Yaw Agyemang is one of the 91,871 national service personnel deployed by the National Service Secretariat to serve in various institutions for one year.
The National Service is a 1-year mandatory service to the country.
At a business event talking about Ghana’s economy Yaw Agyemang who will complete his national service by July 2018, wanted to know what was next for him after the mandatory service ends.
One will think the chemistry graduate was asking the worse question ever but many in the auditorium clapped for him.
Agyemang explained that “though I did chemistry, I know I have an entrepreneurial spirit within. I would like to be an entrepreneur in the agriculture sector, but I am unable to finance this. What funding or investment is available?”
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Agyemang explained that all the banks needed collateral which he does not have. Other investors also ask him to show evidence of his work, before they can support his idea.
Yaw Agyemang is not alone in this situation. Other graduates in Ghana complained of the issue of investment and finances when they decide to start businesses.
Many argue that the interest rates are too high and it deters them from borrowing since you can sometimes not predict your crop or animal yield due to unforeseen circumstances.
Many people complain that the interest rate on bank loans is too much. This is not a new argument in Ghana but the banks have also failed to reduce their rates so that the general public can have access to loan facilities.
In Ghana, the Monetary Policy Rate (MPR) has dropped significantly from the beginning of the year.
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The MPR also has a direct influence on the rate charged by commercial banks for lending to one another on an overnight basis (this is known as interbank overnight rate).
Meanwhile, there have been calls by Ghanaians for commercial banks to reduce their lending rates in tandem with the recent reductions in the Bank of Ghana’s MPR as happens in some jurisdictions.
However, the guidelines that provide for the determination of interest rate have other factors to consider. This guideline was developed by the Bank of Ghana and other stakeholders.
Some of these factors are market-wide while others are bank specific. The bank-specific factors include the banks’ operating costs, funding costs (interest on deposits and other borrowings) and expected return on equity (ROE). The market-wide variable is the 91-day Treasury bill rate.
As at May 2018, the MPR is 17 percent. Meanwhile, the average lending rate of banks is 16.23 percent. This is still high for people who want to do agribusiness in Ghana.
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There are other investment opportunities aside taking a bank loan. Some of these include grants and funds from the government or international donors. Others are also incentives received when one starts any form of agribusiness.
The Ghana Investment Promotion Centre offers a range of incentives for agribusiness investors establishing production and/or processing enterprises in the country. These include:
• A five-year tax holiday for agro-processing businesses, from the date of commencement of business
• Custom duty exemptions for agricultural and industrial machinery and equipment imported for investment purposes
• Location-based tax rebates for manufacturing industries located in regional capitals
In the 2018 budget, the Finance Minister Ken Ofori-Atta stated that the government has decided to give tax holidays to any entrepreneur who is below 35 years.
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This is the government’s way of supporting small businesses in all sectors and encouraging more start-ups that will help reduce unemployment.
Answering Yaw Agyemang’s question, a Deputy Finance Minister Charles Adu Boahene said that “the government is really working hard to ensure that entrepreneurs have the needed environment they need to do business.”
However, everybody agrees that individuals or potential agribusiness entrepreneurs have a challenge soliciting funds or getting investors for their businesses.
The way forward
We all agree that Ghana needs more investors in the Agric sector.
Mr Adu Boahene said the government is doing all it can to help ensure that they create an enabling environment for doing business.
Entrepreneurs must be educated on how to access funding and loans in the country.
The government has a role to play by positioning itself strategically to woo investors into the country and point them in the right directions as well.
The banks and financial institutions must help by reducing their interest rates and also developing special offers for people interested in doing agribusiness.
Ghanaians, in general, must also purchase made in Ghana products to help sustain and grow these start-ups.