Business Analyst - June 30

Thursday, June 30, 2022
ESTABLISHING TRACTOR
ASSEMBLY PLANT
WELCOME NEWS
In 2017, when the government launched its
agricultural flagship initiative, Planting for Food and
Jobs, the intention was to boost food production and
make the country self-sufficient in food.
The initiative was designed to transform the
agricultural sector and position it as the driver of the
national economy.
A key pillar in this transformational agenda has
been agricultural mechanisation to modernise and
fast-track the agenda.
But, since we do not manufacture agricultural
equipment in the country, mechanising agriculture
means importing the machinery, for which reason the
government embarked on the importation of heavy,
medium and hand-held tractors and machinery for
farmers.
The machinery cost the nation a fortune. For
instance, between 2017 and 2020, a whopping $269-
million worth of agricultural equipment has been
imported to mechanise agriculture in the country.
The newspaper believes that if the equipment had
been produced locally, it would have saved the country
a lot of money, which could have been channelled into
other useful projects.
That is why we are satisfied that the governments
of Ghana and India have signed a credit agreement
for the establishment of an assembling plant for
agricultural equipment at Essienimpong in the Ashanti
Region.
The plant, expected to be completed in 18 months,
will assemble tractors and backhoe loaders and also
undertake the fabrication of other agricultural
equipment.
The plant will, surely, be a big relief to the Ministry
of Food and Agriculture, as it will reduce the
international trekking by its officials to countries such
as The Czech Republic, Brazil, India and China for such
equipment.
We also see the agreement as a significant
development and a step to boost the mechanisation
of our agricultural sector to drive the growth the
country desires.
The newspaper cannot help but support the
implementation of the project, as it will bring farm
machinery within the reach of small and marginal
farmers in the country by popularising the use of
agricultural machinery in the country.
We expect that the Action Construction Equipment
Ltd of India, the company to execute the project, will
train our local engineers to be able to operate the
machines and not frequently bring down its engineers
just for routine maintenance of the equipment.
It is commendable that the agreement has a
training component of local engineers on the handling
of the machines.
We don’t expect the plant to remain an assembly
plant forever, but there should be a medium to longterm
plan to escalate it to the standard where it will
manufacture and assemble the equipment locally.
We believe that the decision of the Chief of
Essienimpong, nana Onwanwani, to release 20 acres
of land for the project deserves commendation. It is an
example worth emulating by other chiefs to make land
available for projects in their communities for the good
of not only those communities but the country as a
whole.
The principle of taxing
MoMo transactions and its
unintended consequences
FoR a country like
Ghana, the importance
of predictability,
stability and simplicity
in its tax system cannot
be underscored. When these are
ignored, we have a tax system that
is reactive, resulting in tax
changes that are unexpected and
have not been thoroughly thought
through and analyzed. this is why
recent comments of policymakers
need to be carefully looked into
and further clarification provided
to the ecosystem.
these comments are not new
to industry watchers, and they
follow a pattern of analyzing
transaction volumes and values
largely upon which these
proposals to tax mobile money are
reached. For emphasis, one
policymaker has said that the
revenue from transaction fees that
Electronic Money Issuers (EMIs)
or mobile money operators make
is what she believes must be taxed,
in another submission, it is the
transaction charge that needs to
be taxed one might be wondering,
do these service providers pay any
tax at all?
Corporation taxes and
Withholding taxes readily come
to mind as taxes that mobile
money operators pay to the Ghana
Revenue Authority. their profits
and/or net incomes are subject to
corporate income taxes as well as
withholding taxes applied on the
commission incomes, they pay to
their over 300,000 agents and
merchants across the country. the
Ghana Chamber of
telecommunications put the 2019
figure on taxes earned from
mobile money operations alone at
a little over ₵30million cedis
($5million).
A tax on Mobile Financial
Services (MFS), is simply a tax on
the movement of money.
Borrowing the words of the
present government when it
abolished the VAt on financial
services in 2017; this tax will be a
huge “NuISANCE” to every sector
of the economy that leverages
digital financial services too. this
tax policy will discourage trade
and commerce and retard the
formalization of our economy. We
need to always note if the tax
interferes with financial
intermediation, it will undermine
our progress and strides chalked as
a country in respect of financial
inclusion.
Equally, beyond increasing the
cost of doing business in Ghana, it
will hurt the marginalized citizens
“For Ghana to create
a competitive and
effective tax system,
the principle must
be hinged on the
quality of its tax
laws and the way in
which tax policy is
made largely. The
questions is, how a
tax on traditional
banking as we
know it to be the
preserve of the
middle and upper
class be abolished
and then be reengineered
back
unto the laps of the
lower class and
informal economy.
and discourage usage of mobile
money services. For any sector or
straight end service that employs
over 400,000 direct and indirect
individuals, one may need to
relook the business model
carefully before attempting to
target it with a sector specific tax.
the point here is there is no tax
value that can account for or
provide new livelihoods for the
loss of employment to be
occasioned should the tax on
mobile money kick in today.
For Ghana to create a
competitive and effective tax
system, the principle must be
hinged on the quality of its tax
laws and the way in which tax
policy is made largely. the
questions is, how a tax on
traditional banking as we know it
to be the preserve of the middle
and upper class be abolished and
then be re-engineered back unto
the laps of the lower class and
informal economy.
In our study of
operationalizing Mobile Money,
and experience working with all
the mobile money operators in
Ghana, what is clear is that, only
about 40% of the large transaction
volumes recorded and announced
attract revenue to the service
providers. A greater portion of
these free transactions include
cash in, transactions between
distributors and agents for the
purposes of liquidity management
and let’s not forget the ongoing
promotions like that of Vodafone
Cash which are all free
transactions.
It seems quite unfair that
while service providers are
providing free transactions to
grow their base and ignite usage
within their networks,
policymakers would be fixated on
what they can get from what
largely appears to be a free service
for some. Let’s critique values and
volumes in a sentence; if I send
you 100 cedis and you send it back
to me and we do that 5 times each,
this is recorded as volume being 10
times of transactions and the
value of the (10) transactions
being 1000gh cedis. Lest we forget!
this is the same 100gh we kept
moving on the platform.
Last year, government
launched three key policy
documents namely, the National
Financial Inclusion and
development Strategy, the digital
Financial Services Policy and the
Cash-Lite Roadmap to drive
financial inclusion as well as
support growth within the digital
financial services ecosystem.
Government’s revenue growth
efforts should be done in a manner
that is supportive of economic
growth, employment and
investment. It is always
counterproductive to witness
revenue growth policies
competing with the greater
objectives of economic growth.
the President’s 2021, state of
the nation address signaled
governments intention to switch
the National Id into tIN numbers
and equally link these Ids to SIM
cards which will support
identification within the digital
financial services space. In a
country where roughly 19 million
adults have 15 million active
mobile money accounts, these are
the positive signals that can
ultimately widen the tax base
without taxing directly the
enabling bridge that gives the
state access to persons within the
informal economy.
The writers, Derek B. Laryea, a
Certified Digital Finance
Practitioner and Kojo Dougan,
Digital Finance Professional are
both executives of the Digital
Finance Practitioners Association
(Ghana).