Ghana as an Investment Destination for Foreign Investors Seeking a Conducive Business Environment in Africa

Introduction:

Ghana is the world’s second-largest cocoa producer behind Ivory Coast and Africa’s biggest gold miner. It is one of the continent’s fastest-growing economies and has made major progress in the attainment and consolidation of growth.

Today, Ghana is not only one of the best places for doing business in West Africa according to the World Bank’s Ease of Doing Business Report 2020 but also the most resilient economy in West Africa according to the EY African Attractiveness Index.

With a conducive business environment, committed and progressive government-private sector participation, political stability, transparent regulations, and a thriving private sector, Ghana is one of the most favorable economic environments for foreign investors seeking to do business in Africa.

The Companies Act, 2019 (Act 992), regulates the incorporation of companies in Ghana. It seeks to introduce improved corporate governance standards for companies operating in Ghana. Its aim is to simplify the regulatory framework surrounding the incorporation and operation of companies while improving existing corporate governance standards that exist in the country.

Ghana abounds with investment opportunities and the government is committed to implementing policies that reduce the general cost of doing business to help investors establish and expand their operations. That is why the Ghana Investment Promotion Centre (GIPC) as the agency of government plays a pivotal role in helping investors by;

• Helping establish and maintain liaison between investors and Ministries, Government departments and agencies, institutional lenders and other authorities concerned with investment.
• Furnishing investors with current information on incentives accessible to investors.
• Administering support services to both new and existing investors not to mention assistance with the acquisition of requisite permits.
• Enhancing networking and business opportunities between local businesses and foreign associates.
• Compiling, analyzing, and disseminating relevant information about investment opportunities, sources of capital and a broad overview of the investment climate upon request of an investor.

The Ghana Investment Promotion Centre Act, 2013 was introduced to enable GIPC to act as the agency of government responsible for the encouragement and promotion of investments in Ghana, to provide for the creation of an attractive incentive framework and a transparent, predictable, and facilitating environment for investments in Ghana and for related matters.

REASONS TO INVEST IN GHANA

1. Accessibility

Ghana is geographically closer to the center of the earth than any other country according to World Population Review. Having access into Ghana is easier because it has one of the world-class airports in the world (the Kotoka International Airport), with the best airport service quality with the capacity to serve 2-5 million passengers per annum. Again, Ghana is home to one of West Africa’s largest ports – Tema Port, which is centrally located in West Africa and has been upgraded to handle 3.5 million TEUs.

Ghana has very good network of trunk roads for transporting of goods and services and has excellent financial services to aid investors transact their business smoothly. Foreign investors can have immediate access to the over 370m market size of the Economic Community of West African States (ECOWAS), and lastly, access to the new African Continental Free Trade Area (AfCFTA) market of 1.3 billion people across Africa, with a combined Gross Domestic Product (GDP) of $3.4 trillion.

2. Competitive and educated workforce.

Ghana has one of the most competitive minimum wages in the West African sub-region at Ghc 14.88 per day. It has skilled and trainable labour force. Ghana can boast of having one of the highest literacy rates in the West African sub-region.

3. Strong resource pool

Ghana is number one gold producing country in Africa, and the second largest cocoa producer in the world. Ghana can also boast of being the third largest bauxite reserve in Africa with an estimated reserve base of 900 million tonnes valued at $50millon in its raw state and at $400 billion refined. It has over 150 million tons of iron deposit and over 60 million tons of manganese. Ghana’s oil and gas prospects are very significant. It produces over 189 thousand barrels of oil daily and has 8 trillion cubic feet of natural gas reserve.

The agriculture sector also offers potential investments. As stated earlier, about cocoa, investors can invest in it. Also, Ghana has over 4 million hectares of cultivable land & 228,792 hectares of irrigable land. These lands can be used for cultivating oil palm, shea butter etc. These valuable resources are all lucrative investment opportunities for foreign investors to explore.

In addition to the above, Ghana has, over the past four decades, enjoyed a stable democratic dispensation on the continent of Africa. Its democratic institutions and good governance are an admiration to all forward-looking democratic states and thus position Ghana as a suitable destination for foreign investment in West Africa.

Risks Factors Investors Are Likely To Face in other African Countries

Businesses of investors are likely to face certain risks because of instability or political changes in a country, conflicts and unrest, changes in regime or government, changes in international policies or relations between countries, as well as changes that occur in a country’s policies, business laws or investment regulation. Other factors include commodity price volatility. The following are risks foreign investors are likely to face in a host country.

1. Expropriation or Confiscation

Expropriation is when a government claims or seizes a foreign investor’s property for the benefit of the public. The government doesn’t need the owner’s permission to proceed with expropriation, but they do have to pay for the property. Expropriation is not the same as confiscation, in which the government takes an individual’s private property without consent or compensation.

2. Currency risk

Another risk an investor can face is currency risk whereby an investor cannot convert local currency of the host country into hard currency, or the country increases controls over the exchange of currency. This risk is a means for a country to effect expropriation. A country that prohibits conversion of local currency into hard currency, has in fact, expropriated the assets of the foreign investor. Investors may also face the risk of currency devaluation if there is inflation in the host county. Thus, upon conversion, such currency may be worth less than expected.

3. De facto expropriation

De facto expropriation is also referred to as “indirect” expropriation. It happens through series of hostile actions, depriving the investor the use and benefit of its assets, thus, depriving the investor effective ownership of the asset.

The government of the host country in this way can impose restrictions and controls such as excessive tax regulatory measures on the foreign investment businesses so as to make it difficult to continue in business. Imposition of taxes by government can cripple your investments, rendering it economically unfeasible.

This act can lead to the sale or abandonment of the project by the foreign investor to the government or local private investors.

Other hostile actions apart from excessive tax increments are import and export restrictions, price controls, high minimum wages, controls on expatriation of profits, and prolonged “temporary” seizures of assets.

These imposed regulations by a host country are often claimed by the state to be necessary for the safety of its citizens, thus, it is often difficult to determine at what point an indirect expropriation has actually occurred.

Many regulations and taxes imposed by a state are deemed lawful exercises of the power of the government and may nevertheless affect foreign investments. In this regard, international law does not consider such measures to constitute expropriation because of the “legitimate” purpose behind it.For this and other reasons, there has been a trend away from direct expropriation and toward indirect expropriation, as developing countries have become more experienced in the art of confiscation, as they have realized that indirect expropriation is more difficult for foreign investors to prove.

4. Political violence

Political violence is another risk foreign investors are likely to face. These includes wars, revolutions, terrorism, civil strife, and sabotage. This violence can result in the confiscation of the assets of the foreign investor or an interruption of the investor’s ability to continue to do business in the host country. This type of risk may not be within the control of the host country. Under international law, unless the investor can prove that the host country is responsible for the loss of the investor, the investor may not recover any compensation from the host country.

5. Breach of contract

A foreign investor that has acquired rights in a host country via license, concession, or any other contract entered into directly with the host country may face the risk that the host country will either forcefully renegotiate the terms, or completely repudiate the contract. Repudiation may take the form of a direct breach of contract laws, making the contract worthless, or the laws annulling the contracts. Breach of contract can result in either a direct expropriation (e.g., the host country breaches its agreement granting ownership of a certain portion of land to the investor) or an indirect expropriation (e.g., the host country breaches its promise with regards to the level of taxes applicable to the investor).

Ghana’s Comparative Standing Among Her Peers And Specific Investment Guarantees

In view of the above risks factors likely to be faced by a foreign investor, Ghana is a safe and suitable country for foreign investors to transact their business dealings with no encountering of such risks here. Ghana has enjoyed a stable political system for over twenty years. Below are reasons why foreign investors can operate in Ghana regardless of the risks outlined above.

Firstly, in the case of expropriation or confiscation of properties of investors by the government, the Ghana Investment Promotion Centre Act, 2013 (Act 865) in Section 31 guarantees against expropriation. It states that,

1. Subject to the Constitution, any other relevant law, and sub- sections (2) and (3)
   1. an enterprise shall not be nationalised or expropriated by Government; and
   2. a person who owns, whether wholly or in part, the capital of an enterprise shall not be compelled by law to cede that person’s capital to another person.
2. The Republic shall not acquire an enterprise to which this Act applies unless the acquisition is in the national interest or for a public purpose and the acquisition is done under a law which makes provision for
3. 1. payment of fair and adequate compensation; and
   2. a right of access to the-High Court for the determination of the investor’s interest or right and the amount of compensation to which the investor is entitled.
4. Compensation payable under this section shall be paid without undue delay and authorisation shall be granted for the repatriation of the compensation in convertible currency, where applicable.

The above provision is clear, it advocates against any attempt at expropriation in Ghana. Where expropriation is considered expedient, the law makes provision for prompt and adequate compensation without undue delay.  The content of this provision is sound and intended to pave the way for enormous investment in Ghana.

Secondly, foreign investors are not discriminated in Ghana, and Section 30 of the Ghana Investment Promotion Centre Act, 2013 (Act 865) says that,

Unless specifically provided for under an applicable legislation

1. 1. a foreign investor, employer or worker, shall enjoy the same rights and be subject to the same duties and obligations applicable to citizens;
   2. the Centre, an official agency, or any other legal representative of the Centre shall not discriminate against an investor from a particular country or give special treatment to a prospective foreign investor based on that investor’s country of origin or nationality;
   3. a foreign investor is subject to the same laws that apply to domestic enterprises, particularly in relation to
      1. licences or other permits that are required of enterprises for conducting specific business activities;
      2. maintenance of business books and records in accordance with the recognised accounting standards;
      3. insurance requirements that apply to similar enterprises; and
      4. taxes required to be paid by enterprises which engage in similar activity.

Thirdly, when it comes to investment guarantees, transfer of capital, profits and dividends and personal remittances, foreign investors are always covered per Section 32 of Act 865.  It states that,

Subject to the Foreign Exchange Act, 2006 (Act 723) and the Regulations and Notices issued under the Foreign Exchange Act, an enterprise shall, through an authorised dealer bank be guaranteed unconditional transferability in freely convertible currency of

1. dividends or net profits attributable to the investment made in the enterprise;
2. payments in respect of loan servicing where a foreign loan has been obtained;
3. fees and charges in respect of a technology transfer agreement registered under this Act; and
4. the remittance of proceeds, net of all taxes and other obligations, in the event of sale or liquidation of the enterprise or any interest attributable to the investment in the enterprise.

Lastly, our laws guarantee foreign investors an alternative dispute resolution mechanism outside the established courts system. A foreign investor can initiate proceedings against the Government of Ghana or its established agency in situation of breach of contract or a breach of any of the investment guarantees. The GIPC Act 2013 (Act 865) outlines dispute settlement procedures and provides for arbitration when disputes cannot be settled by other means. It also provides for referral of disputes to arbitration in accordance with the rules of procedure of the United Nations Commission on International Trade Law (UNCITRAL), or within the framework of a bilateral agreement between Ghana and the foreign investor’s country.

Section 33 of Act 865 states that,

1. 1. Where a dispute arises between a foreign investor and the Government in respect of an enterprise, effort shall be made through mutual discussion to reach an amicable settlement.
   2. A dispute between a foreign investor and the Government in respect of an enterprise to which this Act applies which is not amicably settled through mutual discussions within six months may be submitted at the option of the aggrieved party to arbitration as follows:

1. 1. 1. in accordance with the rules of procedure for arbitration of the United Nations Commission of International Trade Law; or
      2. in the case of a foreign investor, within the framework of any bilateral or multilateral agreement on investment protection to which the Government and the country of which the investor is a national are parties; or
      3. in accordance with any other national or international machinery for the settlement of investment dispute agreed to by the parties.
   2. Where in respect of a dispute, there is disagreement between the investor and the Government as to the method of dispute settlement to be adopted, unless there is any arbitration agreement to the contrary, the method of dispute settlement shall be mediation under the Alternative Dispute Resolution Act, 2010 (Act 798).

 

Conclusion

Ghana’s abundant raw materials (gold, cocoa, and oil and gas), relative security, and political stability, as well as its hosting of the African Continental Free Trade Area (AfCFTA) Secretariat makes it stand out as one of the better environments for investment in sub-Saharan Africa.

Ghana does not discriminate against foreign-owned businesses. There are laws that protect investors against expropriation and guarantees the transfer of profits out of the country.  Among the most promising sectors are metals and mining, gold trading and export, oil and gas, agribusiness and food and agro-processing, construction, tourism, and hospitality, etc.

Thus, Ghana is a suitable investment destination for foreign investors.

Notes on the contributor.

Mr David Yaw Danquah is the founder and Managing Partner of Legalstone Solicitors, a boutique law firm in Ghana with a concentration on Corporate and Commercial, Mining and Infrastructure, Debt Recovery and Restructuring, Real Estate and Construction Law, and Commercial Arbitration.

He heads the firm’s practice areas focusing on Corporate and Commercial, Mining and Infrastructure, Debt Recovery and Restructuring, and Commercial Arbitration.

David has advised on numerous investment and mining-related transactions. He also has assisted countless international entities in establishing their operations in Ghana and, through his firms, offers support services to those entities. He has an impeccable record of providing technical savvy and exceptional client services.

David is a graduate of Kwame Nkrumah University of Science and Technology (KNUST), Kumasi, where he received his bachelor’s degree in law (LL. B) and the Ghana School of Law, where he studied and received a Post Graduate Qualifying Certificate in Law (PQCL). Furthermore, he holds a Certificate in Negotiation Mastery from Harvard University. In addition, David has an LL.M. with a Merit Degree in International Dispute Resolution from the prestigious Queen Mary University of London, United Kingdom.

David is a member of the Ghana Bar Association, Association of International Petroleum Negotiators (AIPN) and Institute of Energy Law (IEL) based in Houston, U.S.

Legal Notice

The contents of this publication, current at the date of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your circumstances should always be sought separately before acting based on this publication.

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