Ghana-Economy and Market Opportunities

1.0              INTRODUCTION

The country of Ghana has the fastest growing economy in Africa with a GDP (US $) close to 42 billion.  (IMF, 7 May 2012). The World Bank’s Ease of Doing Business 2013 report ranks Ghana

  • No. 1 on the “Ease of Doing Business in West Africa” index.
  • No. 2 on the “Ease of Registering Property in Sub-Saharan Africa” index.
  • No. 5 on the “Ease of Doing Business in Sub-Saharan Africa” index.

For the purpose of logically comprehending the business environment of Ghana in terms of investing in industries such as Oil and Gas, Refineries, Agribusiness and Pharmaceuticals, the author has considered an overview of Ghana in the context of the work and the overall factors driving or influencing investment in Ghana. To analyze the business environment of Ghana and to categorize Ghana as an attractive place to set up SME’s the framework used here is the PESTEL tool. The PESTEL encompasses the Political, Economic, Social, Technological, Environmental and Legal forces that influence the trade and commerce of a country. The reasons for choosing the PESTEL model are first, it gives a summary of the different macro environmental facets to consider when investing in the Ghanaian market and second, it helps understand the market growth or decline, business position, potential and direction for operations.


Ghana is widely perceived as the Gateway to West Africa. According to the CIA World FactBook, the merger of the British colony of the Gold Coast and the Togoland trust territory formed Ghana and in 1957 became the first sub-Saharan country in colonial Africa to gain its independence. The population of Ghana is around 25,199,609 (July 2013 est. CIA World FactBook) and has a wide range of ethnic groups. The official language spoken in Ghana is English, though there are other commonly spoken languages such as Asante, Ewe, Fante Boron (Brong), Dagomba, Dangme, Dagarte (Dagaba), Akyem, Ga, Akuapem (CIA World FactBook). According to a UNDP Report, the indigenous religions followed by the people of Ghana are Traditional beliefs (21%), Muslims (16%), Christians (63%). Soon after its independence, Ghana marked its first presidential election on 27 April 1960.Ghana conducted its sixth ‘Free and Fair’ election (Stein, December 10,2012). Compared to its neighbors who are always in political turmoil, Ghana’s sixth presidential election was a remarkable example of democracy at work. This shows the dedication of Ghanaians to improve the political climate of their country. In the view of David Zounmenou, the 2012 elections showed the commitment from the political actors, the commitment from its electoral commission for orderly elections and the people of the country. If the country has made progress to such an extent, its efforts are commendable.

‘The Economist’ forecasts Ghana’s economy to grow by just over 8% this year, and its democracy have been widely praised. With its stable political environment, robust economic growth and rich endowment of natural resources Ghana is attracting a significant foreign direct investment. The newly elected government has adopted an ambitious transformation agenda centered on economic diversification, social inclusion and job creation, and macroeconomic stability (Granado, n.d.). The graph below shows the results

Tivona 1

Ghana is the perfect example of a flourishing democracy in the Africa. Ghana is the first SSA country to gain independence from European colonization. In addition, has shown to the world the success of establishing a sustainable democracy. The well-established Ghanaian administration has put forth strong economic reforms making Ghana the easiest place to carry out business in West Africa. The World Bank’s Doing Business 2012 ranked Ghana 63rd on ease of doing business well ahead of Turkey, China, Vietnam, Indonesia, and India, second to none in West Africa.


The 25 years of comparatively healthy management, competitive business environment, and sustained reductions in poverty levels has boosted Ghana’s economy. Blessed with abundant natural resources, agricultural sector accounts for roughly one-quarter of GDP and employs more than half of the workforce, mainly small landholders. The services sector accounts for 50% of GDP. Ghana’s gross national income (GNI) is constantly increasing through the years with a sharp raise 2005 revealing a strong and stable economy. With the economic growth averaging more than six percent each year, the country is among the few in Africa expected to meet the Millennium Development Goal (MDG) of halving the poverty rate by 2015.


2013 Index of Economic Freedom shows that Ghana’s economic score is 61.3 and is ranked 7th out of 46  in the Sub-Saharan African region making its the overall score rise above the world’s average. Government of Ghana has been taking significant steps to draw FDI into the country. According to the 2013 Investment Climate Statement –Ghana by the U.S Department of State, Ghana currently experiences an infrastructure gap of at least US $1.5 billion.  To encourage foreign investment, the Government has replaced the previously unfriendly regulations with investor friendly laws. The Ghana Investment Promotion Center (GIPC) Act, 1994 (Act 478) governs investment in all sectors of the economy except minerals and mining, oil and gas and the Free Zones. Sector-specific laws further regulate banking, non-banking financial institutions, insurance, fishing, securities, telecommunications, energy, mining, and real estate.[1]

The process of setting up a business in Ghana is extensive and complicated and investors have to conform to a list regulations and procedures of at least five government agencies including the GIPC, Registrar General Department, Ghana Revenue Authority (GRA), Ghana Immigration Service, and Social Security and National Insurance Trust (SSNIT). However, due to the latest changes, the average time required to set up a business in Ghana is about 12 days, down from 33 days in 2010 and 129 days in 2003, as per the report issued in 2012 by The World Bank’s Doing Business 2013.


The Ghana Stock Exchange (GSE), incorporated in July 1989 with trading commencing in 1990, is the primary stock exchange of Ghana. Currently, the GSE has 36 listed companies, 3 government bonds, and 1 corporate bond. The report by the U.S Department of State stated that the GSE composite index (GGSECI) was one of the best performers among emerging markets in 2008, but in 2009, it was one of the worst performers, recording a decline of 47.9 percent. While the GSE recovered in 2010, gaining 32.3 percent, it declined by a modest 3 percent in 2011, but rebounded by about 23 percent in 2012.

The GSE has decided to create a market called the Ghana Alternative Market (GAX) for the assistance the Small and Medium Enterprises (SME) that will help raise capital for growth and expansion of their business and will accommodate companies at various stages of their development. At the time of listing, SME’s must have a minimum stated capital of GHC250, 000 ($125,800) and at least 20 shareholders at the time of the public float. The Managing Director of GSE, Kofi Yamoah said that the GSE has already contributed an initial amount of $50,000 to the establishment of the Support Fund and is expecting about $600,000 from the Africa Development Bank, plus an initial amount of $100,000 from Ghana’s Venture Capital Fund.[2]


SME’s play a crucial role in the development of a nation, whether it is the case of a developed economy or a developing economy. SME’s are advantageous as they are able to survive cyclical downturns due to their flexible nature and their adaptability to changing market conditions. The distribution of SME’s across the nation facilitates distribution of income and generates additional value in raw materials and products. As indicated by Registrar General’s Department of Ghana, 92% of companies registered are micro, small, and medium enterprises. SME’s in Ghana have also been noted to provide about 85 per cent of manufacturing employment, contribute about 70 per cent to Ghana’s GDP, and therefore have catalytic impacts on economic growth, income and employment.

In recent years, the SME’s in Ghana are exposed to greater prospects than ever before for expansion and diversification across the various sectors. Taking into account the financial and economic crises prevailing in the current time, the developed global markets may be dwindling but Ghana’s market size is growing and opportunities within Africa are also beginning to look attractive for SME’s in manufacturing, food processing, pharmaceutical, mining, IT and agro and service sector.

Despite of the enormous appeal of SME’s on Ghana’s economy, there are several challenges faced by them. The foremost obstacle for SME’s the world over, to which Ghana no exception, is the scarce funding to expand operations and to compete with relatively larger businesses. Most SME entrepreneurs in Ghana give low importance to accounting and financial planning and place higher priority to marketing aspect of their businesses, which leads to unnecessary and excessive expenditures. In order to thrive in the current economy and have a competitive edge over other businesses, SME’s need to be increasingly innovative but most of the SME’s in Ghana engage in very little or no research at all.  Majority of the companies in Ghana started as family companies and coupled with financial illiteracy makes it difficult for the people to form partnerships. Many of the local entrepreneurs have a mindset that they will lose control of their businesses when they share.  The establishment of GAX will help SME’s raise long-term capital. The GAX will promote the listing of SME’s in the country. It will enhance liquidity on the stock market by providing a structure favorable to invite SME’s to float shares on the Ghanaian bourse. Consecutively this will enable SME’s raise capital through the Exchange, which will support growth and expansion.


Ghana has one of the most promising markets in West Africa considering its plentiful natural reserves. Coupled with other factors such as its stellar economic progression, political stability, and healthy demographic profile, most foreign investors perceive Ghana, as a comparatively favorable region to do business.


The oil and gas industry, even though is still in its initial stages, shows momentous promise. As estimated by BMI’s Oil and Gas sector analysts, production of oil average 100,000 barrels per day (b/d) in 2011, 125,000b/d in 2012, 200,000b/d in 2013 and 250,000b/d in 2014. Multinational oil and gas exploration companies Tullow Oil and Anadarko Petroleum have found direct investment opportunities in Ghana’s Jubilee oilfield. Ghana and its partners on the Jubilee oil field, which include Tullow Oil Plc (TLW) and Anadarko Petroleum Corp. (APC), will invest an estimated $20 billion over the next 10 years to develop newly discovered oil fields.[3]


The agricultural sector of Ghana is the key driver of the Ghanaian economy accounting for about 40 percent of the country’s gross domestic product, employing 60-70 percent of the labor force and generating more than 55 percent of the foreign exchange earnings. Cocoa holds the highest potential growth and is the mainstay of Ghanaian economy. Cocoa is Ghana’s second leading foreign exchange earner, after gold, worth about 30 percent of all revenue from export and responsible for about 57 percent of overall agricultural export . At the micro level, cocoa contributes to poverty reduction as it provides livelihood for more than 700,000 farmers. The cocoa produced by Ghana is of the highest quality and trades at a higher price than cocoa from other origins. Taking into account the stability of the economy, business transparency and finest quality of cocoa, foreign investors can look into invest in the cocoa industry. Identifying the potential of investing in Ghana’s cocoa boom, American food company Cargill, in 2007 constructed a state of the art cocoa processing facility.[4]

Cadbury, a British confectionery company, imports 70% of its cocoa beans from Ghana and 2008 launched the Cadbury Cocoa Partnership. This partnership invested £45 million over a ten-year period in projects to help cocoa farmers of which £30 million is in Ghana.


Mining accounts for 5% of the country’s GDP and minerals make up 37% of total exports, of which gold contributes over 90% of the total mineral exports. Ghana is Africa’s second largest gold producer, producing 70 t in 2003 reaching 2,143 Moz in 2005. Ghana is also a major producer of bauxite, manganese, and diamonds. In terms of quantum investments, as well as output, AngloGold Ashanti and Newmont Ghana Limited are the only firms with stability agreements with government. With recent unconstructive events occurring in the recent past, the mining industry might be unsteady but with government norms imposed, Ghana hopes to attract investors to the mining industry. Gold Fields Ghana (GFG) is presently the number one gold mining company and largest gold producer in Ghana. The annual production is about 935,000 ounces from its two operating mines at Damang and Tarkwa and engages about 5,612 Ghanaians in direct employment.[5]

5.0       CONCLUSION

Even though Ghana is still in its infancy period, factors such as steady political stability, consistent economic growth, ease of doing business, rich natural reserves, and skilled labor and less expensive workforce makes Ghana an attractive place to invest as well as start small and medium ventures. With norms revised to make Ghana more business friendly, the Government is trying to create awareness among individuals, future entrepreneurs, and potential investors (international and local) that Ghana is the upcoming business hub. The author would strongly suggest investors to look into this attractive West African nation for their future investment, and rest assured they would get more returns than they expect!

6.0                BIBLIOGRAPHY

Granado, F. J. A. D., n.d. Ghana’s Advance to Middle-income Status Requires Firm Policies, s.l.: IMF Survey.

Stein, C., December 10,2012. Ghana pulls off sixth ‘free and fair’ election in model for region , s.l.: The Christian Science Monitor.


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