Should the Ghanaian regulatory authorities continue to insert probes and gateways into and within the telecom network to monitor sales of the country’s mobile network operators directly because they do not trust them to disclose the right numbers and therefore pay the right amount of tax?
 
Further thinking is obviously required. But at least we need to start from data-based rational analysis.
 
Here is the starting point of any serious analysis regarding the “official paranoia” based “count traffic and tax” policy being used in the country’s telco industry:
 
Of all the taxes imposed on the Ghanaian telecom sector, the only one that is transaction based in a way that makes the principle of measuring traffic to determine revenue remotely valid is the communications service tax (CST), a top-line tax. The other top-line, and of course bottomline, taxes are not really transaction based. One needs to look at a suitable range of accounting metrics to determine the right revenue and then apply the tax.
 
The communication services tax is barely 25% of the taxes paid by just MTN, the biggest but still only one of five active network operators, though. It is about 15% of all taxes the telecom sector as a whole pays.
 
Since the country imposed PPP contractors, Subah and Afriwave, on the telco industry to police them at a cost, per the government’s own analysis, of $32 million a year, revenue from CST has actually FALLEN. From $58 million in 2016 to $54 million in 2017.
 
Tax take from the overall sector has also dropped. At any rate, probes and sensors cannot help ensure honesty in corporate tax matters, or national stabilisation levy matters, so that point was moot.
 
Does the reader actually understand the point being made? Let me repeat: Ghana has spent $32 million a year on private contractors in order to REDUCE CST (tax) revenue from $58 million to $54 million!
And yet this is the segment of telecom tax revenue that is MOST SENSITIVE to the technologies being deployed to prevent the telcos from cheating and lying. What about the 80% plus take from other taxes in the sector? That much larger proportion of tax revenue that probes and sensors in the live network cannot really reach?
 
Is this really serious policymaking?
 
I will be the first to admit that I haven’t conducted a study to gauge the honesty or dishonesty levels of the telecom industry, and I am not one to make rash assumptions. But neither has the government! No one has.
How can a country be run on base gut instincts? On groundless suspicions? Just so that officialdom can then decide to spend over $32 million a year chasing their tail (the government will say that their latest policy will reduce this amount to $17 million, but that isn’t accurate as the industry is still saddled with interconnect gateways that add no value and need to be paid for)?
 
Surely, Ghana can start with some serious studies and broad-based consultations across the industry and the research community for superior ideas about how to grow the telecom industry, leverage it and then extract even more revenue?
What am I missing?

Magical_Public_Sector_Debt_Drop_2017-2018I see that some officials of the Ghanaian government are in a celebratory mood. And who wouldn’t be? If the relative size of public debt has shrunk by nearly 15%, it sure is cause for celebration.

So I went over to the Bank of Ghana (BOG) source document to try and understand more. Only to meet confusion. The way officialdom in Ghana like to present public statistics can be a tad annoying. With no explanation for gaps in the data etc. etc. Private citizens who take an interest in public affairs are easily frustrated by this lack of annotation and poor referencing. But I trudged on.

First the total public debt numbers:

GHS 145 Billion – March 2018

GHS 142.5 Billion – December 2017

That was easy. All that was needed further then were the provisional GDP number for 2017 so that we could see the base from which the 2018 GDP estimate was being projected from. All of a sudden, trouble (see page 2 of the latest BOG summary of macroeconomic data).

According to the document, the second half of 2017 saw total GDP output of GHS 111.468 Billion (to keep things simple, all measurements are in current prices). If the outturn of the first quarter of 2017 is added, the figure becomes GHS 158.108 Billion. But where is the 2nd quarter GDP number? It couldn’t be found. I went to the BOG’s own second quarter bulletin, fast-read it, but still couldn’t find the number. Surely, a headline figure like that shouldn’t be buried under dense text!

I had to go look for the Statistical service bulletin for the second quarter of 2017. I discovered that there had been a revision of the provisional GDP figure from GHS 45.3 Billion to GHS 40.783.2 Billion for the period.

What the BOG summary does say unambiguously though is indeed that total public debt as a percentage of GDP in January of 2018 dropped to 59.5% and rose slightly to 60% in February 2018, having hit 69.8% in December 2017. I rubbed my eyes and read again. What current projected annual GDP figure is being used though?

From the calculation of private sector credit as a percentage of GDP on page 8, we can deduce that the Bank of Ghana’s estimate for GDP at current prices is GHS 241.5 Billion ($52 Billion).

If this estimate is correct then public debt as a percentage of GDP, based on the BOG’s own figures, should be 63% (i.e. $32.8 billion into $52 billion).

But based on the 2017 GDP figure of GHS 198.9 billion GHS ($45.02 billion, using the BOG’s own forex rate), computed from a mixture of GDP and Stat Service data, the economy would have to be growing by 20.7% per annum in nominal terms (to hit the projected figure of GHS 241.5 Billion) ) for public debt as a percentage of GDP to hit 63% (much less the 60% given in the document).

If it is assumed to be growing instead at 8% (and current GDP thus assumed to be about $46.36 billion), public debt as a percentage of GDP should be 70.7%.

With all this confusion, how can a public interest researcher, analyst or activist do her work of independent scrutiny of Government economic performance?

PS: This is the result of back of the envelope calculations done in half an hour, so very happy to be set straight so that I too can join the party.

The more I think about it, the more convinced I am that new technology requires us to reassess, in 21st century light, some of the seminal outputs of African historical scholarship.

We need to consider the use of novel “pattern analysis” algorithms to trace the evolution of certain interesting ideas, including some scorned in mainstream scholarship.

Case in point: the number of mainstream African historians who have dabbled in the “Afro Israelism” genre (the idea that various African ethnic groups originated from Judah/Canaan or were the “original Hebrews”). Sure, they are not that many in the larger scheme of things, but the “African migratory routes” field is a rather small one.

In Ghana this genre is most strongly associated with the “origins” of the following ethnic groups in particular: Ewe, Asante and Ga. In Nigeria, both Yoruba and Ibo chauvinists have made similar claims.  And whilst some orthodox historians may scoff, these ideas have serious resonance with many, especially Christian revivalist, Africans.

When you look at the pattern of arguments deployed, however, it doesn’t take you long at all to see that they are mostly regurgitations of established pseudo-historical “Israelisms”, many of which take a leaf from the playbook of the “lost tribes” motifs, as pioneered by Le Loyer as far back as the 16th century.

However the peculiar strain that has most entrenched in our local variant of Israelism may owe a lot to Gibsonite revisions to the core tenets of the tradition dating to the late 19th Century. You see coastal dabblers in colonial Ghana start to rev up their speculative analysis around this same period.

I strongly feel that technology-aided research would make the task of locating the twisted trajectories of many of these ideas much easier, and thus more fruitful.

 

When many people say things like: “democracy isn’t suited to African circumstances” and stuff like that, it is usually because they haven’t really thought carefully about what democracy, qua “democracy”, is meant to do.

Democracy, when carefully analysed, is not a tool for taking efficient decisions. It is not a gearbox for arriving at optimal strategies for governance. It is, instead, a set of “brakes”. It is designed to slow, tamper, and moderate. So that should bad or wicked people take over a country, their damage would be minimal and there would be a way to transfer the reins over to others peaceably. That really is all democracy promises, and in many ways it is best at this. All those who curse democracy have never proposed a better tool for doing this one thing well.

For all the other stuff of governance and development, a country needs other instruments, conditions, and cultures. We sometimes use the word, “institutions”, as a shorthand, though some then quickly abuse the word to mean “organisations”.

Institutions are best thought of as “protocols”, “logics” and “strategic intents”. That is also why they must have “specificity”. Institutions are best when they specialise.

The challenge is that some of the issues that confront a society as it develops cannot be narrowed down to a specific set of goals or even agenda. They seem pervasive. They seem to concern the very ethos and mindset of the people generally. And these kinds of issues therefore transcend institutions.

Some of these “issues” include complex notions such as “democratic trust”, how people come to accept certain rules of equity as indeed “agreed to” even when they don’t fully understand them; and the even more nebulous idea of “intellectual climate”, how we summarise the quality of ideas that set the benchmark for how people think.

The current situation in the Ghanaian “telecoms” sector concerns these two issues: democratic trust and intellectual climate. I will explain briefly. The technical details will be very simplistic, for brevity and clarity sake; bear with me.

We have in place now a kind of “telecoms landscape” that is roughly segmented into three broad, crude, domains:

Content (voice and data)
Services (electronic banking, mobile money, geolocation etc.)
Governance (rules, protocols, standards, accounting etc.)

In all these domains, there are again two broad segments: domestic and international (you can also look at distinctions such as “consumer”, “enterprise” etc, but for this analysis that isn’t necessary).

With this crude background in place, let me explain the “problem”.

Telecom companies carry content from their customers and charge them “transportation fees” or even take a cut of the revenue. They also generate some of this content, and sell to their customers. They also facilitate actual services and charge the service provider a fee. And they produce their own services and sell directly to customers. They may do all this domestically. But occasionally they serve as importers, clearance agents, or export agents. In short, one can look at their business in very similar terms as one would any other business. Sometimes, they are like one of those big fuel transport companies. At other times, they are like TV3, Multimedia or Omnimedia.

The thing is this can breed complexity. Which makes it hard for perfectly fitting analogies to be used. And that in turn means that most people shy away from applying common sense principles to evaluate what happens in the sector. This is a common challenge in democracy. Citizens simply do not have the time to break things up into bite-size chunks, compelling them to “delegate their thinking” to others. This works fine so long as some grand principle of “democratic trust” is active.

The second problem is that political decision makers are not always immune to this same “time-constrained understanding” problem. Just that the illusions of “delegated thinking” prevent them from admitting this. Very often, issues have so many layers that decision makers get lost, and they too have to “delegate their thinking”. They rely on consultants, and “experts” both in the private and public sectors. This should work alright so long as the “intellectual climate” is favourable. That is to say, so long as it is fashionable for hard-thinking and quality ideas to be valued, prized, and rewarded.

When both democratic trust and the intellectual climate suffer a downturn, pandemonium results.

Firstly, we decided that content coming from abroad needed to have a tariff, not very different from how we tax material goods.

Even though this content is clearly “digital” in character. This is akin to saying that making a call from Takoradi to Accra need to reflect the distance, because that is the case when transporting oranges from Tekyiman to Kumasi.

Soon, we began to have doubts about the “shipping companies” who bring the digital goods from abroad. So we went and hired companies like GVG and “delegated the thinking to them” about how to solve the problem. Because digital goods are not like physical goods however, people continued to bypass the gatekeeper we had hired.

So we invented a new problem called “simbox fraud”, and hired Subah to prevent people from bypassing the gatekeepers.

Then we said that SIMbox fraud koraa it is not really about tax revenue per se but about manning the “customs posts” of digital imports and since this is digital importation we are talking about and not physical imports, GRA shouldn’t be calling the shots, it should be the NCA.

So we went and brought Afriwave to come and monitor the “customs posts” through which all digital goods should flow into Ghana. When it was pointed out that there is a huge sea not just around Ghana but also “inside” Ghana called the “internet” so this has nothing to do with manning “customs posts” as the SIMboxers can always “smuggle” the content through any of the numerous inlets and estuaries, we remembered that smuggling is dealt with by the Police. Subah immediately entered into a relationship with the CID and jumped back into the picture.

Then we remembered that this distrust problem wasn’t limited to “imported digital goods”, it also affects domestically produced digital goods. So we asked Afriwave to also start monitoring the domestic trade.

They should build guardposts in between each major telecom company so that digital content passes through them from one network to the other. When it was pointed out that most of the digital goods are consumed within the same network within which they are produced, we changed tact and insisted that even those goods should be tracked, regardless of where they originate or may be going.

Then some smartass quickly saw a loophole. How can Afriwave carry digital goods between the telcos and also be responsible for counting the goods? How? We snapped our fingers, and said, “shegey!”

Then we went back to GVG. But this time GVG, knowing how fickle we are, was happy to partner with Kelni, a “majority owned Ghanaian company”, giving us: KelniGVG.

Subah was then kicked out. So here we are now:

Afriwave takes content generated by MTN customers and pass it on to Vodafone. Then they take content generated by Airtel-Tigo customers and pass it on to Glo. As they do this, KelniGVG tags along, counting every good and fastidiously recording it in the book of judgment.

Then we looked on our handiwork, and we said, “it is good”. And our work was marvelous in our own sight. So we said, but what about the services? Sorry? I mean if they are lying about the goods, surely they can lie about the services too, right? Of course! So we asked GHIPSS to come and be doing.

For electronic money to move from Airtel-Tigo to Vodafone, it has to go through GHIPSS. And to ensure that no one is lying, including the government-owned entity, GHIPSS, KelniGVG will be following every transaction, counting it pesewa by pesewa, dama, simpoa, just like that.

If this is still a little bit overwhelming for you, it is like saying that the only way to trust Papaye to pay the correct amount of tax is to hire people to stand there and count every plate of rice and chicken sold. And the only way to trust Nyaho Clinic to pay the right tax is to sit there and count every patient they operate on. But we are where we are.

What about the people who actually invented most of this stuff that we are copying? Britain, America, South Korea, Germany etc? Why are they allowing “standards bodies” and “industry associations” to build systems for interconnection and interconnectivity? Don’t they know that these telecom companies, unlike say chocolate companies and pharma companies, are congenital liars? How can they trust their standard tax regimes to work when we are talking about digital goods and services here?

And why are they more focused on creating ICT companies that generate truly novel innovations instead of those that make their money counting digital goods and inspecting other people’s services, the majority of which are imported anyway?

If you think carefully before you respond, you would conclude that “democratic trust” and the “quality of ideas” are at play.

I love all my West African friends pondering on the recent events in Windsor and then going on some wakandian history binge, like: “they had a traditional wedding, so why can’t we stick to ours too?”

Great. We should. But not because of them. Because, in actual fact, they didn’t really go “traditional”.

This was not how the pre-Christian Celts, Pitts, “Saxons, and the other lots, in Britain married.

Heard of “handfasting”? Exchange of ancestral swords? Piercing the horn? Taking an extra bath in the year? Honey meld? Yeah, those were the real “traditional” wedding rites in Britain before they got christianised.

In fact, even many centuries after becoming Christian they used to follow the two-tier approach that should be familiar to most Africans.

The Groom-to-be would visit the family of the bride and pay three types of dowry (it wasn’t a joke). They will thereafter have the handfasting fun and “jumping the fence” and all ’em “traditional” rites. Then later they will do the church wedding.

Until some plucky, probably foreign monk, in the 12th Century declared some of the dowry and “family-consent” practices pagan. Then in the 16th Century, Canon Law caught up with the Council of Trent and tightened the marriage rites thing further.

Now that Christianity is on the wane, and the vestiges of Roman and Norman colonisation are being stripped away to reveal Britain’s “true native culture”, some of the “pagan” stuff is coming back.

Yep. It isn’t only Africa that has a “woke history” burden.

The World Bank has just released its 2017 Private Participation in Infrastructure Report.

Here are some key findings pertaining to Sub-Saharan Africa (SSA).

Only the SSA region saw “declining investment” by private sector actors into public infrastructure. 2017 recorded the second lowest level of private participation in SSA over the last decade.

Indonesia alone received nearly EIGHT TIMES as much private investment into large scale infrastructure projects as the whole of SS Africa combined!

Whilst Ghana and Rwanda are frontrunners in 2017, it is important to note that the pledges of investment in the case of Ghana are somewhat shaky. Analysts would recall that in 2016 pledges of $2.05 billion for the Tema Port expansion and the Amandi Power Plant couldn’t materialise in 2017 due to ongoing structuring difficulties. The $550 million pledged for the Tema LNG Terminal, which is the basis of the country’s strong performance in the 2017 World Bank PPI report, is likewise mired in administrative delays. Legal and commercial structuring continue to be a major challenge for many Public-Private Partnership (PPP) projects in Africa, generating expensive and distracting legal disputes by the hundreds.

Another insight that is also relevant for the points I intend to make in this brief note is the continued decline of government contribution to PPP ICT projects. In the last five years only one-third of large-scale ICT infrastructure projects received government support.

On the whole, private participation in infrastructure (PPI) projects, especially in SS Africa, continue to be critical. PPI drives foreign investment, which ensures the availability of resources to invest in the first place in Africa’s many cash-crunched economies. PPIs can also bring top-notch expertise and project management capacity simply not available locally.

But that is far from saying that PPI or PPP activity by themselves necessarily produce these benefits. It depends entirely on the principles and strategic logic governing the specific PPI/PPP activity. Let me illustrate this point with a case study from Ghana, in the ICT infrastructure area.

When the Bank of Ghana called for restricted bids in 2016 for a “retail payment system infrastructure”, it was clear from the context that the winner of the tender was going to be working on mobile money interoperability. The Central Bank’s commercial subsidiary, GHIPSS, had already been working on the other components of the system, such as RTGS and ACH. The missing piece therefore was connecting the mobile money platforms of the telcos to the GHIPSS infrastructure. Mobile Money interoperability (the ability of a Mobile Money – MoMo – subscriber on one mobile/telecom network to send funds directly to the wallet of a subscriber on another network) is believed by experts to be essential to the financial inclusion agenda. Interoperability however requires that all telecom networks in the territory accede to a joint protocol for managing settlement, disputes, and sharing of fees (if any) etc. The process requires technical capacity, the procurement of which can imply some costs.

The Bank of Ghana (BOG) decided that the project shouldn’t be paid for from public funds. A private investor should foot the bill and then recover the funds from the mobile money “industry”, in essence from the telecom networks that provide MoMo services in Ghana.

All well and good. However, alarm bells should have rung immediately the BOG saw the bids of the three companies they invited to the restricted tender. They claim that they emailed two other companies to submit tenders but the two didn’t respond. As for why the BOG simply didn’t publish an open tender, no one has so far provided a cogent reason.

One company said the job could be done for $3.2 million. Another said they could do it for $1.2 million. The third, an obscure integrator called Sibton, said it would cost $1.1 BILLION, but that they would raise the needed funds themselves and recover through levies charged to the industry.

The Bank of Ghana, making reference to its Request for Proposals, immediately disqualified the first two companies on the ground that those companies had asked the Central Bank to invest in various aspects of the project, and the Bank had made it clear in its RFP that it did not want any financial exposure.

But if indeed this was the BOG’s attitude, why was it getting involved in choosing a monopoly provider to foist a system on the mobile networks in the first place? If all it wanted was a “facilitation” role, then it could have simply followed precedent around the continent by convening the mobile networks and strongly encouraged them to undertake the interconnections and integrations themselves, as indeed they do for voice calls and other similar services. A number of SS African countries such as Madagascar, Kenya, and Tanzania, had indeed already gone this route.

Looking at the ridiculous gap between the costs quoted by the first two companies and Sibton, did it not occur to the BOG that the cost of interoperability was not that high and therefore that there was something completely off about the Sibton deal?

Anyway, insisting that the contract sum is ZERO, it awarded an exclusive contract to Sibton, authorising the company to spend $1.1 billion (per Sibton’s own preferred exchange rate) to build the interoperability switch and recoup the investment through a revenue sharearrangement with the mobile networks.

The BOG did not bother to establish the capacity of the company to raise this massive amount of money.

Even though the company had stated that it will spend $400 million on electricity and water and $92 million on insurance, no alarm bells rang. Even though no financial institution had committed to the project, the BOG saw nothing problematic. In fact, the BOG consented to an agreement whereby the financial proposals made by Sibton in its tender submission were incorporated by reference, verbatim, as commercial terms. This meant that Sibton was guaranteed to recoup the $1.1 billion plus a reasonable return on investment. Sibton had not been coy about the mean of this recoupment: a levy on mobile money operators.

How much was Sibton hoping to squeeze out of mobile money? An average of $40 million a year for the first 5 years. It was then to escalate this amount such that over the life of the contract (15 years in the first instance, and a further 10-year extension at its discretion) it would make back $1.1 billion plus profits. In fact, the contract was drafted in a manner that allows Sibton to adjust the revenue share amount (called “tariff” in the agreement) to ensure what its mouthy lawyers call “financial equilibrium”.

That point is critical to understanding the logic of this PPP: the contract and the financial proposal (which, as you might recall, had been incorporated into the contract by reference) were emphatic that Sibton shall spend $1.1 billion on the project (though no mechanism was provided to verify how much it actually spends). It must then make enough money from charging the mobile money operators until it has recovered the $1.1 billion and made a reasonable return on its investment, beginning with revenues of $200 million in the first 5 years.

The weirdest problem with this bizarre arrangement is obviously that it takes away all the risks away from the private operator since they are guaranteed that fees shall continuously adjust to ensure that come what may they will recover their investment plus profit. Meanwhile, the said investment had been pegged at a level that is at best several hundred times the cost of what the networks themselves would spend in skilled labour if they were to handle the interconnections themselves.

To understand the sheer monstrosity of the scheme, consider this.

The most profitable telecom company in Ghana is MTN. In its most recent financial disclosure, it revealed a profit figure of about $53 million. If we consider that the profit margins on its mobile money product is similar to its other products, then its profits from mobile money was a measly $7.2 million. But let’s even follow the crowd and assume that mobile money is wildly profitable in Africa. Let’s assume that rather than the 7% margin it makes on its general business, it makes 30% on mobile money. This will still imply a profit of only $31 million per annum on mobile money.

Now here is the meat. MTN in Ghana, according to the latest figures this author has seen, has nearly 90% of mobile money accounts and 92% of deposits! So practically, it makes most of the profits in this nascent industry. It is safe to say that the entire profit outturn in the “mobile money industry” in Ghana (on a 30% profit margin assumption) is not more than $40 million per annum.

For the Sibton deal to have worked, therefore, virtually all the profits in the industry would have had to be whittled away to satisfy a contractor providing very little value in the ecosystem. Or, more likely, the mobile network operators would simply have passed on the costs to the mobile money subscribers.

A PPP/PPI approach to managing MoMo interoperability in Ghana, in the way that the authorities designed it, would thus have cost more and delivered far less to consumers and the industry. Thankfully, there has been a change of guard at the financial helm in Ghana. A decision was taken to continue with the regulator-led approach by implementing a mediating switch (rather than allow the telecom networks to implement multiple, bilateral, interconnections as is the case elsewhere). However the design and construction of the switch has been awarded to the same subsidiary of the Bank of Ghana already managing other aspects of financial sector interoperability, GHIPSS. The cost will be less than $4.5 million upon completion, and already phase one of the effort (allowing wallet to wallet transfers) has been completed.

It is clear, even from this brief case study, that PPP/PPI models of infrastructural transformation in Africa shall offer scant relief to a continent reeling from heavy underinvestment unless serious attention is paid to how risks and rewards are shared between the public and private sectors, with a view to ensuring sound governance and administrative propriety and integrity.

Take a look at the non-performing loans trendline below (Source: Bank of Ghana).
 
Since 1989 when the Ghanaian banking authorities introduced the use of “minimum paid up capital” as a major instrument of quality control in the banking system, the only direction has been “up”. From $740,000 in 1989, and $7 million in 2008, we have now arrived at $90 million plus in 2018.
 
Whilst we are not arguing an absolute correlation, the fact remains that over the last decade and half, more important quality indicators of bank performance, such as capital adequacy ratio and non-performing loans, have actually deteriorated. Just look at the Bank of Ghana’s own graphs annexed below this short note. This deterioration has happened even as the Bank continues on this obsessive drive to promote super-high minimum paid-up capital, a variable considered relatively insignificant in most sophisticated banking jurisdictions around the world.
 
Since 2012, successive Bank of Ghana (BoG) governors have made the same argument when raising the capital floor: we want strong banks that can finance “big ticket” transactions. What happened to “syndication”? To “risk pooling”? Every year we go to Europe for $1 billion plus of loans and facilities to finance cocoa purchases. Each time, several European and other international banks pool capital to lend to us, even though each of the major banks that participate can probably finance our entire national budget on their own.
 
We don’t need every single bank in Ghana to be able to finance a $50 million road on their own. Right now, that is not what happens anyway. Big deals are syndicated. We want more of that. And we want more attention paid also to the $250k to $2.5 million deals that non-bank finance institutions aren’t always able to handle, and which medium-sized and specialised banks are best placed to handle.
 
Arbitrary capital floors are certainly easy to impose. But they do little to cure the deep rot festering within the banking system. When last we pushed the minimum capital requirement from a little over $25 million to more than $50 million, it did little to enhance the health of the financial system. So, few years later, what do we see? As much as 40% of loans extended by banks to the agro sector risk default. A quarter of all loans to the manufacturing sector cannot be paid back. In these critical sectors, Ghana has one of the riskiest credit environments in the world.
 
The truth of the matter is that the aggressive use of the minimum capital requirement as a key instrument in regulating banking quality in this country has not proven effective over the last two decades. The reason is simple: this blunt tool is not the right surgical instrument for dealing with the delicate problems facing the sector.
 
The minimum capital tool’s use in South-East Asia following the Asian Financial Crisis, which influenced some countries in the region to jack minimum requirements to a billion dollars and more, was in the context of very special circumstances. Circumstances whereby international speculators and purveyors of hot money were threatening to bring entire regional financial systems down.
 
A medicine for managing acute crises cannot be prescribed to deal with chronic problems, like the deteriorating capital adequacy and NPL situations we face. Nor is it likely to fix the fundamental challenge of the high cost of credit, which is the bane, not just of the financial system, but of the economy itself. In fact, by raising the cost of doing business for the smaller banks, this blunt capital jackup measure is likely to exacerbate that problem. And what about the 800-pound gorilla that is asset risk-weighting?
 
It is fast becoming obvious, following the Unibank debacle, that a more urgent task confronting the BoG is to completely overhaul the entire framework for assigning risk weights to the off – balance sheet exposures of banks in this country, and to do so in a way that can provide some sort of early warning signal of potential distress.
 
Most of the Basel (BIS) and IMF prescriptions in this regard require considerable adjustment to work in our context, where “sovereign” doesn’t mean what it does elsewhere (our governments often have worse borrowing habits than some addicts) and “public sector entities” don’t have the cachet they are granted by convention. The weak credit referencing system also makes corporate debt rating a virtual crapshoot. It has always been a source of fascination for observers how preferential risk weights and maturity treatments affect capital adequacy measurements in Ghana considering the thinness of regulatory reporting in this country.
 
If capital hungry Dubai and fabulously rich Abu Dhabi, the crown jewels of the UAE, can both make do with a $14 million minimum paid-up capital requirement for their banks, without fear of eroding capacity to finance, then I am pretty sure that Ghana can manage too.
 
Not too long ago, we were all over Mauritius, trying to cosy up to their leaders in the hope of benefiting from the experience of their financial services success story. We even wanted them to come and set up an “International Financial Services Center” here. Yet, this Indian Ocean country maintains a $6 million capital floor.
 
It must be obvious to the Great and Good who run this country that managing a healthy financial system and insisting on a $90 million plus capital floor can be mutually exclusive propositions.