Grant WebberBy Grant Webber|January 21, 2022|8 Minutes|In Risk and Glory

Risk and Glory

“Setting up shop in Ghana.

Ghana finds itself in a crowded market-place competing with other emerging markets for its fair share of Foreign Direct Investment (FDI).

Ghana finds itself in a crowded market-place competing with other emerging markets in general and Africa specifically for its fair share of Foreign Direct Investment (FDI). The standout winner in this competition is Rwanda. By almost any measure Rwanda stands out as the country that has differentiated itself from the rest by adopting proactive policies which promote investor friendly markets which include a raft of financial incentives. Not far off the pace in its drive to accelerate economic transformation and create jobs for its 31 million citizens, is Ghana. A country located at the centre of the planet. Quite literally.

Located within the Office of the President, is the Ghana Investment Promotion Centre (GIPC). Operating under the auspices of the GIPC Act 2013 (Act 865), the Centre provides a coordinating function for attracting inward FDI. For all foreign investors the GIPC represents a one stop shop for the coordination of the investment process. The role played by the GIPC is vital as there are a number of steps to go through to conclude a successful registration and set up of a business in Ghana.

Various sectors have minimum thresholds in terms of foreign equity contribution. Under the current law, the minimum threshold stands at $200’000.00 for a joint venture with a local partner, $500’000.00 for a business wholly owned by foreign investors, and $1 million for a trading/ retail operation. For manufacturing and export businesses, there is no minimum equity requirement for foreign investors.

The administrative part of the incorporation process commences with registration at the Registrar General’s Department. Having obtained a certificate of incorporation and tax identifier number, the foreign investor is the obliged to register with the GIPC. This five day registration process includes showing proof of the minimum foreign equity contribution clearance from the Ghana Revenue Authority. Thereafter, the company registers with the Ghana Revenue Authority to ensure compliance with tax laws. Finally, and depending on the sector it may be a requirement to register and obtain an environmental permit from the Environmental Protection Agency.

Given that the GIPC prides itself on its efficiency and effectiveness, just how successful is it in attracting inward FDI? Statistics published for the Sparkup Investment Summit during 2021 show that even despite the negative effects of the Covid pandemic, inward flows reached $2.65 billion in 2020. This represents an increase of nearly 140% on the 2019 figures and the upward momentum has continued into the first half of 2021 with a 32% increase in inward investment when compared with the corresponding period in 2020. This healthy increase in inward FDI in 2020 was achieved through the mobilization of 279 projects. 129 of these were new and in various sectors. The manufacturing sector recorded the highest value of $1.27 billion.

The material rise in manufacturing sector investment can be attributed to proactive government policy. The Ghana Free Zones Authority operating under The Free Zone Act 1995 (Act 504) provides foreign investors a number of financial incentives including exemptions on duties, income tax, withholding tax on dividends, and 100% foreign ownership. Furthermore, the One District One Factory initiative has also contributed to the rise in foreign investment into manufacturing, value addition, and export of processed goods.

A stable political environment and a growing economy, make Ghana one of the most attractive investment destinations in Africa.

Grant Webber

Other institutions aid the decision making and due diligence process prior to the establishment of businesses in Ghana. Foreign embassies all provide access and guidance to commercial and trade information for prospective foreign investors. The international business community in Ghana tends to coalesce around their respective business chambers. These are formal groups and networks which work towards the attainment of common goals. Typically these international business chambers work in tandem with their Embassies and provide networking and opportunity sharing, as well as guidance for new market entrants.

Two important trends also play a part in the decision making process. Firstly, the UN Sustainable Goals (2030) form a central plank in Ghana’s development agenda and monitors progress towards the attainment of the 17 goals. Ghana’s ambitious Industrial Transformation Agenda, or the 10-Point Agenda, sets out the context for its Economic Policy. Amongst other things, it articulates the National Industrial Revitalization Programme. Secondly, the long-awaited implementation of the African Continental Free Trade Area (AfCFTA) provides a raft of incentives aimed at increasing inter-African trade.

Ghana is the biggest gold producer in Africa, second largest cocoa producer globally, second largest oil producer in West Africa, possesses large deposits of natural resources such as bauxite, iron ore, manganese, and timber, has 13 million acres of land for agriculture, and has a growing population and middle class ready to consume goods and services.

The continent stands to benefit from technological advancement and hitherto unseen levels of foreign investment.

Black Star Africa is a private investment holding company which provides capital for its subsidiaries involved in scalable impact ventures in Africa.


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