Africa Market Update - February 2015

MARKET UPDATE – AFRICA | February 2015
In view of
depressed global
oil prices, Ghana
will be even more
pressed to pursue
fiscal reform
aimed at slashing
excesses such
as in recurrent
spending.
POLITICAL OUTLOOK
Warding off Boko Haram
The spill-over of Boko Haram’s threat into
Niger and Cameroon in the recent past has
put Ghana on alert, with President John Mahama
leading dialogue on formation of a
multi-national force to combat the militia.
Whereas Ghana does not share a common
border with Nigeria, unlike Niger and Cameroon,
historically strong ties between the
two and close relation between Goodluck
Jonathan’s and Mahama’s administrations
could render Ghana predisposed to the militia.
Masses Restive over Harsh
Environment
Opposition factions continue to capitalize
on the deteriorated economic environment
to whip up the public’s sentiment against
the government. During its January 2015 regional
delegates’ conference, People’s Progressive
Party called on the public to change
the regime in 2016. Short-term investors
are likely to be guarded about the country’s
risk outlook; with long-term counterparts
banking on historic bullish performance to
augment future expectation.
ECONOMIC OUTLOOK
Monetary Tightening Offers
Breather
The sixteen month long uptick in inflation
has been arrested for the first time with
the December 2014 rate standing at 17.0%.
This comes as a much needed breather for
investors eyeing the Ghanaian market as it
points at gradual improvement in the economic
environment. We attribute this development
to prudent monetary policy action
that has reined in the money supply. The
November 2014 200.0 bps hike in Bank of
Ghana’s policy rate to 21.0% is likely to be
playing an especially central role in addressing
the run-away cost of living and business
operation.
Inflation
BUSINESS NEWS ENVIRONMENT
Construction of a USD 60.0 million logistics park is set to be completed
by the end of Q4, 2015. The facility, to be carried out
through partnership between the government and Agility Group,
targets streamlining operations for investors including fasttracking
of raw material procurement. If implemented, this facility
could buoy the competitive edge of Ghana’s business climate
with regard to red-tape that renders procurement tedious and
costly for investors.
Key Procurement Metrics
Country
Number of
Procedures
Senegal 4 6
Time (Days)
Ghana 8 14
Cameroon 5 15
Nigeria 8 28
Source: Bank of Ghana, StratLink Africa
We note that money supply had grown by
a marked 33.6% in the twelve months to
September 2014 compared to 17.6% in the
same period a year earlier, indicative of an
unusually steep rise in money supply. The
steep rise in money supply comes on the
back of high recurrent spending with available
fiscal data indicating for the first half of
2014, recurrent spending constituted 82.1%
of total expenditure 10 .
In view of depressed global oil prices, Ghana
will be even more pressed to pursue fiscal
reform aimed at slashing excesses such
as in recurrent spending.
Source: World Bank, StratLink Africa
10 Ministry of Finance 2015
26 | StratLink Africa Ltd.
www.stratlinkglobal.com