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4 Feb 2023

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Ghana's Bond Issue Reflects Country's EESG Reality and Potential

A relatively obscure story in recent financial news describes West African nation Ghana's purported plan to convert more than $3 billion in loans from its central into bonds issued by its finance ministry. The amount is equal to about 4% of the economy of this nation of more than 30 million people.

Ghana has been regionally successful recently in creating Digital Infrastructure and a renewable-energy grid to support it. AWS and Azure are available in the country, and Ghana is one of eight African countries where Google Cloud is present as well.

Ghana is a Frontier Market
Yet the country is still considered a Frontier Market by IDCA Research, the fourth of five income tiers among the 147 countries in the IDCA EESG Digital Readiness of Nations Index. Ghana ranks 85th in the index, slightly below the world average and above 43% of countries overall. It ranks 13th among 37 African nations in the Index.

The new bonds will be considered risky. Ghana carries a CC rating from Standard & Poor's, the 20th of 22 tiers of bond ratings described by the agency. It had previously suspended interest payments of $13 billion of Eurobonds, according to Bloomberg.

A Look at Ghana's EESG Factors
Looking at the specific categories within the EESG Index reflects Ghana's strengths and areas of opportunity. Its economic strength is below the world average, and 13th among African nations surveyed in the Index. Its social structure is below the world average and 10th within the African nations. But its governance is ranked above the world average and 9th within Africa.

Ghana's environmental conditions are below the world average as well, and middle of the pack within Africa. Yet this category is the key to future economic growth and social development in Ghana. Africa generally has abundant hydroelectric resources and a high potential for wind and solar development. Ghana's renewables grid of around 40% puts it well into the top half of the world.

The country's electricity generation is only about 5% that of the EU on a per-person basis, but much higher than many of its African neighbors and brethren. Its emissions are thus a fraction of that of developed nations, and its economic efficiency in developing its economy relative to its emissions is several times higher than relatively developed South Africa.

What Do the Numbers Mean?
All of these numbers (and others in the EESG Index) show Ghana to be a classic Frontier Market and a good example of the challenges facing Sub-Saharan Africa. There is a substantial population, and a presence of Digital Infrastructure that establishes the country as a regional leader.

Ghana already has a relatively strong renewables grid. Its overall electricity grid has a high potential for development. Bringing the country to 40% of the EU standard, for example, may appear to be a quantum leap, but would require an investment equal to about 20% of its overall annual economy.

Ghana also has the mixed economic data that simultaneously shows risk and opportunity. The new bond issue will thus be watched closely by potential investors in the country. If the country can be perceived in positive enough terms, its ability to develop its energy grid and Digital Infrastructure will rise as a result.

Photograph in Ghana from Google.

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