Toma Imirhe, an economist, has stated that businesses, especially small and medium enterprises (SMEs), should save their capital in 2016 instead of investing in expansion plans due to uncertainties associated with election years.

“I believe that due to government’s appetite for overspending in election years, businesses should save, ride the storm and plan for 2017 -- which is more crucial than 2016,” he said at the first Union Savings and Loans SME Clinic of 2016, which came off in Accra.

He explained that with interest on Treasury-bills and Fixed Deposits averaging 25 percent, businesses with surplus income are better off with savings rather than investments in expansion and growth, since no one can determine the outcome of elections and government’s action in such years.

To underline his proposition, he added that banks have slowed down on lending because non-performing loans are rising: “The default rates are rising dramatically, and so the banks are riding the storm and hoping things become steady before they increase lending.

“I do believe that 2017 is more crucial than 2016. Toward end of the year government will be spending -- and don’t forget that 2017 is the last year of the IMF programme; what will happen is that the IMF will insist on a very tight programme for 2017.

“If you spend or invest in expansion you do so with major uncertainties, without knowing exactly where you are going; however, if you are saving the returns are attractive, especially in fixed deposits. Which is the better option? Therefore, uncertainties make it prudent to save,” he added.

He added that the central bank, due to the IMF’s presence in the country, will not be supporting government’s expenditure and will be maintaining tight monetary policy throughout the year.

He predicts that due to the policies of both government and the central bank, and barring a collapse of commodity prices on the word market, the cedi will be strong against the major trading currencies but will start depreciating by end of the year because government will increase expenditure -- which will also see inflation spike further.

Union Savings and Loans, which recently acquired a provisional universal banking licence, has for the past two years impacted businesses, both small and medium, through its SME clinic that seeks to educate businesses on how to conduct judicious business at all times.

Through this clinic, the financial institution has been able to work with its clientele to minimise risks and maximise returns consistently. The SME clinic has thus become a platform where Union brings clients and potential clients, trains them and builds their capacities to run their businesses.

Head of Business at Union Savings and Loans, Dominic Donkor, explained that an election year in Ghana is not the regular business as usual, because there are strong economic and political implications.

“As a financial institution committed to the development of small and medium enterprises, it is our responsibility to bring experts to give perspectives on how they expect 2016 to be from a purely business point of view.

“With these perspectives, our customers are expected to make good business decisions and sustain their businesses before, during and after the elections,” he said.

He added that due to stable interest rates in the first half of the year, this is the best time to borrow so as to avoid volatilities in the next half. Also, he urged businesses with excess income to come and save with banks to enjoy good interest rates.

“Now is also the time to channel surplus inflows through their accounts because in a regime of high interest rates it is better to deposit your funds in a bank and get banking products that give you competitive interest rates, so that you earn income on both competitive business and cash management.”

He noted that Union Savings and Loans will be strategic this year and support businesses that have the potential to grow and expand in 2016 and beyond.

“We will be very strategic about this. We will be looking at business that will boom and support them to grow, but we are also advising businesses whose business may not be too strong in an election environment to be cautious of their expansion activities.”