In 1996, the country took a giant step towards promoting the processing and manufacturing of goods and services for export by establishing the Ghana Free Zones Authority (GFZA) to administer the country’s free zones concept.
The authority was empowered, under the Free Zones Act 1995 (Act 504) to partition the country into export processing zones (EPZs), either as enclaves or single-factory enterprise schemes.
Since then, interest in the country’s concept, which requires companies operating under the programme to export a minimum of 70 per cent of their products, has witnessed strong growth.
Local and international investors have taken advantage of the programme to set up multi-million dollar factories that have now become icons in their areas of operation, great sources of export revenue and value creation for the economy, symbols of industrialisation and tremendous relief to the country’s bulging unemployment situation.
An example is the Niche Cocoa Industry, an indigenous cocoa processor that has taken advantage of the free zones programme to expand into tertiary processing of cocoa beans, making it the country’s largest fully integrated cocoa processor.
Data from the GFZA show a positive impact of the concept on the economy in the areas of exports and job creation. They show that job creation stood at 30,357 as of 2016. Annual export values had also risen to $2.3 billion in 2016 and remain strong till date.
Latest figures show that as of September this year, total exports of the 156 active free zones companies were valued at $1.04 billion, compared to an import value of $311.1 million.
In spite of these tremendous benefits, many bodies and experts have justifiably called for a review of the free zones concept to help maximise the gains and bring it in tune with current dispensations.
One of such institutions is the Institute for Fiscal Policy, a fiscal policy think tank which recently called for a review of the “overly generous incentives” offered to free zones companies and other firms to help save the country some revenue.
The Daily Graphic recalls a recent press conference by the Ghana Revenue Authority (GRA) during which it chastised firms said to be free zones companies for fleecing the state of the relevant taxes.
Following that press conference, the Executive Secretary of the GFZA, Mr Michael Baafi, said in a press statement that firms under the programme were generally tax compliant and further advised against the use of the alleged malpractice of one firm to demonise the entire programme.
Ghana is not the only country that operates a free zones programme. Most countries that operate the system have capitalised on it to attract investments to grow their export base. Almost all of Ghana’s neighbours operate successful free zones regimes. Therefore, our inability to operate our system well can result in investors being antagonised, which can result in such investors moving into competing markets in our neighbourhood where institutions and policies may favour them.
We urge the GFZA to liaise with the GRA to plug whatever loopholes that exist within the free zones programme to help create mutual benefit for the country and the firms.
In doing that, the focus should be long-term — how the country can maximise gains from the companies — instead of the short-term motive of increasing tax collections.