With a GDP of $38.54 billion and a population of 27.4 million, Ghana is West Africa’s second largest economy as well as the region’s second most populous country. Historically a major gold and cocoa exporting country, the recent discovery of oilfields has helped increase its revenue from the resource. This article attempts a brief overview of the investment climate, with emphasis on opportunities and challenges.
A brief political and economic picture of Ghana
Ghana is undoubtedly one of Africa’s most peaceful and politically stable economies. Since transitioning to democracy in 1992, the country has adopted numerous reforms aimed at developing strong democratic institutions and fostering a favorable investment climate. Elections have been conducted peacefully and the judiciary has performed relatively well in adjudicating cases, including disputes on land acquisition.
Ghana has led efforts to diversify its economy in recent years. Historically, Ghana has always been a major exporter of cocoa and gold. However, recent discoveries in oil helped diversify its export revenues with oil earnings estimated at $2.66 billion. However, this foray into oil exports also leaves the country at the mercy of volatilities in the global oil and gas markets.
As an English-speaking country, Ghana shares a strong bond with other Anglophone countries in the region, particularly Nigeria. This greatly increases the market for products from Ghana since they could be exported to Africa’s largest economy and most populous country. In addition, as a member of the West African economic bloc (ECOWAS), Ghana has access to the entire market valued at over $623 billion in 2015 with a population of 349 million.
Major investment opportunities include the oil and gas markets on the coast, the cocoa fields (plantation and processing), and gold fields in the central region. Opportunities exist in primary stage mining as well as secondary stage refining and processing of raw materials. The cocoa processing industry particularly presents attractive opportunities for internal processing since some its products (cocoa butter and cocoa powder) are currently seeing huge demand in the region. In addition, the northern region of Ghana is home to one of the largest collection of shea butter which is fast becoming an important product for the food, cream, and soap making industries.
Beyond the country’s traditional products, Ghana is fast becoming an attractive market for real estate. The country’s coastline particularly makes it attractive for Oceanside real estate investments including hotels, resorts, office spaces and luxury villas. The increasing rise of the country’s middle class as well as a general rise in population and urbanization are trends that real estate investors would find favorable.
While opportunities abound and the country is relatively peaceful, there are challenges worth mentioning. Foremost, the recent slump in oil prices had an effect on the country’s macroeconomic stability. Since oil revenues make up substantial parts of the country’s foreign reserves, the slumps have had negative effects on Ghana’s exchange rate. The weakening currency also has an effect on the price of imported products. However, the country is working closely with the IMF and other partners to deal with the short-term macroeconomic problem.
Secondly, the land tenure system in the country is quite different from what most incoming investors are used to. Almost 80% of Ghana’s land is either owned by extended families or vested in the hand of traditional chiefs. Thus the government has very little say in land negotiations. This system creates complexity in negotiations with numerous family members and traditional chiefs. However, the recent drive towards titling of land by a single family member on behalf of the entire family has helped reduce periodic litigations that accompany familial land acquisitions. It is also worth saying that foreigners are allowed a maximum of 50 years on land lease while citizens may lease up to a period of 99 years. This difference could be resolved with by forming strategic partnerships with local companies. Highly experienced professionals can help with this.
Notwithstanding the aforementioned challenges in the country, the opportunities for investment remain highly attractive if approached carefully. There is the need to develop a deep understanding of the country as a whole but also understand subnational factors across different regions, especially regarding land acquisition. Investors stand to benefit by seeking advice from highly experienced professionals on navigating the Ghanaian market.
Nugwa is Nigeria’s premier Investment and Intelligence consulting firm. Corporations and Investors leverage our deep knowledge of Nigeria and the West Africa region in making intelligent investment decisions. Contact us today, or read more of our Insights.