Ghana has emerged as the biggest recipient of foreign investment in west Africa, beating even Nigeria, having thrown its weight behind a strategy to become the prime regional hub for financial services, logistics and manufacturing within the next decade.
Stability, solid economic growth, a pipeline of major investment projects in the resource sector and a fertile tech ecosystem support the country’s vision – though the coronavirus crisis may now delay it as investors, particularly in the resource sectors, postpone projects.
In the past few years, Ghana – with a population of 30.1 million and a $67.1bn economy in 2019 – has played host to one of the world’s fastest growing economies. It expanded by an estimated 7.4% in 2019 compared with 6.2% in 2018 and 8.1% in 2017, according to IMF data.
The IMF projected that the economy would grow by 5.6% in 2020, before the coronavirus outbreak hit. Income per head stood at $6,955 at purchasing power parity in 2019.
Rule of law
“Ghana can certainly be a gateway to, and a trade hub for, west Africa,” says Yofi Grant, chief executive officer at Ghana Investment Promotion Centre (GIPC). “The government has pursued sound macroeconomic policies during the past few years, which has resulted in rapid economic growth. The rule of law is better in Ghana than other countries in west Africa.
“The country has followed a robust industrialisation policy and has one of the best integrated infrastructure networks – including railways, highways, ports and air links – in west Africa. Investors recognise this and want to set up a base here before expanding into the rest of the region. Ghana has enjoyed a tradition of relative peace and security since its transition to multi-party democracy in 1992,” he adds.
Ghana was the biggest recipient of FDI in west Africa in 2018, with total inflows of about $3bn, according to Unctad. This was 8% lower than 2017 but compared favourably with Nigeria, which received about $2bn in inward FDI 2018, a 43% decline on the previous year.
In the past few years, most of Ghana’s foreign investment has been oriented towards gas and minerals, and the emergent oil and gas sector has been one of the main drivers of economic growth. A consortium made up of state-owned Ghana National Petroleum Corporation, Italian company Eni Group and Dutch energy and commodity trading company Vitol Group has committed to invest up to $7bn in the Offshore Cape Three Points project, an integrated greenfield oil and gas project located in the Tano Basin, 60 kilometres off the Ghanaian coast.
Development began in January 2015 and the project has a partial risk guarantee from the World Bank. The fields are estimated to have 40 billion cubic metres of gas reserves and 500 million barrels of oil reserves. The largest M&A deal in 2018 was the purchase by Gold Fields, a South African mining group, of a 50% stake in Asanko Gold Ghana, a Ghanaian gold mine operator, for $185m.
“Ghana has had one of the best-performing economies in the world during the past few years,” says Pierre Laporte, World Bank country director for Ghana. “Economic growth averaged 6.8% a year between 2017 to 2019. The country had a history of high inflation but the government managed to bring it down to 7.8% in 2019.
“We were projecting economic growth of 6% this year but the coronavirus crisis could well result in a recession in the country. The oil and gas sector had been a significant contributor to economic growth during the past few years but most projects in the industry will now have been put on hold for a year or so.”
GIPC expected all the FDI commitments it received in 2018 to create almost 18,000 jobs, up from 13,100 jobs in 2017. The investment promotion agency says the services sector is especially popular with investors, attracting FDI commitments valued at $1.4bn in 2018.
Ghana also enjoys one of the most advanced tech ecosystems in sub-Saharan Africa. According to Meltwater Entrepreneurial School of Technology (MEST), one of the biggest tech incubators in west Africa and located in Accra, the Ghanaian capital, the city had a total of 38 tech hubs in 2020.
“There are a number of factors that make Accra particularly attractive to tech start-ups,” says MEST managing director Ashwin Ravichandran. “It is English speaking, physically safe, and the government’s macroeconomic policy has been pretty solid during the past few years. Ghana is also a border market and Accra is a good base for start-ups that want to expand into other African countries, including Togo, Benin and Nigeria. The country is spearheading the effort to improve free trade in Africa, and Accra is a significant shipping and logistics centre.”
Ghanaian president Nana Akufo-Addo – who will stand for re-election in November or December 2020 – has been one of Africa’s most vocal proponents of the African Continental Free Trade Area. This single market, signed and ratified by 29 African countries, came into being on May 30, 2019. Its secretariat headquarters will be located in Accra and, prior to the coronavirus outbreak, was expected to become operational in July 2020.
Accra is also home to Tema Port, the third busiest seaport in west Africa after Lagos and the combined Lomé Container Terminal and Togo Terminal. Its traffic reached 836,000 twenty-foot equivalent units (TEUs) in 2018, representing 90% of the port’s container volume. Main clients include the container transportation and shipping companies CMA CGM of France, Maersk of Denmark and Singapore’s PIL.
In April 2019, the consortium Meridian Port Services – which includes France’s Bolloré Ports, APM Terminals (owned by Maersk) and the Ghana Ports and Harbours Authority – announced it would invest $1bn to construct a new terminal to meet the needs of the growing Ghanaian economy and the sub-region, including Niger and Burkina Faso. The new terminal will include two 600-metre-long berths and a small tugboat berth, with a total capacity of 1 million TEUs per year.
“The project strengthens port capacity in west Africa and represents a new stage in the development of intra-African logistics,” says Olivier de Noray, managing director of Bolloré Ports.
Ghana was ranked 118th among 190 economies in the World Bank’s Doing Business annual ratings 2020, down four places on its 2019 position. Meanwhile, Transparency International ranked Ghana 80th out of 180 countries in its Corruption Perceptions Index 2019, but says the country requires an all-inclusive anti-corruption law.
This article first appeared in the April-June edition of fDi Magazine. The full digital version of the magazine is available here.