Barclays Bank in Ghana

Ghana has seen a significant boost in the appetite for a better road network, railways, reliable electricity and water supply as well as the development of other infrastructure following the discovery of oil in commercial quantities in 2007 and subsequently, its production in December last year.

Given the fast pace in economic growth and the potentially huge financing opportunities for infrastructure development the expanding economy is offering, Barclays, one of the nation’s oldest and well capitalised banks, has started engaging government and its parastatals to explore the various funding options available. Depending on the government’s decision and appetite, the bank is eager to provide the expertise to support the state to raise the needed funding.

“What we have started today is the first in the series of engagements with the public sector in Ghana around how we can bring our expertise from around the globe, particularly our investment banking expertise which resides in Barclays Capital in London and Absa Capital based in South Africa, to support the government in all the financing needs that we have in this country,” Benjamin Dabrah, managing director of Barclays Ghana, told GB&F.

Absa Bank, one of South Africa’s largest financial service providers, is a subsidiary of Barclays Bank PLC, and Absa Capital, a division of Absa Bank, is mandated within the Barclays Group to lead investment banking activities in Sub-Saharan Africa.

It is from this background that Barclays Ghana expects to tap into Barclays Group’s global capabilities and product knowledge to deliver the full suite of investment banking solutions to
government and other public sector organisations.

“We are very excited about where Ghana is going especially with the oil find. There is a huge expectation in economic growth and today’s session with the public sector was really about trying to share some of the things we have done in Sub-Saharan Africa and see where we can assist Ghana in terms of her growth plans,” said Raj Shah, head, corporate and investment banking of Absa Capital.

Actually, this is not the first time a financial service provider is proposing funding options to Ghana for the purpose of raising money for infrastructure development. In 2007, UBS and Citigroup led the government of Ghana to raise a US$750million, 10-year Eurobond for the development of the country’s energy and telecom sectors. Ghana’s success on the Eurobond market four years ago opened doors for other Sub-Saharan African countries. In January this year, Nigeria made its debut on the Eurobond market and succeeded in raising US$500million, a transaction that had Barclays Capital acting as financial advisor.

Between VRA and BOST alone, it is estimated that they require funding in excess of US$1 billion for transmissions system, petroleum terminals, tanks and pipelines.

Mr. Benjamin Dabrah, Managing Director,
Barclays, Ghana

Through the support of financial service providers, other African countries have also accessed different kinds of funding for infrastructure projects.

Between 2009 and 2010, Kenya for example, successfully issued two infrastructure bonds, a type of investment which unlike government bonds does not attract withholding tax.

“This series (the public sector breakfast meetings) is not necessarily about Barclays providing funding. It’s about providing support to the government and the public sector and showing them all the funding options available globally. It’s also about mobilising domestic funding and what sort of instrument and what sort of funding options are available. It’s not just about 91-Day T-bills that they can do. They can also do infrastructure bonds, municipal bonds and others,” Dabrah said.

“We talked about energy. Any country that is growing or is expecting to grow needs power to support that growth. So we shared priority areas where we can assist by bringing some public-private partnerships. We discussed how we can assist the state enterprises raise finance for their projects so that they don’t necessarily have to rely on government,” Shah said.

Aside government bonds and infrastructure bonds, audience at the Barclays public sector breakfast meeting also heard that Ghana’s parastatals like the Volta River Authority (VRA), Bulk Oil Storage and Transport (BOST) and others could follow the examples in South Africa where similar state- owned organisations had benefited from debt financing instruments proposed by financial service providers.

For example, in 2007, Absa Capital with other partners arranged a R30 billion medium-term debt note for Transnet, South Africa’s largest infrastructure operator.

And in 2009, Absa Capital concluded a R500 million private placement for Airports Company South Africa through the issuance of an inflation-llinked bond.

“Each funding type has got its advantages and disadvantages. It depends on the type of project and the nature of the project. If you take municipal bonds, for example, it requires that the municipal authority that is raising the bonds have certain infrastructure in place. If the government decides that they are interested in a particular funding option, we will then work with them to understand what are the pros and cons and facilitate their access to that market,” Shah said.

“If the government were to decide that they want to, for example, build the Kumasi-Accra road into a triple dual carriage road and they require financing and we were advising, a part of that advice will be to lead them to areas where they
will get the lowest cost funding and on the best terms for that project.”

Economists point out that it will be difficult for Ghana to meet its growth targets if the country does not carry out major expansion works that is required to increase electricity supply and improve its reliability.

Between VRA and BOST alone, it is estimated that they require funding in excess of US$1 billion for transmissions systems, petroleum terminals, tanks and pipelines.

It is these kinds of parastatal organizations, beside central government, that Barclays Ghana is seeking to win over, should they decide that they need advice on how to raise funding for their projects, to offer them support as financial advisors.

The bank believes it brings a lot to the table to merit attention from its prospective public sector clients.

“As a group, Barclays has been engaging with the government throughout the 94-year history of the bank in Ghana. We have had a strong partnership with government in various sectors through the years,” said Dabrah.

“Until recently, we were the lead arrangers of the Cocobod syndication. We have not done that in the last two to three years. But this year, for example, in the recent Cocobod syndication we were the biggest local bank participant,” he said.

“What we try to demonstrate is our track record and experience in providing the best services to various public sector institutions across Africa and globally. So when you are buying advice, you want somebody who can bring experience and expertise to bear, not somebody who has just a balance sheet.”

“We have independent institutions who rate what experience and expertise various institutions (financial service providers) have. What we put up today demonstrates the various awards that we have won from various reputable institutions demonstrating their confidence in our expertise. It’s not really about balance sheet size, although we have significant muscle,” he said. As Barclays Ghana tries out its new approach to engaging government and public sector institutions, who between them account for the dominant share of the country’s total spending, it is expected that rival financial service providers with equally wide global presence, a long pipeline of similarly remarkable transactions and good local knowledge, experience and network, will all enter the fray and pitch for their share of the ever lucrative government business. With a lot more funding options available to it, ifthe government and its parastatals can choose wisely, the people of Ghana should be the ultimate beneficiaries.