GHANA: An Introduction

Current Economic Conditions 

Inflation 

The Ghanaian economy is showing signs of recovery following the 2020–2022 economic downturn. The inflation rate has been steadily declining since October 2023, ending at a rate of 23.2% in December 2023. It is anticipated that this decline will continue in 2024, considering the gradual reduction in the price of domestic food and transportation costs.

Exchange rate development 

Ghana’s foreign exchange market was relatively stable in 2023. Compared to 2022, where the Ghana cedi lost about 50% in value to the US dollar, the Ghana cedi saw only a year-to-date depreciation of 15.57% to the US dollar in the retail market in 2023. External inflows, such as the first tranche of the IMF Extended Credit Facility (ECF) loan (USD600 million) received in May 2023 and the first tranche of the Cocoa Syndicated Loan (approximately USD541 million) received in December 2023, eased the pressure on the Ghana cedi in 2023.

External support 

On 17 May 2023, the Executive Board of the IMF approved a USD3 billion three-year ECF arrangement to support Ghana’s post COVID-19 economic recovery programme. The completion of the first review was concluded following Ghana’s successful debt restructuring deal with its official creditors, which grants the country a moratorium on debt repayments until May 2026. This deal unlocked the disbursement of another USD600 million, bringing the total disbursements up to that point under the ECF arrangement to USD1.2 billion. This also paved the way for an additional USD300 million disbursement from the World Bank under its Development Policy Operation Financing, to be received by the end of February 2024.

Trends and Developments 

Debt restructuring 

The Domestic Debt Exchange was completed in 2023. The government has finalised its agreement in principle with official creditors in relation to debt management. It is anticipated that the terms of the debt management will be incorporated into a memorandum of understanding between Ghana and its Official Creditor Committee. Discussions with private creditors related to external debts are ongoing.

The government is in the process of establishing the Ghana Financial Stability Fund to provide solvency support for the financial sector to help mitigate the impact of the debt operation.

Environmental, social and governance (ESG)

The government has launched the National Energy Transition Framework to chart Ghana’s long-term goal to reach zero net emissions by 2070. The plan includes an increased use of renewable energy, the conversion of thermal plants to natural gas, and the integration of nuclear power into the energy mix.

In Ghana’s capital markets, several policies and regulatory measures have been developed to facilitate investment in environmentally friendly initiatives. The Ghana Fixed Income Market Listing Rules were updated to include requirements and guidance on how to issue sustainability bonds. Sustainability bonds encompass various categories, including social bonds, gender bonds, green bonds, sustainability-linked bonds, and other sustainability-themed bonds.

Business rescue 

Measures are being put in place to implement the Corporate Insolvency and Restructuring Act, 2020 (Act 1015) which provides for business rescue measures, such as, administration, insolvency procedures and official liquidation. These measures will assist struggling businesses in navigating through the current economic conditions while still maintaining their operations.

A Corporate Insolvency and Restructuring Journal has been launched. Its goal is to influence policies and legislation, shaping the corporate commercial sector of the Ghanaian economy.

Regulatory compliance 

In 2023, the Office of the Registrar of Companies (ORC) took steps to remove the names of about 513,338 businesses from the companies’ register for non-renewal of certificates and failure to file annual returns. The ORC has also commenced the imposition of administrative penalties for defaults in filing annual returns.

In 2023, the Data Protection Commission began active enforcement of regulatory compliance. This includes spot checks, data protection auditing and clamping down on unregistered data controllers.

It is imperative that businesses remain compliant to avoid repercussions.

Joint ventures (JVs), mergers and acquisitions (M&A)

The global economic crisis and Ghana’s debt restructuring programme have impacted businesses in the country. In the coming years, more companies may explore M&A as a way to remain in business. In February 2023, Vodafone Group Plc transferred its 70% majority share in Vodafone Ghana (Ghana Telecommunications Company Limited), a partially state-owned company, to the Telecel Group.

Alternatively, JVs have become a key structure to leverage resources, reduce costs and combine expertise while retaining the autonomy of the separate entities.

In March 2023, Gold Fields and AngloGold formed a JV to create Africa’s largest gold mine. In November 2023, AT, formerly AirtelTigo Ghana, announced a joint venture with Hannam Investments.

Digitisation 

The Ghana Card is a biometric national identity card that plays a significant role in enhancing business transactions by providing a seamless means of verifying the identity of persons and protecting the integrity of business dealings. The ongoing drive to enhance the efficacy of the Ghana Card is evident in the proposed launch of an e-Ghana Card in 2024, to complement the physical card.

New Legislation 

The government has introduced the Growth and Sustainability Levy Act, 2023 (Act 1095), effective from April 2023. Generally, this levy is to be imposed on businesses and may potentially affect profitability.

The Excise Duty (Amendment) (No 2) Act, 2023 (Act 1108) was passed in December 2023 to amend the Excise Duty Act, 2014 (Act 878). Act 1108 has increased the excise duty rate on cider to align with the rate on beer, reduced the rate on plastics, and expanded the coverage of duty on plastics to imported plastic packages.

The Value Added Tax (Amendment) Act, 2023 (Act 1107) (Section 4(f)) excludes the supply of non-life insurance from exempt financial services. A person who supplies non-life insurance products is therefore required to account for the tax on services supplied. However, Section 3 of Act 1107 provides some leeway for such persons to recover input tax. This change may have a ripple effect of increased insurance premiums.

The Income Tax (Amendment) (No 2) Act, 2023 (Act 1111) varies the tax rates and creates a new band for high net worth individuals (chargeable income exceeding GHS600,000 per annum) at a rate of 35%.

Potential Hurdles 

Political  

Ghana is approaching its presidential elections, which are scheduled for December 2024. A change in leadership may bring about key changes that influence the business climate and investor confidence.

Although Ghana has shown exemplary democratic stability and offers many incentives for investors, a stable government may sometimes experience moments of instability which can pose significant risks to projects. For instance, in 2022, the government’s goal to widen its tax net and generate more income led to the introduction of a levy of 1.5% on electronic transfers (the “E-Levy”). Although the policy rationale behind taxation is to raise revenue for the state, a high tax burden increases financial pressure on businesses, which can be counter productive.

Legal and compliance 

Generally, foreign-owned companies must satisfy minimum foreign capital requirements per the Ghana Investment Promotion Centre Act, 2013 (Act 865). This is marked at USD200,000 for JVs with a Ghanaian shareholder having not less than 10% of the shares; USD500,000 for wholly foreign-owned companies; and USD1 million for trading companies.

It is argued that minimum capital requirements exist to protect the Ghanaian business climate and compel prospective investors to consider investments more cautiously. However, these requirements may also discourage potential foreign investors.

Another significant legal hurdle has been the introduction of laws and policies that are deemed unfavourable. In November 2023, the Minister of Trade and Industry presented the Export and Import (Restrictions on Importation of Selected Strategic Product) Regulations, 2023 to parliament for approval. The proposed Regulations restrict the importation of 22 strategic goods including rice, poultry, motor cars and cement into the country. If approved, the new law will compel importers of strategic goods to seek licences from a committee to be set up by the minister. This may lead to monopolisation, price hikes and abuse of power if not handled properly.

Under the Minerals and Mining (Local Content and Local Participation) Regulations, 2020 (LI 2431), the Minerals Commission is obliged to publish a local procurement list detailing local content and local participation levels for support service providers in the mining sector. The Commission has issued the fifth edition, which is presently in force. In this list, providers of insurance/reinsurance services must be incorporated in Ghana with at least 60% Ghanaian directors and shareholders. Mining surface operations companies must be wholly incorporated, owned and managed by Ghanaians.

Where Ghanaians lack the financial capacity to set up such specialised companies, this may result in a lack of service providers and the monopolisation of certain services, which may stifle effective technology transfer.

How to Overcome These Challenges? 

The government must increase efforts to sign double taxation agreements (DTAs) with other countries to minimise incidents of double taxation. Currently, Ghana has initiated DTAs with 26 countries, with 14 approved by parliament.

The legal challenge of meeting the minimum capital requirement under Act 865 may be addressed by setting graduated minimum capital requirements related to the various stages of a business’s life and other key performance indicators. This could encourage foreign direct investment in Ghana. Businesses are also better placed to invest when they can anticipate potential measures the government may introduce. A crucial reference point for this is the policy document, the Medium-Term Revenue Strategy (MTRS) of Ghana (2024–2027), published in September 2023, which may provide insight for businesses.

Conclusion 

Overall, the Ghanaian economy has demonstrated improvement in various facets characterised by adaptability and the ability to surmount internal and external hurdles. It would be wise to remain cautiously optimistic about the economic recovery process. The best approach for an investor is the anticipatory approach that equips the business to navigate, adapt and survive. This is the best way to ensure business continuity.