• Two smallest mobile telecoms might lose licences – minister
• Country slides 11 positions in TI corruption ranking
• South Africa’s AngloGold signs agreement on redevelopment of Obuasi mine
• One of the bidders for ECG concession reportedly objects to some of deal conditions
• Regulator instructs oil marketers to lower fuel prices following special tax cut
• Annual percentage rates on mortgage loans continue rising in January
• T-bill yields fall in latest auction
• Moody’s affirms sovereign ratings, outlook remains stable
• Spain’s Abengoa Water sells 56% stake in desalination plant for USD 26mn
Two smallest mobile telecoms might lose licences – minister
- One of them, with market share of just 0.1%, might lose licence within days
- Ghana has five operators at present, the biggest of which is MTN
The two smallest mobile operators, Expresso and Glo Mobile, might soon lose their licences, communication minister Ursula Owusu-Ekuful told Citi FM. She explained that the two companies had consistently operated below the standards sets by the National Communications Authority (NCA) and had been given 30-day ultimatum by the ministry to respond to questions about their poor performance. Owusu-Ekuful said she was convinced NCA would soon revoke Expresso’s licence as it’s 30-day ultimatum ends next week and the company has sent a response that does not address the issues raised. The minister also said that the government would soon auction the remaining 4G spectrum in June.
The country currently has five mobile operators, the biggest of which is MTN (47.6% share at end-September 2017), followed by the recently established AirtelTigo, a merger of Airtel and Tigo (a combined share of 26.0%), and Vodafone (24.3% share). Glo Mobile and Expresso have much smaller market shares – Glo of 2.1% and Expresso of just 0.1%.
Country slides 11 positions in TI corruption ranking
- Ghana’s corruption perception score also drops by 3 index points to 40
Ghana slid 11 positions to rank 81st among 180 surveyed countries in the 2017 Global Perceptions Index by Transparency International. The country’s score also decreased by 3 index points to 40, the lowest result in the past six years, although it was still better than the regional average of 32.0. The country’s regional ranking was 12th among 49 surveyed countries, down 3 positions from last year. The results show that the situation is slow to improve despite the arrival of a new government after the 2016 elections won by the then opposition NPP. The government of President Nana Akufo-Addo has pledged to tackle corruption and recently appointed a special prosecutor to deal with such cases.
South Africa’s AngloGold signs agreement on redevelopment of Obuasi mine
- Company expects to invest over USD 500mn in redeveloping the mine over six years
- Production is seen to average 350,000-450,000 ounces in first ten years
- Obuasi mine has been in limited operation since 2014, its reopening was complicated by illegal mining
South African company AngloGold Ashanti said in a statement that it signed regulatory and fiscal agreements with the Ghanaian government that will provide the framework for the redevelopment of the Obuasi gold mine. The agreements include a development agreement, a tax concession agreement, a security agreement and a reclamation security agreement. Of these, the tax concession and development accords are subject to parliamentary approval. The company said that the Environment Impact Assessment process has been completed and the permits are expected to be issued soon.
AngloGold said the agreements reached will enable it to restart the mine as a modern, productive, long-life high margin operation. A feasibility study has been conducted into the redevelopment of the high-grade ore body, which has 5.8mn ounces of ore reserves and 34mn ounces of mineral resources. The redevelopment will be done in two phases – the first comprising project establishment, mine rehabilitation and development, plant and infrastructure refurbishment to enable production at a rate of 2,000 tonnes per day for the first operating year. The phase is expected to take roughly 18 months, with the first gold expected in Q3 2019. The second phase includes refurbishment and construction of additional facilities and is expected to take a further 12 months boosting operation to 4,000
tonnes per day. The operation is then expected to ramp up to 5,000 tonnes per day over the next three years.
Mine production is expected to average 350,000 ounces to 450,000 ounces in the first 10 years and 400,000 ounces to 450,000 ounces in the second 10 years. The initial investment in the project is estimated at USD 450-500mn in the first 30 months, and additional capital expenditure of USD 94mn is expected after the completion of phase two through to year six. The operation is expected to create between 2,000 and 2,500 jobs.
Obuasi has been put in limited operating phase since 2014 due to growing operating costs and in 2016 it was placed under care and maintenance due to the invasion of the site by thousands of illegal miners. AngloGold had plans to redevelop the mine, which was estimated to cost up to USD 1bn, but its potential partner Rangold Resources decided to pull out of the investment agreement for the redevelopment in 2015 after it completed a due diligence. While it said later that there were other potential partners interested in the project, the problem with illegal miners and the closure of the mine meant no progress was made on that. The government got involved and helped evacuate illegal miners in early 2017 which allowed AngloGold to lift the force majeure in February 2017. It then started to evaluate the damages and look at ways to develop it.
One of the bidders for ECG concession reportedly objects to some of deal conditions
- The French-led consortium reportedly disagrees with 51% local content requirement
- Six companies were shortlisted in the tender launched last year
- Private sector participation in ECG is requirement under USD 537mn Power Compact with MCC
One of the bidders in the concession tender for power utility ECG, a consortium of CH Group (Ghana) and France’s EDF and Veolia, has objected to the some of the deal conditions, local daily B&FT reported citing a letter sent to the CEO of Millennium Development Authority (MiDA), which oversees the selection process. The bidder, in particular, opposes to the requirement that 51% of the concession should be held by Ghanaian companies. The requirement was included in the amended request for proposals sent in late November 2017 and envisages that this 51% local ownership is maintained throughout the duration of the concession. The consortium reportedly said in the letter that this restriction would impact their ability to find a workable solution and would ultimately impact the concession’s
bankability. An energy expert who talked to B&FT commented that the letter would effectively exclude the French-led consortium from the tender.
MiDA has said it expects the successful bidder for ECG concession to be selected by end-2018 and the ECG’s distribution business to be transferred to the winning bidder in Q1 2019. Apart from the above-mentioned consortium, the six shortlisted bidders in the tender announced last year include Italy’s Enel, India’s Tata Power Company, the Philippines’ Manila Electric Company, France’s Engie Energie Services and a consortium of BXC Company Ghana with Chinese firms.
The involvement of a private sector partner in the management of ECG aims to improve its performance and efficiency and is a requirement under the 537mn Ghana Power Compact signed with the Millennium Challenge Corporation (MCC). The five-year porgramme comprises six major projects designed to improve power supply in Ghana.
Regulator instructs oil marketers to lower fuel prices following special tax cut
- Fuel prices expected to be cut by 4%
The National Petroleum Authority (NPA) said in a press release that oil marketing companies should lower fuel prices with immediate effect following the recent reduction of the special petroleum tax by 2pps to 13%. The amendment to the special petroleum tax law was passed last week and the NPA said it expects fuel prices to have been cut as of Feb 17. The NPA has projected that the tax cut will result in a 3.6% cut in petrol prices to about GHS 4.50 per litre and a 4.1% cut in the diesel price to GHS 4.48 per litre.
The special tax cut was adopted after pressure from consumer organisation COPEC and trade unions. And although they demanded that the tax was scrapped altogether, the trade unions commented that they were satisfied for now. The two organisations were planning a protest. Fuels have 2.5% weight in CPI basket.
Annual percentage rates on mortgage loans continue rising in January
- Rates on most other types of consumer and business credit declined in January
- Lending rates fell by 150-310bps in 2017, with biggest drops for household credit
- Central bank cut rates by total of 550bps last year but banks face low asset quality
The effective annual percentage rates (APRs) charged on mortgage loans by local commercial banks continued rising, adding 20bps m/m to 30.4% in January, according to the data released by the central bank. At the same time, most other rates declined, with the rate charged on vehicle loans falling the least, by 20bps, and the rate on other consumer loans, agriculture and commerce loans falling by 70-90bps m/m. Construction loans were the only type of business credit to see an increase in rates, by 10bps w/w to 31.6%. The average rates on deposits stayed flat at 10.4%.
Lending and deposit rates had generally been on the decline in 2017, falling by between 150bps and 310bps. The biggest drops were in household credit rates, and mortgage in particular, where rates are now lowest among different types of credit. The smallest decline was for construction credit. The new drop in January means the commerce credit is now the one with the biggest rate drop, and the more pronounced cut in rates for business credit in general signals some moderate improvement in business confidence and prospects. The PMI for January marked the 24th consecutive month of expansion albeit slowing, and the economy
is seen to benefit from oil production growth.
The central bank cut the key policy rate by a total of 550bps last year, citing the continued disinflation process and the need to support growth. However, banks have been dealing with declining asset quality as a result of the economic slowdown over the past three years, growing operating costs, and the significant energy sector debt. The non-performing loan (NPL) rate worsened to a record high of 22.9% in November before easing to 22.7% in December. The government signed a debt settlement deal with banks last year with some payments already made, and the energy bond issued this year should help settle legacy debt and reduce NPLs, but a tangible effect is yet to be seen.
T-bill yields fall in latest auction
- Yield decline amid stronger demand
T-bill yields declined in the latest primary auction held by the Bank of Ghana on Feb 16. The weighted average yield on the 91-day T-bill fell by 2bps w/w to 13.34% while the 182-day Tbill yield was down 1bps w/w to 13.89%. The yield on the two-year note which is sold once a month fell by 68bps from its last sale on Jan 5. The yield decline came amid stronger demand, in particular for the two-year note. The Bank of Ghana sold a total of GHS 1,026mn in debt at the auction against a GHS 819mn target. The total amount of T-bills and notes (one- and two-year maturities) sold since the start of the year reached GHS 4.3bn, which is 45.9% of the Q1 plan. The next auction will be held on Feb 23 offering GHS 570mn in T-bills.
Moody’s affirms sovereign ratings, outlook remains stable
- Ratings supported by lower borrowing needs, higher oil production, expected fiscal management improvement
- Ratings are constrained by high debt burden and weak fiscal institutions
Moody’s affirmed Ghana’s long-term issuer and senior unsecured bond ratings at B3 and maintained the outlook as stable. Moody’s also affirmed the rating of the bond enhanced by a partial guarantee provided by IDA at B1. The foreign-currency bond ceiling was affirmed at B1, the foreign-currency deposit ceiling at Caa1, and the local-currency bond and deposit ceilings at Ba3.
The ratings are supported by some improving trends such as lower, albeit still elevated, borrowing needs, progress with the restructuring of legacy debts of state-owned power utilities, and benefits to growth and the external accounts from the oil production increase. The IMF also expects that the improved fiscal management as a result of the measures set in the Public Financial Management Act 2016, and the reforms adopted under the IMF programme ending in December 2018, will engrain greater spending control through electoral cycles. At the same time, the ratings are constrained by persisting credit challenges including a high debt burden, weak debt affordability, and weak fiscal institutions reflected in revenue target underperformance and the past accrual of arrears.
The stable outlook reflects Moody’s view that risks to the B3 rating are balanced. On the upside, stronger growth in the oil- and non-oil sectors and improved BoP dynamics could lead to faster fiscal consolidation and a larger build-up of external buffers than currently expected. On the other hand, and pending more visibility about the sustainability of the government’s fiscal consolidation and arrears clearance track record, the government’s capacity to finance significant borrowing could remain weaker than currently assessed, Moody’s said. It noted that while liquidity risk has declined as a result of the government’s maturity lengthening strategy, gross borrowing requirements remain relatively elevated at an estimated 12-17% of GDP over the next three years (down from the peak of 23% in 2017).
Spain’s Abengoa Water sells 56% stake in desalination plant for USD 26mn
- Stake is acquired by US-listed water purification company AquaVenture Holdings
- Desalination plant is run by joint venture in which remaining 44% stake is held by Dutch company
US-listed multinational water purification company AquaVenture Holdings said it had signed an agreement with Spanish company Abengoa Water for the purchase of a 56% stake in Ghanaian company Befesa Desalination Developments Ghana (BDDG) which runs a desalination plant in Accra. The desalination plant has the capacity to supply approximately 60,000 cubic metres of potable water daily to Ghana Water Company under a long-term water purchase agreement. It was launched in 2015 and supplies some 500,000 residents of Accra.
The value of the deal, which is structured as the purchase of the entire share capital of Abengoa’s subsidiary that holds the 56% stake, is about USD 26mn, the company said. The price is subject to adjustment based on the results of talks with Ghana Water regarding changes to the water purchase agreement and with BDDG’s lenders regarding the existing financing arrangements, among other things. The completion of the transaction is expected to occur by the end of Q2 2018 after meeting certain conditions, including getting required approvals.
AquaVenture Holdings has offered to purchase the remaining 44% in BDDG on the same principal terms and is in active negotiations with that shareholder too, the statement read. The BDDG is a joint venture of Abengoa and Dutch-owned Daye Water Investment (Ghana) which owns the 44% stake.
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