Doing Business in Ghana
Recently, Ghana's economy has outperformed the global and sub-Saharan African economies (PWC, 2018), and this has enhanced its profile as an attractive investment destination. Ghana’s investment attractiveness has also resulted from government initiatives such as the legal changes that have sought to address the challenges to the country’s development into the business hub of West Africa. This paper examines some elements of Ghana’s business environment.
In Ghana, businesses can operate as either limited liability companies incorporated under the Ghanaian laws or external companies incorporated in foreign countries (PWC, 2018). The law allows Ghanaians or non-Ghanaians to have the whole or partial ownership of local companies. For a local company to be registered, the required disclosures are its name; the nature of its business; the identities of a minimum of two directors <\a> at least one of these directors must be a permanent resident of Ghana; the number of shares of the company; the identity and address of the company auditor; and the company’s registered office, principal business place and postal address (PWC, 2018). The other disclosures required for the registration of a local company are the “number of authorized shares, the stated capital, the issued shares, the identities and addresses of the shareholders, and the identity of the company secretary” (PWC, 2018). Registration attracts stamp duty of 0.5 per cent of a company's stated capital and a fee of USD 75 (PWC, 2018).
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The law considers external companies as bodies corporate that are formed outside Ghana and have established business places in Ghana (PWC, 2018). For these companies to be registered, there has to be a disclosure of “their name, the nature of their business, the identity of the local manager, the head office’s authorized and issued capital, the address of the principal place in which the company conducts business in Ghana, the address of the registered office in the country in which the company is incorporated, and the identity and address of the agent who processes the registration” (PWC, 2018). The other required disclosures are “the memorandum and articles of association and the certificate of incorporation of the head office” (PWC, 2018).
The Ghanaian law does not fix the share prices at either the original issue price, the current market price or the book value, and it leaves the market forces to determine the value of a company’s shares (UHY, 2018).
Companies with partial or whole foreign ownership have to meet some minimum capital requirements (UHY, 2018). In the partially-foreign-owned enterprises, each foreigner has to invest at least USD 200,000, and wholly-foreign-owned enterprises must have a capital of at least USD 500,000 (Ghana Investment Promotion Center, 2017). Foreigners intending to undertake trading businesses have to meet a capital requirement of USD 1 million (HG.org, 2020). The law allows foreigners to contribute capital in cash, in the goods that would be used to operate a business, or in both ways, and the contribution has to be in the form of equity participation. In the case of portfolio investments or the enterprises whose sole business is export trade and manufacturing, the minimum capital requirements do not apply (Ghana Investment Promotion Center, 2017). If a Ghanaian citizen has registered a joint venture company in which Ghanaians have partnered with a foreigner, the Ghanaian’s shareholding in the company should not fall below 10% (HG.org, 2020).
The law prohibits foreigners from doing certain businesses. Under the law, foreigners cannot sell goods or provide services in a market or petty-trade, hawk or sell goods in a stall located anywhere in Ghana (Ghana Investment Promotion Center, 2017). Foreigners cannot also operate a taxi business or a car hire service if they are not organized as a business that owns a fleet of at least 25 vehicles (Ghana Investment Promotion Center, 2017). Other businesses that foreigners cannot undertake are operating beauty salons or barber shops, printing the airtime vouchers for telecommunication services, producing basic stationery such as exercise books, retailing medical and pharmaceutical products, producing, supplying and retailing sachet water, and operating betting shops or lotteries (Ghana Investment Promotion Center, 2017).
According to the World Bank (2020)’s Doing Business Report, Ghana ranks 118 among 190 countries in terms of the ease of doing business, and it has a “Doing Business” score of 60.0. Ghana’s best rankings are in “protecting minority investors,” “getting electricity” and “getting credit”; in these areas, Ghana’s ranking is 72, 79 and 80 respectively (World Bank, 2020). The worst rankings, on the other hand, are in “paying taxes,” “trading across borders,” and “resolving insolvency,” where Ghana’s ranking is 152, 158 and 161 respectively (World Bank, 2020).
In Ghana, it takes 4 procedures and 55 days to get an electricity connection, but in Sub-Saharan Africa, it takes at least 5 procedures and 109 days to get a connection (World Bank, 2020). In Ghana, electricity costs 632% of the income per capita, but in Sub-Saharan Africa, electricity costs 3,187.5% of the per capita income (World Bank, 2020). In Ghana, the electricity supply is more reliable, and the tariffs are more transparent than in the rest of Sub-Saharan Africa; Ghana’s index of the reliability of electricity supply and the transparency of tariffs is 4, and this is more than double Sub-Saharan Africa’s index of 1.6 (World Bank, 2020).
Ghana’s “getting credit” score of 60 exceeds that of the Sub-Sahara African region (45.2), and this difference is apparent in three indicators <\a> the strength of legal rights, depth of credit information, and credit bureau coverage <\a> of the “getting credit” measure of the ease of doing business. In Ghana, both the “strength of legal rights” and the “depth of credit information” indices are 6, but in Sub-Saharan Africa, the “strength of legal rights” index is 5.2, and the “depth of credit information” index is 3.9 (World Bank, 2020). Ghana’s credit bureau coverage stands at 33.2% of the adults, but in Sub-Saharan Africa, the credit bureau coverage stands at 11% of the adults (World Bank, 2020).
Sub-Saharan Africa has a “protecting minority investors” score of 38.5, which is 20-plus points lower than Ghana’s score of 60.0. Ghana’s “extent of disclosure,” “extent of director liability,” and “ease of shareholder suits” indices are 7.0, 5.0 and 7.0 respectively, but sub-Saharan Africa’s respective indices are 5.5, 3.5 and 5.5 (World Bank, 2020). Ghana’s “extent of shareholder rights,” “ownership and control” and “corporate transparency” indices are 5.0, 3.0 and 3.0 respectively, and these indices exceed Sub-Saharan Africa’s respective indices of 1.8, 1.4 and 1.5 (World Bank, 2020).
Some of the challenges of doing business in Ghana are an inefficient tax regime, difficulties in cross-border trade, and long periods of settling trade and commercial disputes (World Bank, 2020). The World Bank (2020) has estimated that in Ghana, the compliance with tax laws takes an estimated 226 hours in a year, which is almost 5 times the period it takes to comply with tax laws in the most efficient tax regimes.
Doing business is easier in Ghana than in most of the other Sub-Saharan countries. Ghana’s ease of doing business reflects the effectiveness of the Ghanaian government in undertaking the initiatives that have enhanced Ghana’s attractiveness to foreign investors. If the Ghanaian government consolidates its past efforts and addresses the challenges in the Ghanaian business environment, it could go a long way towards positioning Ghana as the West-African business and commercial hub.
References
- Ghana Investment Promotion Center, 2017. Doing Business in Ghana. https://www.jica.go.jp/ghana/english/activities/c8h0vm00004bps0w-att/ghana_01.pdf
- HG.org, 2020. All You Need to Know for Foreigners Doing Business in Ghana (GIPC Requirements). https://www.hg.org/legal-articles/all-you-need-to-know-for-foreigners-doing-business-in-ghana-gipc-requirements-43643
- PWC, 2018. Doing business and investing in Ghana. https://www.pwc.com/gh/en/pdf/doing-business-and-investing-gh.pdf
- UHY, 2018. Doing Business in Ghana. https://www.uhy.com/wp-content/uploads/Doing-Business-in-Ghana.pdf
- World Bank Group, 2020. Doing Business: Economy Profile of Ghana. https://www.doingbusiness.org/content/dam/doingBusiness/country/g/ghana/GHA.pdf