Making support for the private sector


Consistently, over the years, the Association of Ghana Industries’ (AGI) Business reports have registered the lack of access to capital and it being unaffordable even when it was available, as one of the major factors impending business growth in the country.
The domestic private sector has always argued that its growth has been stunted by bank credit being largely its only source of capital, despite its critical need for long-term patient capital that will help businesses transit from their small size to mid-sized ones.
In financing businesses therefore, what the private sector has been telling government is that, “we cannot depend on short-term banking credit; we have to create a long-term pool of funds, that is on the bases of pensions and insurance.”
But, the Social Security and National Insurance Trust (SSNIT), the only game in town with long-term funds, have invested left, right and center in real estate, so they have virtually not much left to invest.
So there is the need to create a pool, whether with seed money from government or to allow the private sector to do so by, for instance, establish a tax-exempt bond that will create the opportunity to aggregate long-term pool of funding the private sector can draw from. That pool of funding will be captive investment funds that cannot go anywhere.
Another area also is, foreign companies coming in to invest benefit from tax exemptions.
These, also, should be asked to reinvest some of their profit margins in sectors unrelated to their sector. That will help pull or drive small businesses in other sectors into a higher level of efficiency.
Giving foreign investors tax exemption is giving them money that should have gone to government. The exemption is to allow them keep the money and do things with it that will to impact the economy.
A cost benefit analysis will show we didn’t direct those tax exemptions; we only propped up those businesses for success. But once they’re successful, what do we demand in return?
We can demand that they, for instance, invest 20 percent of every year’s accumulated profit margins in particular sectors for five years or more and then we will help them get the foreign exchange to repatriate home.
It’s the kind of trade-offs that we must put on the table. This is investment that will accrue benefits to the investor company. So we tackle it in such a way that it impacts targeted sectors.
It is law we allow them to repatriate, but we also now have to look at it from the perspective of what the cost benefit is to our economy; to give them tax exemptions to pop up their companies to become profitable and haemorrhage us? No!
A company’s investment it makes is still its money, what we may perhaps do is to point them to our desired investment destinations by providing them with a list of such destinations from which they choose and invest there long-term.
Everything is negotiable. The law says they have been given tax exemption, but the law also says it can be taken away, because when a company becomes profitable, it doesn’t have to be operating under a tax exemption. Tax exemption, indeed, is not a bad policy but it must be targeted.
President Akufo-Addo recently observed that tax exemption costs the nation US$2.2 billion yearly.
Ghanaians must therefore have control over our financial sector. We must own our destiny.