, around 25 per cent 35 per cent.
The rest should be private sector institutions such as non-governmental and development finance institutions,” he said.
Mode of operation
He explained that such a setup would help give the bank the needed independence and professionalism to be able to raise capital internationally.
“Second, it should neither be a saving nor lending institution; it should be purely an investment institution lending through existing banks,” he said.
Having agreed on the concept for the bank, Mr Abugre said SADA and its stakeholders were now discussing the scope of the bank, once it is operational.
“We said for it to be viable, we have to see whether the scope of it should be national with emphasis on the savannah; savannah with emphasis on the greater savannah in West Africa or just national with a desk for the savannah region,” he said.
He, however, explained that these questions would be answered by the prefeasibility studies, which the AfDB approved a couple of months ago.
With this work already done, Mr Abugre said it was exciting to hear the Finance Minister saying that the country indeed needed a development bank.
“So yes, the bank idea is a good one,” he said and expressed the hope that it would be actualised soon to help attract investments into the agricultural and industrial sectors of the economy.