Saturday , 4 February 2023

Laud Nartey writes: Debt Exchange or Debt Restructuring/Haircuts: Uncertainty has no room in financial sector

From my own perspective, at least, Ghana has witnessed three major financial crises within the past eight years that threatened the survival of the sector.

We had the DKM issues and other-related matters as one of the crises. Then also, the issues that led to the banking sector clean-up as well as the Menzgold matter.

I remember when the collapse of DKM, the Jasta Motors and the other microfinance came about, a lot of the victims complained of how bad they had been affected by the situation.

Some lost their lives, others lost their businesses, and others still suffered all forms of troubles – psychological, emotional and physical torture following their lost investment.

Leadership of the country at the time, under the Mahama administration, raised issues against the judgement of some of these victims for investing in schemes that were promising outrageous and unrealistic returns on their investments.

As a way of restoring hope and confidence in the sector, the then President John Mahama ordered then Bureau of National Investigations to confiscate properties of DKM Microfinance as government rolled out plans to pay customers whose investments had been locked up.

This matter did not fade out completely only for the controversy involving gold dealership firm, Menzgold to pop up.

The Chief Executive Officer of Menzgold Ghana Limited, Nana Appiah Mensah, aka NAM1, was accused of allegedly defrauding 16,000 customers of more than GH¢1.68 billion between January 2017 and September 2018.

He was charged with two counts of abetment to defraud by false pretence and two counts of abetment to carry out banking business without a licence, contrary to Section 6 (1) of the Banks and Specialised Deposit-taking Institutions Act, 2016 (Act 930).

We also experienced the banking sector crisis that led to the clean-up by the central bank.

This exercise resulted in the collapse of nine domestic banks.

There were panic withdrawals at the time when the regulator announced that some banks were going to be merged whereas the licenses of some financial institutions were going to be withdrawn.

The panic withdrawals were meant to take the deposits to safe havens – banks that were considered viable, mostly foreign-owned.

Presently, Ghanaians are ones more saddled with another situation.

I am unable to tell whether or not it is a crisis and even if it is, whether it comes near any of the above-mentioned ones.

There is the issue of whether there will be haircut. Also whether there is Debt Restructuring and Debt Exchange. Kindly note that the government has launched the Debt Exchange Programme.

Concerns are that there is going to be “haircut” on the principal of bonds.

Despite the repeated assurances by the Finance Minister, Ken Ofori-Atta, the President and other government communicators that there will be no haircut, a lot of investors, deep within them, are not satisfied with the assurance.

At around 6PM Monday, December 5, as an investor who is currently undertaking an investment with one of the banks, I called my banker, (name withheld) to seek further assurances from him whether my investment was safe.

This was despite having followed and monitored keenly the conversations, assurances, comments by the Finance Minister that there will be no haircut.

My banker himself was unsure whether my investment was safe.

He cautiously explained to me that some of these funds are invested in government’s bonds and so if the government’s bond is going to be affected, indirectly, I may be also affected.

It dawned on me to call him when a colleague at work and I had a conversation in the early hours of Monday, December 5 about how others were complaining about challenges with their investments.

Some have started withdrawing from their investments or have even suspended it. Others are also contemplating doing same.

This has led to the Minister of Finance to appeal to them, saying “there is no need to rush for their monies”.

In my view, given the sensitive nature of the sector we are dealing with, and with the benefits of experience regarding the past crises in the sector, one would have thought that the government would have done extensive sensitization and engagements way in advance before announcing this Programme.

As we speak, a lot of people are unsure whether or not to go for their monies.

They are uneasy but we all do know a basic principle in finance that “uncertainty has no room in the financial sector”, as one economics professor said. Because if it does, it creates a major setback for industry players.

It is refreshing that government has said there is going to be constant engagement on the Debt Exchange Programme.

Until then, in order to restore the confidence, all the major issues that have come should be dealt with promptly.

The writer is a Ghanaian journalist

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