The Coronavirus Alleviation Programme (CAP) was proposed by the government to effectively manage social and economic recovery in Ghana as a result of the ongoing Covid-19 pandemic, or so we thought.
A clear CAP implementation strategy has not been communicated to date.
It is common knowledge that the majority of small businesses have been adversely impacted by the lockdown. And when the Finance Minister during his CAP presentation to Parliament on April 8th where he highlighted the program's strategic objectives, mentioned support to be given in the form of soft loans to micro, small, and medium-size businesses (and the self-employed), Ghanaians felt some semblance of reassurance.
Yet, three (3) weeks after passing the bill with the understanding that an implementation plan was imminent, we still do not have the exact details of CAP's roll-out plan.
The CAP strategy needs to be transparent and answer the following questions:
- the quantum of loans/funds that would be made available
- When will these loans be disbursed?
- What is the qualification criteria?
- Which financial institutions will be disbursing these loans?
- What is the risk-sharing arrangement between these institutions and GOG?
- How long will interest be forgiven?
- What is the maturity of these loans?
As other nations extend their lockdown period to protect human lives and numbers of those infected by the Covid-19 virus; and Ghana's cases continue to rise, we need to be realistic and prepare economically for an extension of this lockdown period to the mid-May (and possibly, even to end of May).
Already, most small businesses are struggling to meet even 25% of their monthly sales targets, and it is projected that many may not hit the 50% mark of their 2019 sales number post- lockdown. This is because demand will pick up very slowly, and this trend will continue before demanding in the market fully bounces back — the best-case scenario is September 2020.
Since it is estimated that projected 2020 sales may reach only about 50% of their value for most SMEs and traders in Ghana as a result of Covid 19, government needs to encourage spending. It should lead by example, by injecting funds into businesses that produce essentials, particularly in this lockdown i.e. food, agriculture and pharmaceuticals.
The expectation is that discretionary spending will drastically reduce as workers lose their earnings — paying full wages is going to continue to be more difficult for businesses as the lockdown continues. Many will rely on their savings (where available), and banks will have to reschedule loan repayments for small businesses i.e. provide grace period of paying interest and principal.
Economists are predicting a decline in economic activity and reduced spending and this contraction could put Ghana, potentially, in a recession by end the year. As such, Ghanaians must be advised of a sound economic path laid out by the government to move us forward.
For instance, we should have begun to see estimations on the financial impact of this pandemic by healthy sampling of businesses in our market.
Such surveys will amongst other things, shed some light on understanding the effects this pandemic is having on our businesses and project reduced demands; given that most businesses are very likely to downsize if this situation persists.
Another thing that Ghanaians need to see immediately are the cost-saving measures in government spending and the elimination of non-essential grandiose programs — I just wonder if the government is going to take any decisive actions to reduce the over bloated workforce in some non-performing parastatals and agencies, and other “special” government initiatives?
If these critical cost-cutting measures are not executed, our economic status will end in a disaster this year. My analysis reveals that there will be a funding gap of government spend of about GHS25bn (best-case scenario – if measures are taken). Here’s why; Our 2020 estimated revenue is GHS 67bn.
I envisage a downward review in a few weeks, to about GHS 50bn (10% below 2019) due to lower revenue from oil receipts and taxes as a consequence of the general slowdown of the economy.
Even with a healthy review of cost-cutting measures in government spend, how will this cater to our current projected 2020 spend of between GHS 86bn (budget) to GHs93bn (from the Appropriations bill)? My forecast- a review of this expenditure number to a more prudent number of approximately GHS75bn when some of the not-so-well thought through programmes and projects are axed.
Our expectation of government is to demonstrate that they are mitigating the social and economic troughs of COVID-19 in Ghana. Crucial topics such as this projected GHS 25bn fiscal gap, coupled with keeping depreciation of the Cedi below 10% and keeping GDP growth above 2% ought to be addressed. With clear, comprehensive and concise financial roadmaps be shared with both Ghanaians and investors.
Food for thought! I hope we get some answers quickly.