It believes South Africa's alumina smelting activities for Ghanaian clients may soon be under threat, but big opportunities could emerge within Ghana's reforming banking sector.

Imara, incorporated in Botswana, but with a significant Johannesburg presence, differentiates itself through its knowledge of African markets and in-depth research into African economies and equity markets.

Imara's African Opportunities Fund managed by Harare-based fund manager John Legat currently has no stake in Ghana, but that could change following its recent scrutiny of banking reform and commodity beneficiation strategies.

John Legat commented: "It was time to take a long look at Ghana, especially when the gold price topped $500. Gold underpins its economy and its stock exchange is dominated by Ashanti, which accounts for 90% of the US$10 billion market capitalisation.

"Ghana is moving towards its Millennium Development Goals so quickly that roughly US$4bn of Ghana's US$6bn foreign debt is due to be cancelled. Inflation has halved from 32.9% to 15%. A 4.5% real rate of growth has been maintained for two decades, with 5.8% growth likely for 2005.

"As fund managers we focus on equity opportunities, especially as the values of some listed companies have fallen 40%. However, our investment research throws an interesting sidelight on how South Africa might be impacted by new developments."

Ghana is eager to derive more value from its commodities, curtailing the long-standing practice of outsourcing most value-adding processes to countries such as South Africa.

For instance, Ghana's bauxite is processed into alumina in the Caribbean and the alumina smelted into ingots in South Africa. Only then are the ingots rolled and formed in Ghana. One Ghanaian exporter of cold rolled and continually cast aluminium is now preparing to use a local smelter, enabling ingots to be produced in Ghana rather than South Africa.

This potential loss could be more than offset by financial sector developments which South Africans are well qualified to exploit.

Legat explained: "Ghana's banks have not been keen to lend, partly because risk-free rates are so high. Some banks had loan-to-deposit ratios as low as 1%. Banks have preferred to take in low-cost deposits, invest in T-bills - at 18% in Ghana until recently - and pay out large dividends. However, major bank reforms will ease reserve requirements, potentially freeing large amounts of liquidity.

"Strong locally based players such as Standard Chartered and Soc Gen predict major growth in 'small ticket loans' averaging US$2,000 for education, non-mortgage house loans, auto loans etc.

"Lending to the agricultural sector is highly profitable since a cocoa marketing board guarantees to buy from farmers, ensuring a low rate of non-performing loans. There is obvious scope for some of the southern-African micro-lending specialists to move in. They may be tempted by the estimated default rate on new retail loans of about 2%."

Ghana's Bankers' Association is also setting up a credit reference system, another factor which may make the market more attractive to micro-lenders. Less than 12% of Ghanaians have a bank account and bank lending is equivalent to just 18% of GDP.

Legat added: "Financial service opportunities beckon and it will be no surprise if micro-lenders who have honed their skills in the Southern African market decide to have a closer look."

The Imara Group is an independent investment bank with more than US$140 million under management in southern Africa and is one of the region's leading issuers of equity capital, having raised more than US$1 billion for sub-Saharan corporations

The Group was originally founded as Edwards & Co in 1954. Robert Fleming bought into Edwards in 1994, but JP Morgan became owners in 2000 at a time when JP Morgan was actually retreating from Africa. Employees and minority shareholders from around the region decided to fill the vacuum being left by JP Morgan and others and formed Imara Holdings Ltd, which was incorporated in Botswana in 2002. Imara is regulated by the Bank of Botswana, and all investment offices are now regulated by their appropriate regulator.

The Chairman of the holding company is Philip Gray. The CEO of the Group is Mark Tunmer.