The Securities and Exchange Commission wants Parliament to pass the Local Government Finance Bill to empower Metropolitan, Municipal and District Assemblies (MMDAs) to raise private capital for financing infrastructure development.

The bill, when passed into law, will facilitate investment in municipal bonds and credits by individuals, companies, and capital market entities such as mutual funds and pension funds. It will also facilitate credit enhancement assistance and help establish credit assessment and rating systems for local governments.

“We have not had any progress on the bill. The bill has been in the system for a long time and not much has been done. But it is key that we all look at it, because that is what will empower the MMDAs to go out there and borrow funds to be able to build their infrastructure,” said Adu Anane Atwi, Director-General of the Commission.

The increasing demand on the central government's scarce resources has necessitated the need for MMDAs to consider alternate sources of funds for infrastructure projects.

The bill was laid in Parliament in 2008 to complement the Municipal Finance and Management Initiative (MFMI) of the government at the time. The bill also includes a proposed Municipal Finance Authority (MFA).

Conservative estimates by the government indicate that the country’s huge infrastructure deficit requires sustained spending of at least US$1.5billion per annum over the next 10 years to address the shortfall.

The deficit covers all the main infrastructure areas -- such as roads, energy, water, aviation, housing, and ICT. In the housing sector, for instance, the government estimates that the country needs to build about a million more units to bridge the demand-supply gap.

In the power sector, the VRA estimates that for a country growing rapidly at a rate of about 10 percent per year and using under 2,000 megawatts of electricity annually, Ghana ought to be bringing onstream 200 megawatts of new capacity every year. However, government is unable to provide the huge investment required to generate additional new capacity.

In advanced countries and some developing ones such as China and South Africa, local and municipal governments are backed by law to issue bonds -- proceeds from which are utilised for general capital expenditure including electricity network projects, roads and upgrading of existing roads, and the provision of housing.

Mr. Antwi therefore pointed to the passage of the bill as the way forward to quickly address the huge housing deficit, poor roads, and the provision of pipe-borne water to thousands of people -- using the MMDAs as vehicles to raise funds.

He said MMDAs should be empowered to raise capital by issuing bonds to finance housing, road-construction and utility development projects, and to use the revenue that would accrue from such investments to pay the interest rate or yield.

“I don’t see why the Accra Metropolitan Assembly (AMA) should collect money from market traders if it wants to build a market. [If the bill is passed] they could raise bonds and use rentals to pay back. But the bill has been put on hold somehow.”

There are currently six Metropolitan, 40 Municipality and 124 District Assemblies within the 10 regions of the country. If they are authorised to raise private funds for infrastructure projects, it would entice investors to their areas who critically consider the availability of certain amenities before deciding where to locate their businesses.

It would also take pressure off the capital city and other major regional capitals where companies compete for space due to the relatively good infrastructure available.