UMB’s bold step commendable

Last Thursday, the Universal Merchant Bank (UMB), a Ghanaian bank, announced that it had earmarked $100 million (about GH¢433 million) to support the government’s one district, one factory (ODOF) policy.

The bank explained that it was ready to match any bankable investment of $1 million or more in the policy area with the Ghana cedi equivalent of $50 million. The decision is predicated on its belief that the policy initiative was workable and achievable and, therefore, required stakeholder participation and support.

The Ministry of Trade and Industry, which is overseeing the policy initiative, has already announced some modalities underlying the implementation of the ODOF policy, with the sector minister disclosing that about 100 of such viable enterprises have been penciled in for take-off.

The President, Nana Addo Dankwa Akufo- Addo, has also explained that the initiative is a private sector-led agenda and that the government will only facilitate the process to ensure that the private sector takes advantage of it.

Consequently, the government has used the 2017 Budget and Economic Policy to give a clear direction to the private sector, through incentives and support structures, to ensure that the sector thrives, having been buffeted by an austere economic environment over many years.

The Daily Graphic believes that the move by the UMB is most appropriate, not only because it supports a government engineered initiative but also the growth engine of the economy – the private sector.

The UMB example is again enviable because it appears the relatively high profits banks in Ghana record do not translate into funding the productive sectors of the economy, as most of them invest in havens such as government treasury, trade activities, which they have come to term ‘small and medium enterprises (SMEs)’, and finance big corporate concerns which sometimes do not need such bank financing anyway.

The banks do this to the total neglect of the likes of agriculture, manufacturing and the businesses of artisans which together create the most jobs that this economy needs for its teeming youth. Every economy needs a large middle class to spend for economic activities to thrive.

These days, one only sees such economy transforming expenditure during Easter and Christmas festivities for Christians and Eid-ul-Adha and Eid-ul-Fitr for Muslims.

This could be attributed to the small size of the middle class, as majority of Ghanaians still fall within the low-income bracket, with a small percentage being counted among dollar millionaires.

To grow more people into the middle class bracket, industries must come alive and thrive to employ more.

Interestingly, however, Ghana’s private sector, which should take up the challenge and grow the middle class, is not very strong. This is evident in the kind of investors who take up opportunities created by the country’s laws.

Our investment and tax laws, for instance, provide generous incentives, including tax holidays, for companies, particularly manufacturing and agro-processing concerns that establish in the regions and districts outside Accra and Tema, the two industrial cities.

The free zones concept and various interventions by the government to promote investment have only done well by attracting foreign investors, while the Ghanaian private sector, at best, plays second fiddle and, in most cases, only front for foreign partners.

It is against this background that the Daily Graphic supports the bold step by the Universal Merchant Bank (UMB) and encourages other banks to join the bandwagon.

Ghana can only be built by Ghanaians and its high time indigenous banks took the bold decision to support the Ghanaian private sector to take its right of place in the country.

The Daily Graphic also wants to encourage the government to continue to create the enabling environment for the private sector to invest, grow and employ the thousands of Ghanaians being produced by the educational institutions.

Indeed, the ODOF policy will remain a mirage, if the private sector does not run with it. It is, therefore, good news that the Association of Ghana Industries (AGI) has already shown interest and the UMB is putting money behind it.

The Daily Graphic thinks this is the way to go to increase exports and foreign exchange, stabilise the local currency, create employment, boost consumption and generally grow the economy.