The West African country of Ghana is the focus of a pilot of the Pipeline Builder, a partnership between SDG Lab at the United Nations in Geneva and Ground_Up Project, a Swiss-based impact finance advisor. It seeks to connect investors with SDG-aligned opportunities in emerging markets and developing countries through a network of financial intermediaries. Since the project began in late 2019, the global environment for investment has changed dramatically, and many developing countries are struggling with rising interest rates, soaring prices and slower global growth. In this interview, the first in a four-part series, Yofi Grant, CEO of the Ghana Investment Promotion Centre, discusses SDG investing in light of the new pressures.
To discover more avenues to help advance sustainable finance visit the website of the upcoming Building Bridges Week, as well as to see more of Yofi Grant's interview.
Like many countries, Ghana is facing a challenging economic and debt situation in an increasingly difficult global environment. How has that affected the climate for sustainable investing in Ghana?
Prior to the pandemic, all the relevant economic indicators were trending positively in Ghana. When the pandemic struck, we were hit by the global disruption in supply chains and in trade and financing flows. From the onset, the government prioritized saving lives and livelihoods. Significant national resources were spent on unbudgeted emergency programmes, such as providing warm meals and free water and electricity to people in need. At the same time, government revenues shrank due to the severe disruption of business. A number of projects and investments, especially in the oil and gas sector, were cancelled or suspended. Even our ability to reach investors was affected.
Fortunately, 2020 ended up better than we feared. Unlike many countries, we saw a significant increase in foreign direct investment to some USD 2.6 billion in 2020 from USD 1.1 billion in 2019. This can be explained by the confidence in the Ghana story and the hands-on management exhibited by the president during the pandemic. We were, however, still very mindful of the worrying global decline in FDI and the disruptions in financial markets. In addition, the global economic downturn significantly eroded value and capital, which further strangled FDI opportunities. All these notwithstanding, Ghana was one of a few countries that did not go into recession as a result of the pandemic, with year-end GDP growth of 0.72 percent in 2020.
Further on, the Russia-Ukraine war has disrupted fuel and food supplies, and the global economy has taken another hit, with many countries experiencing significant downturns. Ghana has not been spared. At the end of August, inflation here had risen from single figures to 31 percent. And our currency had depreciated by some 36 percent. The government is currently seeking support from the International Monetary Fund.
These are the factors that have affected the investment climate in the region, and the impact of which is not expected to be remedied for the next two or three years.
Ghana still shows significant promise going forward. The economy continues to expand, with year-end 2021 GDP growth estimated at 5.2percent, which is appreciable in these trying times. Gross domestic product grew 3.3 percent in the first quarter of 2022, and initial numbers for the second quarter are showing about 3.1 percent growth. The government’s focus on sustainable investments -- Ghana was one of the first countries to integrate the SDGs into its budget process -- is a strong indication of where growth will come from going forward.
How can Ghana keep its SDG strategy on track? Even before the pandemic the government was facing a significant gap in financing for the 2030 Agenda.
We are carrying on with some of our priority strategic policies, like Planting for Food and Jobs, Planting for Export and Rural Development and the One District, One Factory initiative. Of the 17 SDGs, the most important ones for us are SDG 1 (eliminating poverty) and SDG 17 (partnerships for sustainable development). We are pushing the private sector to partner with the government in this whole drive.
The government’s post-recovery strategy hinges on the Ghana Covid Alleviation and Revitalization of Enterprises (Ghana CARES) programme -- a strategic effort to build back better and stronger with a clear expectation of sustainability entrenched in the priorities for investment. The programme has a GHS 100billion (USD 9.85 billion) funding ticket of which government will provide 30percent, with the rest coming from the private sector and investments. The priority areas include infrastructure, industry, renewable and sustainable energy, technology, health and education, agriculture and agro-processing. Most of the activities we have engaged in at GIPC are targeted at these sectors.
In addition, the government has established the Sustainable Financing Framework to select and finance or refinance eligible expenditures in the various ministries, departments, and agencies through the issuance of green, social or sustainable financing instruments. One of the big plans is to move to sustainable and renewable energy, starting with solar energy in public buildings, and to assist private businesses to do the same.
That said, there must be a cultural perspective to the SDGs, or more like a regional perspective. Sometimes when the SDGs are spoken of broadly, I get nervous because there is a possibility of a miscommunication of the conceptual and contextual definitions based on regional demands and developmental objectives. Conceptually different regions have different expectations, and there are sometimes differences in how providers of capital and recipients measure or see impact. Our unique situations and problems, may not necessarily conform to the expectations of more endowed investors and that could confuse the ability to raise money.
For example, education. In Europe and America, the SDGs refer to increased quality. But we are not at that level yet. For us, it’s about access. We are looking to ensure that every child has an education. That every child has clean drinking water. That every child has access to health care. For most of the developing world, these are the priorities. Our development agenda is already aligned with the SDGs and has been for a long time. So, in raising capital, I am not sure there should be different mechanisms so far as you are able to demonstrate that our development agenda and strategy are already inseparable from the SDGs.
Developing countries face significant barriers to securing finance for the SDGs. Higher inflation and slower growth are making it even tougher. What can be done to mobilize more investment for these countries?
This is a big question because the conversation should not be just at the country level. It must be global, because issues today have global impacts. Despite these issues, I suspect Africa still stands to be the continent that is going to boost global growth going forward because of its demographics. Sixty percent of our 1.4 billion population is under the age of35. While that is a consumer market waiting to happen, it also has a reasonable human capital potential. So, the real question is: how do we enable young people be the agents of change in Africa? The youth bracket is key to the government’s strategy to achieve the SDGs.
Ghana took very proactive steps, even prior to the pandemic, in its commitments to attaining the SDGs. The government partnered with the World Economic Forum's Sustainable Development Investment Partnership. The Country Financing Roadmap, in partnership with the UN Development Programme and WEF, was introduced to identify, quantify, and develop strategies to bridge the SDG financing gap. And every year we have the SDG fair where we showcase potential projects and bring in potential financiers and the government.
What is the case for investing in the SDGs in Ghana in the short term? Where are the opportunities at the moment?
Let me try to break this down a bit. When we take SDG1 – no poverty – we recognize the role of rural poverty, the lack of social systems in rural areas. The government's first initiative was the Free Senior High School Program. Since it was implemented, about 1.4 million kids have gone back to school. The Nation Builders Corps, which brings together school leavers to do projects around the country, and the Infrastructure for Poverty Eradication programmes have also been significant.
Then if I take SDG 2 – zero hunger – there is the Planting for Food and Jobs policy. About 60 percent of our land mass is agricultural. There is ample opportunity to invest in greenhouse villages, agricultural mechanization, and industrial farming. That is one side. The other side is value addition in agriculture, which is an industrial perspective that we are talking about in SDG 1 – no poverty – under the One District, One Factory policy. There are significant opportunities in all these areas for investors and the Country Financing Roadmap indicates a number of these.
If we go to SDG 3, which is good health and well-being, the government has indicated that it is going to support the building of 111 new health facilities. This opens significant opportunities for people who want to invest in the healthcare sector, not just in the infrastructure, but also services in the sector.
In SDG 4, quality education, the government is pushing the construction of new school buildings and has also supported the setting up of private universities. Likewise, we are moving from STEM education to STEAM education – STEM plus the arts – and building facilities to support creative arts. And the private sector has been encouraged to participate with government to enable these investments.
Another opportunity for participation of the private sector is the 50 Million Women Speak Platform, which is aimed at helping female entrepreneurs grow their business to empower and safeguard economic independence.
One cannot, however, overemphasize the UNDP-sponsored SDG Investor Roadmap which is possibly the most significant effort at outlining the SDG opportunity as viable for return-seeking investors with clarity. The roadmap outlines specific investment opportunities, especially in SMEs, which offer attractive returns and there forehold very strong investment possibilities for financial investors as well. But it does more than that. it actually creates the pathways and linkages to crowd in unconventional funding sources and blended financing into the mix of sources of capital.
You have over three decades of experience in investment banking and finance. From that vantage point, what makes the Pipeline Builder project a compelling proposition for advancing the SDGs?
The Pipeline Builder represents an important contribution to the effort to finance the SDGs, offering a structured program for finding opportunities and matching them with appropriate investors. In the past, many have felt that the SDGs were the responsibility of government. There was no particular attention to how to finance them. The Pipeline Builder provides a mechanism for converting SDG priorities at a national level into investable opportunities, especially those that match the unique developmental challenges of the potential recipients, and almost all of them on a risk-adjusted returns basis. In one setting, you can see the opportunities, the kind of finance required and the potential investors. Like the SDG Roadmap, it creates the opportunity for all actors to be at the table and remove or dispel misconceptions in the space. It also provides a very conducive platform for partnerships from different sources.
Why is the Building Bridges sustainable finance conference an important initiative?
We need to build bridges amongst multiple stakeholders in finance, government, and international development to have a clearer understanding of global problems and how to solve them. This goes beyond opportunities for investment. It goes deep into the thinking and the ethos of sustainable development. The Building Bridges conference is a major highlight of this movement to bring all the relevant people to the table. With closer cooperation, we can create opportunities for the private sector to participate in partnerships with governments and investors and speed up funding for the SDGs. And we can achieve this in areas that investors might have overlooked before because they considered them the government’s responsibility or thought they didn’t produce attractive returns.