Analysis of the Business Environment of Ghana

Ghana is a West African country with a population of about 25 million people as of 2012. It has an area of about 239,460 square kilometers.Most of the country’s workers are famers therefore the economy is mostly driven by agriculture. The main crops harvested include yam, plantain, rice millet, sorghum, cassava and corn.  The country also boasts of being the fastest growing economies in Africa and also one of the top ten in the world.  The country  has a lot of natural resources, which are the main exports and consequently the sources of foreign exchange, that include gold, bauxite, diamond, manganese and cocoa. This paper seeks to analyze the business environment of Ghana starting with theeconomic,social,political,legal and technological environments.

As stated earlier, Ghana’s economy is driven by agriculture. Half of the country’s workers engage in farming. The Ghana National Agricultural Export is a government agency that deals with operating and maintaining the planting of cocoa, cashew nuts, and other crops due for export.  Since the inception of this agency, illegal sale of the cash crops has drastically reduced. This has led to the stabilization and improvement of the economy because the government gets its fair share of the foreign exchange after exporting and also they get to employ people to work on the farms and therefore leading to a reduction of unemployment in the country, and consequently crime rates also go down. Mining also plays an important role in Ghana’s economy.  The main mining extractions are bauxite, phosphates and gold.

Ghana is considered one of the largest gold producers of the world.  The country also produces crude oil. It is reported that between December 2010 and June 2011, Ghana exploited 120,000 barrels of crude oil per day.  Ghana’s vision is to increase this figure to 1 million by the year 2020.There has been an 8% economic growth over the past five years. This can be attributed to strong improvements in the private sector and also the fact that institutions that enhance economic growth are becoming more efficient and effective. There are a lot of multinationals in Ghana which can be attributed to the fact that Ghana also produces natural gas which they use in their operations. There was also a discovery of an oilfield in 2007 which reportedly contained 3 billion barrels of oil. This has boosted greatly the number of investors in the oil sector in the country.

Ghana’s stock exchange is also the third largest in Africa, with a market capitalization of 57.2 Billion Cedes in 2012. Investors, especially those interested in the stock market, should watch this country closely.Despite all this progress, there are some obstacles in that property rights are poorly protected and also high levels of corruption persist due to the overall weakness in the rule of law. If Ghana is to succeed, then tackling these problems should be a priority.

Ghana’s population is about 25 million people (51% females and 49% males) made up of close to 75 different ethnic groups. 75% of the total population is literate. Of this, 83% of the male population andonly 67% of the female population is literate.About two thirds of the total population lives in rural areas.The capital city is Accra, which has a population of approximately 3 million inhabitants. 70 percent of the total population lives in the southern half of the country. Other important cities include Kumasi, Tema and Sekondi – Takoradi.

Before independence in 1957, Ghana was a British colony and as a result of that, English is the official language of the country. Family plays a very important role and is still one of the strongest social pillars of the Ghanaian society. As much as this is a good thing, it could lead to instances of corruption in the work place i.e. nepotism. In terms of religion, traditional religion accounts for 5% of the population. The Christian population accounts for 71%, of the total population and includes Roman Catholics, Baptists, and Protestants. The Muslim population accounts for 18% and is mostly located in the northern part of the country. This part of the country is backward economically and also prone to ethnic violence. The ethnic conflict between Andani and Abudu clans was witnessed in 2002 and the Minister for Northern Region and the Interior Minister were forced to resign and a state of emergency was declared on the Yendi region. The state of emergency was lifted in August 2004.

Ghana is a maturing democracy and is usually held up as an example for having organized successful elections three consecutive times, in 2004, 2008 and 2012. As to whether the trend will be maintained, is still a mystery but hopefully it will in the next general election in 2016. The stability of the country has been reinforced by the smooth political transition when the former president John Atta Mills passed on suddenly in July 2012. The presidential elections held in December 2012 led to the election of President John Mahama. The political stability makes the country a suitable place to invest in. According to a World Bank report, in 2012, Ghana was ranked as second best after Angola in terms of the ease of doing business. Kenya is ranked third.

Ghana’s political stability has also been complemented by an impressive economic output, driven by oil production in the recent years. This has also boosted its reputation as an investment destination, because as it is known, political instability can disrupt the economy. An example of this is Kenya, after the post-election violence experienced in 2008. The cost of living got so high that a “revolution” fighting for the reduction of prices of basic food stuffs emerged, called the Unga revolution. (Unga is the Swahili word for flour). The stable political environment of Ghana has led to the country experiencing an increase in investments in the country, reaching up to three billion dollars in 2012. Although Ghana poses as one of the strongest investment hubs in West Africa, it is not without challenges. Corruption still remains a challenge in that some of the investment procedures lack transparency.

As I have stated before, Ghana is a very suitable country for investment. This is not only because of its political stability or economic potential, but also because of the simplicity of the investment procedures in the country. With the ruling party retaining power after the 2012 presidential elections, a degree of continuity is expected over the next four or more years. A bill was brought forward by the Minister for Trade and Industry HarunaIddrisu (MP), called Ghana Investment Promotion Centre bill (2013). This bill seeks to provide for the Ghana Investment Promotion Centre as the agency responsible for the encouragement and promotion of investments in Ghana, and also provide for the creation of an attractive incentive framework and a transparent, predictable and facilitating environment for investments in Ghana and for related matters.

This bill was passed by the parliament and assented to by the president. According to the bill, an enterprise in which foreign participation is permitted shall, after its registration, be registered to the agency. The agency shall, after five working days, register the enterprise. This is advantageous to both local and foreign investors in that within a month, an investor can register his business. This is good compared to some other African countries where registration of a business can take up to six months. Ghana was ranked 64th out of 172 countries in 2012 according to the Transparency International Corruption Perception Index. According to the index, 100 is very clean i.e. perceived corruption free and a172 is very corrupt. Ghana is 64th which is not very bad, but still the government should put more effort to make the country corruption free.

Ghana was the first country the sub-Saharan Africa to launch a cellular mobile network back in 1992. It was also one of the first countries in Africa to be connected to the internet. It is ranked 84th in terms of the fastest internet connection in the world, out of 182 countries. This is according to the Ookla Net index which also ranked the country as the fourth fastest country in Africa in terms of internet connectivity. This means that businesses can be run on the internet, given that internet connectivity is better than most developing counties. The mobile phone network Ghana Telecom (GT) was privatized in 1996. In 2008, the company was sold to Vodafone, which had a 70% stake and the Ghanaian government retained a 30% stake.

The company is now called Vodafone Ghana. Since then, the country’s mobile phone services market has grown to six competitors i.e. MTN, Vodafone, Millicom (Tigo), and Zain. It can be asked why it is that a country of such a huge economic potential has only six mobile phone operators. The reasons could be that there are a lot of barriers of entry into the mobile phone operators markets like the huge costs and tough competition. The government is also committed to increasing the penetration of ICT through the Better Ghana ICT project. This is a project that deals with the distribution of free laptops to students and schools. This project is done through the Ministry of Environment, Science and Technology with the support of the Ministry of Education and the Ministry of Communication. The laptops are not for sale and the beneficiaries are eligible once in every five years. This project is aimed at increasing knowledge of information technology in students. This is beneficial to the government because the students will be able to compete with other students in other developing countries.  A fibre – optic cable was also recently built by Alcatel and Globacon to increase internet speed between West Africa and the rest of the world. The long cable network called Glo I offers 99% uptime as well as long distance communication services. It is no wonder that technology giants such as Google and SAP are rushing to invest in this country.

From a business perspective, I would urge investors to invest in this country because the country has the potential of becoming one of the strongest economies in the world. Their economic potential puts to shame some of the countries in the developed world. It has not only a lot, but a wide variety of resources. The political landscape looks promising enough, the country has one of the best technologies used in Africa and the legal framework is favorable to the foreign investor. With all these factors, I think Ghana is a country that investors should flock.

 

REFERENCES

Ookla: Household Download Index. Ookla Net Metrics.Speedtest.net.Retrieved 31st July 2013.

Ministry of Environment Science and Technology, (2013).National assessment report on achievement of sustainable development goals and targets for Rio+20 conference. Republic of Ghana: Accra

Jha, A., Negi, N.,Warriar, R., (  ).Ghana: Microfinance investment environment profile.Retrieved 28th July 2013.

Transparency International, (2012).Corruption Perceptions Index 2012. Berlin: EYGM Limited

Iddrisu, H., (2013). Ghana Investment and Promotion Bill. Date retrieved 1st August 2013.

Schoar, A. (2010). The divide between subsistence and transformational entrepreneurship. The National Bureau of Economic Research, 57 – 81.