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Mon, Aug

Leverage pensions, insurance to create long-term funds

Ms Gloria Ofori-Boadu, a law lecturer asking a question

The Private Enterprise Federation (PEF) wants government to create a long-term source of funding for investments into the agriculture sector from pension funds.

The percentage allocation, according to PEF, would help make funds readily available for the private sector to channel into agriculture investment initiatives.

The Chief Executive Officer of PEF, Nana Osei Bonsu, explained that the private sector was supposed to benefit from at least 60 per cent of the tier three pension contributions, but currently the private sector was not getting any. 

“What we did when we designed the third tier was to create a fund, and it should invest not more than 40 per cent in government treasuries, but now it is investing 100 per cent. The private sector who were supposed to be the beneficiaries of the 60 per cent at least, are getting nothing,” he said at the Graphic Business–Stanbic Bank Breakfast meeting in Accra on Tuesday.

He, therefore, noted that; “What we are looking for is for government to redirect that every pension fund should have a portfolio of agriculture investment. Every pension fund should have a portfolio or a percentage prescribed by government to go into agriculture, then that can allow for a long-term funding available for investments into agriculture.”

The meeting was on the theme; “A public-private dialogue on stability, growth and jobs”, and it brought together stakeholders in the business community to deliberate on how government can develop the economy through stability, growth and jobs.

Low-cost funds

Nana Bonsu explained that investments in the agriculture sector could not be funded with loans from the universal banks as a result of the high cost of borrowing, hence the need to create funds locally.

“If we had low cost funds, we wouldn’t have a problem with agriculture. It cannot depend on the high cost of borrowing from the universal banks,” he said.

Rather, the sector, he said, needed to have a long-term low cost pool of funding which should be mobilised to influence the transformation.

“The two vehicles to create a long-term pool of funds are the pension schemes and the insurance industry. I don’t see why we are waiting for what we call development partners. Let us not depend on anybody, instead let’s depend on ourselves,” he said.

Warehouse Receipt System (WRS)

He reiterated the need for the country to develop a Warehouse Receipt System (WRS) to not only help address the post-harvest losses in the country, but also be used as a tool to aggregate supplies, create additional markets for commodity producers, protect against price volatility and leverage for financing.

“A WRS provides storage facilities and protection against the vagaries of the weather. It can also be a source of sustainable supplies of commodities for industrial use through aggregation of smaller harvests from various camps,” he said.

He also added that the depository in the WRS could serve as a holding pen for improved price regime and to avoid price volatility before the producer entered the market, while the stored commodities in the warehouse could be used as collateral to obtain funding.