Francisco A. Laguna & Annapurna Nandyal
Ghana is a rapidly growing country located on West Africa’s Gulf of Guinea – a few degrees north of the Equator. It is a strategic gateway to Africa’s trade and investments due to its location and the relative stability of the region. Ghana is rich in minerals and natural resources, making it the region’s second largest economy. It is one of the world’s largest gold and diamond producers, second largest producer of cocoa, and an important petroleum and natural gas producer. According to the World Bank 2014 Doing Business report, Ghana is easiest member of the Economic Community of West African States (ECOWAS) in which to do business.
Ghana follows the British common law system and has the most liberalized market in the ECOWAS. Investors are attracted by Ghana’s wealth of gold, minerals, diamonds and oil and natural gas exploration. Recent trends show an increase in foreign direct investment (FDI) in the energy sector. To promote, encourage and facilitate investments, the Ghanaian government has established the Ghana Investment Promotion Centre (GIPC) under the Ghana Investment Promotion Act, 1994. The GIPC is charged with assisting domestic and foreign investors in most sectors of the economy; it does not provide assistance in the minerals / mining, oil / gas sectors or to entities operating in the country’s free zones. The GIPC regulates foreign investment in acquisitions, mergers, takeovers and new investments.
An investor interested in doing business in Ghana must register an in-country, wholly-owned limited liability company, a joint venture with a Ghanaian partner or a branch office in Ghana. Foreign investors are required to satisfy the minimum requirement provisions for investing in Ghana.
- For a joint venture, the minimum requirement is $10,000 or equivalent in capital goods
- For a 100% foreign-owned company, the minimum requirement of equity should be $50,000
- For trading companies, whether wholly or partly foreign owned, the minimum requirement for an investor is $300,000 and the firm must employ at least 10 Ghanaians.
The minimum capital requirement does not apply to portfolio investments, enterprises set up for export trading or branch offices.
The Investment Promotion Act carves out specifies areas of investment reserved for Ghanaians, including small-scale trading, operation of taxis and rental services (except when a non-Ghanaian operator has a fleet of at least 10 vehicles), pool-betting businesses, lotteries (except soccer pools), and the operation of beauty salons and barber shops.
While investors are mainly attracted to Ghana’s natural resources, the government actively promotes FDI in other sectors. To diversity investment in non-traditional sectors, Ghana established the Free Zone Board (GFZB) in 1995. The GFZB has identified the following sectors as having tremendous FDI potential:
- Agriculture and Agro-food processing
- Textile / Apparel Manufacturing
- Sea Food Processing
- Information and Communication Technology
- Jewelry / Handicraft Production
The GFZB provides a variety of incentives for foreign investors interested in developing and operating in these priority areas, including:
- 100% exemption from direct and indirect duties and levies on all imports for production and exports from free zones
- 100% exemption from income tax on profits for 10 years and, thereafter, taxes at a rate that shall not exceed 8 %
- Total exemption from withholding taxes on dividends arising out of free zone investments
- Relief from double taxation for foreign investors and employees
- No import licensing requirements
- Minimal customs formalities
Traditionally, Europe, and in particular the United Kingdom, has been a major source of FDI in Ghana. However, the introduction of free zone incentives, political stability and reasonably skilled, low-cost labor force has attracted Asian investors from China, India and Malaysia who are playing an important role in the development of the region.
Ghana has the potential to be a front runner in FDI in West Africa. Investors interested in doing business can contact TransLegal to discuss possible opportunities.