Higher capital requirement demands from foreign companies by Ghana are seen as being on the high side when compared to other African countries and are, therefore, a disincentive to investors, a multi-stakeholder research has revealed.
According to a report on a study commissioned by the World Economic Forum (WEF) in collaboration with the Ghana Investment Promotion Centre (GIPC) and the Ghana Centre of the Consumer Unity & Trust Society (CUTS Ghana) which recommended a reduction of the minimum capital requirements for foreign investors, there was also the need for Ghana to consider differentiating between minimum capital requirements for different types of firms, particularly those in the technological sector.
The report also called for targeted investment facilitation measures specific to agriculture to help increase investment flows to the sector and recommended measures, including agriculture insurance, One District, One Factory agricultural linkages, the formation of land information banks, a strong agricultural data, out grower schemes and skills enhancements, to help overcome the challenges in the sector.
The report underscored the usefulness of certification and standards in facilitating investment in Ghana.
Furthermore, the report said, Ghana’s open data initiative should include agricultural data for investors, adding that data for investors should be linked to research.
The report stressed the need for policy co-ordination and a legal regime that would ensure a proper interpretation of laws and policies, the integration of agricultural training in Ghana’s educational system and skills development in handling agricultural machines.
Matthew Stephenson of WEF presented the key findings of the report at a validation workshop in Accra on Thursday, September 12, 2019.
Welcoming participants to the workshop, Mr Appiah Kusi Adomako, Country Director, CUTS Ghana, called for an investment regime that would promote desirable outcomes for both the investor and the investing country.
Mr Adomako explained the difference between investment promotion and investment facilitation.
He said while investment promotion actively sought to bring investment opportunities to the attention of potential investors, provide capital, jobs, skills, technology and exports, and to increase productivity, innovation and wages in a city or country, the main objective of investment facilitation comprised a set of policies and actions aimed at making it easier for investors to establish and expand their businesses.
The objective of investment facilitation, he said, was, therefore, to provide an investment-friendly legal and business climate to investors.
Mr Adomako said the workshop on Investment Facilitation for Sustainable Development in Ghana, therefore, aimed to create an understanding of investment and trade facilitation in key areas of the economy and to seek stakeholder feedback on the draft measures identified.
Under the new Ghana Investment Promotion Centre (GIPC) Act, 2013 (Act 865), the minimum capital required for retail business has moved from US$300,000 to US$1million, while foreign investors who participate in joint-venture enterprises must show a minimum capital of US$200,000, with wholly-owned foreign enterprises showing a minimum capital of US$500,000.
Again, currently, foreign technological companies that wish to invest in Ghana, currently have to pay US$500,000 as minimum capital to set up, but the results of the study show that the amount is too much and could prevent international investors from coming to do business in Ghana since their business is not nearly as capital intensive as manufacturing, for example.
Despite government’s long term moves to promote investment in agriculture, the sector’s share of Gross Domestic Product has consistently declined over the years, falling from 32 percent in 2009 to 20 percent in 2018.
Apart from the 20 percent contribution to economic output, the sector also provides employment to about 40 percent of the labour force.
As a result of this relatively low labour productivity, Foreign Direct Investment (FDI) in agriculture and its contribution to job creation has been comparatively low, compared to other sectors of the Ghanaian economy.
For example, out of 160 investment projects registered in 2018, according to GIPC, only four percent were in agriculture as against 27 percent in manufacturing and 25 percent in the services sector.
The agriculture sector in 2018 attracted FDI valued at US$8.58 million and created 946 jobs from only six projects registered.
Ghana, over the years has adopted policies aimed at promoting investment in agriculture, current examples being government’s flagship Planting for Food and Jobs (PFJ), Rearing for Food and Jobs (RFJ) and the Ghana Commercial Agricultural Project (GCAP).
Agriculture also offers some of the most generous fiscal incentives on investment such as tax holidays and rebates.
It is against this background that WEF, GIPC and CUTS-Ghana embarked on the research project, aimed at increasing both the quantity and quality of investment in Ghana as well as identifying specific measures that could both increase investment flows and their development impact.
The research focused on the agriculture and food sectors, given the development dimension. Some of the measures identified apply to the economy as a whole, and others are specific to the agriculture and food sectors.
WEF is an independent international organization committed to improving the state by engaging business, political, academic and other leaders of society to shape global, regional and industry agenda, while CUTS Ghana) is a public policy research and advocacy think tank.
GIPC, on the other hand, is a government agency created under the GIPC Act. 2013 (Act 865) to support and promote investment in Ghana, by facilitating an attractive incentive framework and a transparent, predictable and facilitating environment for investment in Ghana.