A GNA Feature By Christian Agubretu Following the passage of Act 582 of 2000 the Export Development and Investment Fund (EDIF) was born as a facility to assist those in agriculture, manufacturing and export services providers and thus give impetus to the industrialisation of the country. The satisfaction of the farmer would be that the industrialist could process his produce for export thereby creating a ready market that would give value to his toils. The law was passed in December 2000 at a time when a number of Members of Parliament (MPs) had deserted Parliament and were engaged in serious campaigns for re-election. It came out of an intensive research into how best to promote the national export drive by indigenous exporters to enable them to command the economic heights of the nation. The ruling New Patriotic Party (NPP) saw the wisdom in the law and set up a structure to make it functional. Nonetheless, the utilisation of the fund within its established framework would whet the appetite of Mr Dan Lartey, Founder of the Great Consolidated Popular Party (GCPP) whose philosophy of domestication that hinges on the philosophy of ‘eat what you can and can what you cannot’. This immediately brings to mind the Minister of Food and Agriculture, Major Courage Quashigah's daily song that the country should eliminate post-harvest losses, a task he had set himself to accomplish.
At a recent EDIF review workshop in Accra, Mr Alan Kyerematen, Minister of Trade, Industry and President's Special Initiatives, noted that lack of finance was a major problem facing industry generally and the export sector in particular.
"Our industrial sector operators need capital to rehabilitate, diversify and expand their operations", he said.
"Our exporters also need capital to enable them to overcome supply-side constraints so that they would be able to meet export orders and be competitive in price, quantity and delivery", the Minister said.
This refrain was invariably taken care of by Act 582 of 2000, which established the EDIF and became operational in March 2001 to make Ghanaian exports competitive and to increase the country's export earnings.
Mr T. K. Obeng, Chief Executive of EDIF, told the Ghana News Agency that the Fund would be sustained from the following sources; 0.5% of the value of non-petroleum commercial imports, 10% of net divestiture proceeds, grants from government and other sources, recoveries of loans and interest payments, and loans and other credits generated by government.
Sixteen Designated Financial Institutions (DFIs) are operating EDIF.
The Fund Secretariat on behalf of its Board and the DFIs undertake appraisal of applications.
"Of primary importance to us is to ensure that the project for which credit is sought is engaged in or has the potential for export business and the facility is operated in the form of loans", Mr Obeng said.
As at the end of October, this year, commitments on this account was 181 billion cedis for 77 projects. The DFIs on-lend at maximum rate of 15% giving the DFIs a spread of 10.0% per annum.
Speaking to the GNA, Mr K. M. Nkrumah, Director of Credit and Projects, said the Fund was engaged in the provision of credit, export insurance, re-financing and credit guarantee.
Export marketers, producers and exporters, producer of export goods (manufactured items/agricultural produce) and investor undertaking an infrastructure project to provide services to exporters qualify for loans and other credit facilities.
The EDIF law states that an enterprise, which "is wholly owned by a Ghanaian or partly owned by a Ghanaian with majority Ghanaian shareholding is eligible for credit facilities.
"In simple terms, an individual who is not a Ghanaian does not qualify for EDIF's assistance. A company, which does not have Ghanaian majority shareholding is also ineligible for assistance from the Fund", Mr Nkrumah said.
He said as at the end of December 2002, nearly 77 billion cedis had been approved for 31 projects. From January 1, 2003 to October 31, 2003, 46 projects had been granted an aggregate loan of about 104 billion cedis.
Between June 2002 and October 2003 EDIF had approved loans totalling about 181 billion cedis for 77 projects or applicants. Twelve out of the 77 projects were new.
Breakdown of the loans into sectors/products are: Sector/Product No. of Projects Amount ('000) Percentage % 1. Agro-processing 12 31,939,994 17.64 2. Other Agriculture 9 15,749,406 8.70 3. Salt Mining & Processing 13 25,655,647 14.17 4. Wood 9 26,836,279 14.83 5. Handicrafts 7 14,571,860 8.05 6. Plastic 4 13,110,000 7.24 7. Garment & Textiles 7 18,460,703 10.20 8. Pharmaceutical 4 11,150,914 6.16 9. Others 12 23,538,182 13.00 Total 77 181,099,985 100.00
The table below shows the size of the loans granted: Size/Range of Loans Cedis No. of Projects Amount (¢'000) % 1. 1 m - 500 m 18 5,509,114 3.04 2. 501 m – 1,000 m 9 7,000,736 3.87 3. 1,001 m – 1,500 m 2 2,405,000 1.33 4. 1,501 m – 3,000 m 18 40,049,742 22.13 5. 3,001 m – 4,500 m 28 133,545,393 62.73 6. 4501 m + 2 12,500,000 6.91 Total 77 181,009,985 100 Regional Distribution The table below shows the regional spread of the loans, which EDIF has granted. Out of the total loan of 181,009 billion cedis, Greater Accra has 102,534 million cedis representing 56.65% of the total. In terms of number of projects, it accounts for 46 out of the total of 77. There are no projects in the Volta and Upper West Regions. Region No. of Projects Amount (¢'000) % 1. Greater Accra 46 102,534,112 56.65 2. Ashanti 12 34,611,914 19.12 3. Central 7 22,516,647 12.44 4. Eastern 4 11,068,779 6.12 5. Western 5 9,217,700 5.09 6. Northern 1 590,833 0.33 7. Brong Ahafo 1 320,000 0.18 8. Upper East 1 150,000 0.08 9. Volta 0 0 0.00 10. Upper West 0 0 0.00 Total 77 181,099,985 100 Mr Nkrumah said the EDIF would like to have a situation where all the 10 regions of the country actively got involved in exports to qualify for its credit facility. He said, "a greater portion of the loans granted are medium term and it takes time to implement the projects". It is, however, anticipated that export earnings from the projects financed would be 60.6million dollars in 2003 and 105.1 million dollars in 2004. Mr Nkrumah said 19.6 billion cedis out of the loans were due for payment as at September 30 2003 and 17.93 billion cedis had been repaid giving a recovery rate of 91.26% and that Prudential Bank Limited, whose loans are mainly short-term, tops the list and it has paid 10.8 billion cedis due it showing a recovery rate of 100%. There were, however, some problems associated with the Fund in the form. Some beneficiaries were asking for the extension of moratorium periods on the loans because the underlying assumptions on which the companies based their projections were unrealistic. In some cases it was noticed that the charges levied by the DFIs on EDIF loans were high. Mr Nkrumah appealed to DFIs to support the exporters by reducing their charges because it was a challenge to all to make good use of the Fund to enhance and sustain exports without which the country could not make progress. In that regard it was necessary to be mindful of what Mr Kyerematen said: "There are a number of areas that require fine tuning to make EDIF more beneficial to the business community in Ghana." He said that could be done by catering for the needs of start-ups, which have no track record and inadequate collateral, addressing the issue of perceived delays in the processing of loan applications, and the need to identify other avenues of capitalising EDIF to complement the existing funding sources. There is the need to promote spatial distribution of the benefits of EDIF, to minimise over-concentration of EDIF sponsored projects in only a few regions. There is also the need to explore the possibility of introducing venture capital into the EDIF portfolio and sustain the fund by ensuring prompt repayment of loans.