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Is Ghana Open Or Restrictive On Foreign Investment?

Is Ghana Open or Restrictive on Foreign Investment?

Foreign Direct Investment (FDI) into Ghana had been constantly increasing in recent years. In late 2013, Ghana was the fourth largest recipient of FDI in sub-Saharan Africa. FDI decreased slightly in 2015 to 3.19 billion in US dollars,  but increased again in 2016 to an all-time high of 3.48 billion. According to data provided by the Ghana Investment Promotion Center, FDI influx broke another record in 2017, rising to 4.91 billion USD. China had the highest number of investment projects registered with Ghanaian institutions, followed by India, the United Kingdom, South Africa, Turkey, Mauritania and France. Despite an all-time high FDI influx, Ghana lost 12 spots in the 2018 “Doing Business” report issued by the World Bank, ranking 120th out of 190 economies.

Hindrances to Foreign Direct Investment in Ghana

The authorities are making an effort to simplify the complex and lengthy procedures while also offering tax incentives to investors. Furthermore, Ghana is one of the most democratic countries in Africa, and it counts a large and inexpensive labor force, a substantial agricultural base, numerous natural resources and stable institutions. It is also one of the more open economies to foreign equity ownership in the region. However, the troublesome bureaucracy, weak productivity, costly and difficult to obtain financing services, under-developed transport infrastructure, unclear property laws, frequent power and water cuts and an unskilled labor force are the main factors that hinder foreign investment in the country.

Ghana’s Foreign Direct Investment Strengths

Mining and oil exploration are the main sectors that attract most of the FDI. The country hosts annual summits (Ghana Investment Summit) to position itself as hub to West Africa for foreign investors.

In fact, Ghana’s current account deficit should narrow in the near future, largely due to a strong performance of its oil exports. The combination of narrowing current account shortfalls and rising investment inflows will support a recovery of foreign reserves, further improving the country’s external position.

The combination of rising investment and structurally narrower current account deficits compared to previous years have shown that Ghana’s foreign reserves are recovering in the short term, with its import cover rising from an estimated 2.3 months at the end of 2017 to 5.1 in 2018 and a projected 6.1 in 2019, indicating a much improved external position.

Ghana Moves Up in Africa Investment Index Ranking

The latest Africa Investment Index 2018 (AII) has ranked Ghana high on the list of the most attractive economies for investments flowing into the continent.

Ghana has moved up two places to the 16th position showing progress compared to last year’s index where it ranked 18th on the list. Quantum Global Research Lab, who put together the index, said Ghana moved up based on its increasing solid economic growth, strategic geographic positioning, increased foreign direct investment, external debt levels, social capital factors and overall favorable business environment.

Conclusion

After yet another peaceful election, Ghana continues to uphold its reputation in Africa as one of the continent’s few strong and politically stable democracies. Ghana’s recent peaceful democratic transition has reignited investor confidence in the country, especially with the new

government’s pro-business stance. While infrastructure appears to be its biggest weakness, Ghana, as a whole, looks like a great place for foreign investors to land.

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