Ghana sits on the Atlantic Ocean and borders Togo in the east, Cote d’Ivoire in the west, and Burkina Faso in the north (World Bank 2021). It has a population of approximately 31.07 million people (2020) and is the second most populous country in West Africa after Nigeria. Ghana is a multi-ethnic country rich in natural resources as well as one of West Africa’s most stable and democratic countries (Central Intelligence Agency 2022). Over the last two decades, the country has made significant strides toward democracy through a multi-party system, with its independent judiciary earning public trust. Ghana has consistently ranked in the top three countries in Africa for freedom of expression (World Bank 2021). It has maintained one of the continent’s most free and stable governments since 1993 and ranks relatively well on measures of healthcare, economic growth, and human development (Ateku 2017; Wikipedia 2022).
Ghana’s economy is diverse and resource-rich, with industries ranging from manufacturing and exporting digital technology goods, to automotive and ship construction and exportation, as well as the export of diverse and resource-rich resources such as hydrocarbons and industrial minerals. The economy is heavily reliant on primary commodity exports such as gold, cocoa, and oil. As a result, Ghana now has one of the highest GDP per capita in West Africa and became the world’s fastest-growing economy in 2011 (Wikipedia 2022). Ghana is classified as a middle-income country (Central Intelligence Agency 2022; Wikipedia 2022). The services sector accounts for 50% of GDP, followed by manufacturing (24.1%), extractive industries (5%), and taxation (20.9%) (Ghana Statistical Service 2012; Central Intelligence Agency 2022). 82% of Ghanaians are employed in the public sector, while 20% are employed in the private sector (Ghana Statistical Service 2015).
Ghana’s business environment is marked by rapid economic growth and steady innovation (Expat Arrivals 2022). In Ghana, businesses can be either limited-liability corporations incorporated under Ghanaian law or foreign firms incorporated under the rules of another country. The law allows Ghanaians and non-Ghanaians to own a majority or a minority stake in local businesses. The current most profitable businesses in Ghana include technology accessories, alcoholic beverages, toiletries, jewelry, construction materials, pharmaceuticals, beauty salons, food industry, and herbal medicine (Fada 2018). Ghana has been an attractive investment destination for the past two decades due to its relative political stability and improved macroeconomic prospects (PricewaterhouseCoopers2018). The World Bank and the International Finance Corporation’s 2017 Doing Business report put Ghana at 108th out of 190 nations for overall ease of doing business, up three places from 2016 (World Bank 2022). Ghana’s investment attractiveness also stems from government actions such as law amendments aimed at addressing the hurdles to the country’s development as a West African economic hub. Ghana’s “getting credit” score of 60 is higher than the sub-Saharan African region’s (45.2), as evidenced by three indicators: legal rights strength, credit information depth, and credit bureau coverage. In Ghana, getting an energy connection takes four procedures and 55 days, whereas in sub-Saharan Africa, it takes at least five procedures and 109 days. Sub-Saharan Africa has a score of 38.5 for “safeguarding minority investors,” which is 20 points worse than Ghana’s score of 60.0. According to the World Bank, complying with tax regulations in Ghana takes an estimated 226 hours per year, about five times the amount of time it takes in the most effective tax regimes.
Additional initiatives being implemented by the government to improve Ghana’s attractiveness as an investment destination include a review of the Ghana Investment Promotion Centre (GIPC) (PricewaterhouseCoopers 2018; Bin Salih 2020). The structure mimics that of a mature or stable economy, with industrial and service sector expansion driving total economic growth. A number of governmental efforts relating to agriculture and industry are projected to stimulate growth. The information and communication sub-sector is predicted to drive further growth in the services sector (PricewaterhouseCoopers 2018). Ghana’s ease of doing business reflects the government’s success in implementing programs that have increased Ghana’s appeal to foreign investors (Bin Salih 2020). The World Bank argues that Ghana has the potential to accelerate economic development and create more and better jobs over the next several decades, if not for the COVID-19 pandemic. It may accomplish this by promoting further global integration, technological transformation, macroeconomic stability, and financial sector development, according to the World Bank’s most recent economic review of the country (World Bank 2021). However, Ghana’s rapid growth was slowed by the COVID-19 pandemic, the March 2020 lockdown, and a precipitous drop in commodity exports (World Bank 2022).
The COVID-19 pandemic has had a devastating effect on economies, businesses, and consumers worldwide, particularly in terms of crisis management, supply chains, liquidity, and operations (Oxford Business Group 2022). Without a doubt, the impact on businesses has been far-reaching, and businesses in Ghana have been equally impacted (Cudjoe 2021). At first, only central banks and the broader banking community were initially impacted by these disruptions (Oxford Business Group 2022). The pandemic’s disruptions resulted in massive revenue losses—including a GH2.2 billion shortfall in non-oil tax revenue. Additionally, it resulted in a downward revision of the country’s GDP growth target for the year from 6.8% to 1.9%. According to the Ghana Statistical Service (GSS), during the partial lockdown of two major cities in Ghana (Accra and Kumasi), more than a third (35.7%) of business establishments were closed (temporarily or permanently), compared to nearly a quarter (24.3%) of household firms. As reported by the IMF, the economic shock manifested itself initially through trade disruptions with China, commodity price declines, and tightening financial conditions, even before the first confirmed case on 12 March 2020 (IMF 2020; Cudjoe 2021). While several businesses were forced to close or close partially as a result of the pandemic, a critical factor that drove many businesses into the abyss was the announcement of lockdowns by numerous governments worldwide. As a result, the partial lockdown had a detrimental effect on the revenue of many of these businesses. The current developments have made their recovery extremely difficult.
In 2020, Ghana’s economy was badly impacted by the COVID-19 crisis, with the tourist and service sectors suffering the most, and the agricultural sectors suffering the least (Adu-Ababio et al. 2021). The new COVID-19 Business Tracker Survey, conducted across the country between 26 May and 17 June 2020 by the Ghana Statistical Service (GSS) in collaboration with the United Nations Development Programme (UNDP) and the World Bank, revealed that the COVID-19 pandemic has had a significant impact on Ghanaian businesses, forcing many to cut costs through reduced staff hours, wage reductions, and, in some cases, layoffs (World Bank 2022). In general, the findings indicated that businesses experienced shocks in supply and demand for goods and services during the country’s COVID-19 partial lockdown. About 131,000 businesses reported having difficulty obtaining financing and expressing uncertainty about the business environment (World Bank 2022). The poverty rate is increasing again, rising from 11.1% in 2019 to 11.3% in 2021 (Statista 2022). The economic crisis has had a tremendous impact on ordinary people’s lives as well. Ghana’s fiscal deficit grew in 2020, and the country’s national debt surpassed 78% of GDP, putting it in debt distress (Trading Economics 2022).
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Countries hardest hit by the pandemic have implemented aggressive fiscal and monetary policy measures to address the health crisis’s challenges, including rate cuts (Oxford Business Group 2022). Since the first detection of COVID-19 in March 2020 in sub-Saharan Africa, Ghana has undertaken a range of containment measures to combat the pandemic, as well as a variety of tax-benefit policies to cushion society from the significantly reduced economic activity, comparable to many of its peers. In addition to the comprehensive tax-benefit system in place prior to the crisis, the government implemented a number of discretionary policy initiatives. Supportive policy measures have benefited low-income households (Adu-Ababio et al. 2021).
Despite the economic stress on Ghana as a result of the pandemic, the business sector has transformed to mitigate the impact. One such transformation is the significant acceleration of digital transformation, which is propelling the growth of the digital economy to new heights. This has provided new opportunities, particularly for small businesses that are still struggling to adopt digital tools. Due to the economic freeze, many businesses have been forced to reinvent themselves to adapt to the new reality or face closure (Guarda 2021). Other sectors that have seen a boost include local product and service production, especially with delivery services. Despite the various discretionary policies implemented, simulations point to an increase in poverty and inequality. Overall, the negative effects of the lockdowns outweighed the positive benefits of the measures and resulted in a rise in poverty (Adu-Ababio et al. 2021).
Bibliography
Articles |
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