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Country Commercial Guides for FY 2000:
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CHAPTER VII: Investment Climate
1. Openness to Foreign Investment
Attraction of foreign direct investment has been a main feature of Ghana's Economic Recovery Program, which it started in 1983 under the auspices of the World Bank and the IMF. Encouraging foreign investment in Ghana is therefore an integral part of Ghana's economic policy. This policy has also become a basis for Ghana's foreign policy. The government has embarked on several investment promotion trips outside Ghana, including the U.S. The President, Flt. Lt. (ret.) Jerry John Rawlings, leads some of these trips, which shows the degree of importance attached to attracting foreign investment.
Ghana's policy of encouraging foreign investment in Ghana also finds expression in the hosting of major international events on foreign investment in Ghana. The most recent is the 5th African-African American Summit held in May, 1999. Approximately 4000 delegates from the United States and Africa attended the conference, the theme of which was "Trade and Investment." Reverend Leon Sullivan, founder and president of the Summit, initiated a People's Investment Fund for Africa which will be managed by OPIC (Overseas Private Investment Corporation). By the end of the Summit, pledges of $500,000 had been received, with a projection of $1 million by the end of 1999. The Summit generated much renewed interest in Ghana, but it is still too early to tell whether serious investment will follow as a result. Ghana is also scheduled to host the 3rd Pan African Investment Summit in Accra in September, 1999.
Ghana has embarked on a privatization program which has resulted in the sale of two-thirds of approximately 300 state-owned enterprises. Foreign firms comprise most of the bidders for these businesses. Few local investors participate in this process except in partnership with foreign firms because of an inability to raise sufficient capital. There is no evidence of a pattern of discrimination against American investors in the privatization program. The Divestiture Implementation Committee (DIC) is the government institution that oversees the privatization of these enterprises.
The Government of Ghana (GOG) recognized the creation of an enabling legal environment as a fundamental prerequisite for the attraction of foreign investment. Thus, laws that encourage foreign investment as well as private sector activity have been replaced by some that previously stifled investment. The principal law that was enacted as a result is the Ghana Investment Promotion Center (GIPC) Act, 1994 (Act 478). The GIPC Law governs investment in all sectors of the economy except minerals and mining, oil and gas, and the free zones. Even though the GIPC law governs investment in all other sectors, those sectors such as banking, non-banking financial institutions, insurance, fishing, securities, and real estate are also regulated by sector-specific laws. A foreign investor is required to satisfy the provisions of the Investment Act as well as the provisions of the sector-specific law. An example is investment in banking, where laws specific to the banking sector apply in addition to the GIPC law. Generally, procedures have been streamlined and delays curtailed through the assistance of the GIPC.
The GIPC law applies to foreign investment through acquisitions, mergers, takeovers, as well as new investments. The law is also applicable to portfolio investment in stocks, bonds, and other securities traded on the Ghana Stock Exchange.
The GIPC law specifies areas of investment reserved for Ghanaians, namely, petty trading, operation of taxi services (except when a non-Ghanaian has a minimum fleet of 10 vehicles), pool betting businesses and lotteries (except soccer pools), beauty salons and barber shops. It also specifies the minimum foreign capital requirement for non-Ghanaians. The law further sets out incentives and guarantees that are applicable to enterprises registered under the law. These incentives and guarantees relate to taxation, transfer of capital, profits and dividends and guarantees against expropriation.
Ghana ceased the screening of investment since the enactment of the GIPC law. The GIPC only registers investments, promotes both domestic and foreign investment in Ghana, and provides all the necessary assistance that enables an investor to establish. The government has no identifiable overall economic or industrial strategy that has a discriminatory effect on foreign-owned businesses. In some cases a foreign investment can enjoy additional incentives if the project is deemed to be very critical to the country's development.
The only pre-condition for investment in Ghana is financial. A foreign investor is required to satisfy a minimum capital requirement. Once this is met and all necessary documents submitted, investments are registered by the GIPC within five working days. The minimum capital required for foreign investors is US$ 10,000 (for joint ventures with a Ghanaian) or US$ 50,000 (for enterprises wholly-owned by a non-Ghanaian). Trading companies either wholly or partly owned by non-Ghanaians require a minimum foreign equity of US$ 300,000, and the trading company must employ at least ten Ghanaians. This may be satisfied through remitting convertible foreign currency into a bank in Ghana or by goods brought into Ghana for the purpose of the investment.
The principal law regulating investment in minerals and mining is the Minerals and Mining Law, 1986 (PNDCL 153) as amended by the Minerals and Mining Amendment Act, 1994 (Act 475). This law regulates investment in mining except investment in small-scale mining, which is reserved for Ghanaians. The law specifies the different types of mineral rights, issues relating to incentives and guarantees, and land ownership. The Minerals Commission is the government agency that implements the Minerals and Mining Law.
The exploration and production of oil and gas in Ghana is regulated by the Petroleum (Exploration and Production) Law, 1984 (PNDCL 84), known as the Petroleum Law. The law deals extensively with petroleum contracts, the rights, duties, and responsibilities of contractors and compensation payable to those affected by activities in the petroleum sector. The Ghana National Petroleum Corporation (GNPC) is the government institution that administers this law. Currently there are three U.S. oil companies actively involved in oil exploration in Ghana.
There are no major sectors in which American investors are denied the same treatment as other foreign investors. There are, however, some areas where foreign investors as a whole are denied national treatment. Those sectors are real estate (where non-Ghanaians may not own an interest in land for more than fifty (50) years), banking, securities, and fishing.
2. Conversion and Transfer Policies
Ghana operates a free floating exchange rate policy regime. To promote inter-bank activity and the use of foreign exchange bureaus, the foreign exchange auction was eliminated in 1992. There are no restrictions on the conversion and transfer of funds once there is documentary evidence to support it. Ghanaian cedis are easily exchanged for dollars and most major European currencies.
Ghana's hard currency needs are met largely through gold and cocoa export revenues and donor assistance. The fall in the world prices of these commodities in 1999 have led to a foreign currency shortage since the beginning of 1999. Currently, there are delays of approximately one month for the acquisition of foreign exchange, which is the first time this has happened since 1992.
Ghana has no restrictions on the transfer of funds associated with investment. Ghana's investment laws guarantee the investor the transfer, in convertible currency, out of Ghana of the following: dividends or net profits attributable to the investment; payments in respect of loan servicing where a foreign loan has been obtained; fees and charges in respect of technology transfer agreements registered under the GIPC law; and, the remittance of proceeds in the event of sale or liquidation of the enterprise or any interest attributable to the investment.
With regard to offshore loans, the loan agreement must be approved by the Bank of Ghana, the central bank. The Bank of Ghana inspects the terms of the loan, especially the interest rate, to see if it conforms to the going international rates. There is no legal parallel market which investors can remit through.
3. Expropriation and Compensation
Ghana's investment laws provide guarantees against expropriation and nationalization. The 1992 Constitution, however, provides exception to these laws. While providing protection from deprivation of property, the Constitution sets out the exceptions to the rule and a clear procedure for the payment of compensation.
The GOG may only compulsorily take possession or acquire property where the acquisition is in the interest of national defense, public safety, public order, public morality, public health, town and country planning, or the development or utilization of property in such a manner as to promote public benefit. It must, however, make provision for the prompt payment of fair and adequate compensation. It also allows access to the High Court by any person who has interest or right over the property. There has been no expropriatory action in recent times, and there is no indication of any such action or shift in policy or the law in the future. This view is based on the constructive attitude of the GOG towards foreign investment, and no sectors are more at risk than others. American investors have not been subject to differential or discriminatory treatment in Ghana. There are no instances of "creeping expropriation", and there is no pattern of government action which could amount to expropriation.
4. Dispute Settlement
The major investment disputes involving U.S. companies are in the areas of rice production, agricultural trading and telecommunications. Encouraging efforts have been made by the GOG to solve these problems, some of which are still in their discussion stages.
Ghana's legal system is based on British common law. The most important exception for the purpose of investment is the acquisition of interest in land, which is governed by both statutory and customary law.
The judiciary, which is established by the Constitution, comprises the Inferior Courts and the Superior Courts. The Superior Courts are the Supreme Court, the Court of Appeal, and the High Court. Lawsuits are permitted and usually begin in the High Court. The legal system provides an effective means for enforcing property and contractual right. There is no visible sign of government interference in the court system, especially in commercial matters. The courts have, when the circumstances require, not hesitated to enter judgement against the government. Recently, the Supreme Court dismissed an application filed by the government in a case that involved an American agricultural trading company. The courts, however, have been slow in disposing of cases partly due to institutional inadequacies.
Enforcement of foreign judgments in Ghana, like in many other countries, is based on the doctrine of reciprocity. On this basis, some foreign judgements are enforceable in Ghana. These are judgments from Brazil, France, Israel, Italy, Japan, Lebanon, Senegal, Spain, the United Arab Emirates, and the United Kingdom. Judgements from the United States are not enforceable in Ghana at this time.
The GIPC law as well as the Minerals and Mining law address dispute settlement procedures and provide for arbitration when disputes cannot be settled by other means. They also provide for referral of dispute to arbitration in accordance with the rules of procedure of the United Nations Commission of International Trade Law, or within the framework of a bilateral agreement between Ghana and the investor's country. Recently, the U.S. signed two trade and investment bilateral agreements with Ghana: the Investment Protection Agreement and the Trade and Investment Framework Agreement. These agreements make provision for investment and trade dispute settlement. Where the parties do not agree on a venue for arbitration, the investor's choice prevails. In this regard, Ghana accepts as binding the international arbitration of investment disputes. Ghana does not have a bankruptcy statute.
In 1996, the Ghana Arbitration Center was established to strengthen the legal framework for protecting commercial and economic interests, and in order to bolster potential investors' confidence in Ghana. In June, 1999, the American Chamber of Commerce (Ghana) established a Mediation/Conciliation unit to provide arbitration services on trade and investment issues.
5. Performance Requirements/Incentives
Ghana is in compliance with WTO Trade-Related Investment Measures (TRIM) notification.
Generally, Ghana does not have performance requirements for establishing, maintaining, and expanding a business. However, in its privatization of state-owned enterprises, notably the telecommunications sector, companies have to meet performance targets or have their licenses revoked. In the case of banks, the opening of branches in Ghana requires approval from the central bank. Investors are not required to purchase from local sources. Except for free zone enterprises operating under the Free Zone Act, investors are not required to export a specified percentage of their output.
Foreign investors are not required by law to have local partners except in the fishing, insurance, and mining industries. In the tuna-fishing industry, non-Ghanaians may own a maximum of seventy-five percent of the interest in a tuna-fishing vessel. In the insurance sector, a non-Ghanaian cannot own more than sixty percent of an insurance company. In the case of the Ghana Stock Exchange, a single foreign investor cannot own more than ten percent of any security listed. This applies to individuals as well as institutional investors. Also the total holding of all foreigners in a listed security cannot exceed seventy-four percent. There is compulsory local participation in the minerals and mining sector. By law, the GOG acquires ten percent of all interests in mining ventures at no cost to the country.
There are no conditions imposed on physical location of investments. However, there are tax incentives to encourage investment in specific geographic locations. There are also no import substitution restrictions, but there is an export quota of seventy percent for companies operating under the Free Zone Act. The only requirement for compulsory employment of Ghanaians is where the investment is a trading enterprise, when a minimum of ten Ghanaians must be employed.
There are regulations relating to technology transfer. These regulations are applicable if the technology is not freely available in Ghana and where the transfer will exceed eighteen months. The transfer of technology should be governed by an agreement under the Technology Transfer Regulations of Ghana. These regulations state clauses that are unenforceable if included in a technology transfer agreement.
Investment incentives differ slightly depending upon what law the investor operates under. For example, while all investors operating under the Free Zone Act are entitled to a ten-year corporate tax holiday, investors operating under the GIPC law are not automatically entitled to a tax holiday. The tax holiday granted to them depends upon what sector they are operating in. All investment-specific laws, however, contain some investment incentives.
The GIPC law allows for import and tax exemptions for plant, machinery (and parts thereof) imported for the purpose of the investment. Specifically, chapters 82, 84, 85, and 89 of the Customs Harmonized Commodity and Tariff Code zero-rates (i.e., does not attract import duty) some plants, machinery, and parts thereof. The law also guarantees the investor all the tax incentives provided for under Ghanaian law. For example, rental income from commercial and residential property for the first five years after construction is exempt from tax. Similarly, income from a company selling or letting out premises is income tax exempt for the first five years of operation. Rural banks and cattle ranching are exempted from income tax for 10 years.
Corporate tax is 35 percent for all sectors except income from non-traditional exports, which is 8 percent, and income from hotels, which is 25 percent. Locational incentives in the nature of tax rebates are also offered. Capital allowance in the form of accelerated depreciation allowance is also applicable in all sectors except banking, finance, commerce, insurance, mining, and petroleum.
The Ghanaian tax system is replete with tax concessions which make the effective tax rate generally low.
The incentives are specified in the statute and are not applied in an ad hoc or arbitrary manner. The Ghana Investment Promotion Center has no discretion and once the investor has been registered under the GIPC law, the investor is entitled to the incentives provided for by law. The GIPC, however, has discretion if an investor is seeking additional custom duty exemption and tax incentives.
There are no government-imposed conditions on permission to invest. The conditions to be satisfied are imposed by law. They are not subject to the discretion of government or any government agency. U.S. and other foreign firms are able to participate in government-financed and/or research and development programs on a national treatment basis.
Ghana has no discriminatory or excessively onerous visa requirements. An investor who invests under the GIPC Law is entitled to an automatic immigration quota. The number of people who benefit from this quota depends on how large the investment is. When an investment of US$10,000 or its equivalent is made in convertible currency or machinery and equipment, it entitles the enterprise to one automatic immigration quota. An investment of US$10,000 to $100,000 entitles the enterprise to two automatic immigrant quotas. An investment of US$500,000 and above gives an enterprise four automatic immigrant quotas. The need for extra expatriates can be applied for, but it is incumbent on the investor to justify why a foreigner must be employed rather than a Ghanaian. There are no restrictions on issuing of work and residence permits to free zone investors and employees.
Ghana has no import price control. It is pursuing a liberalized import regime policy within the framework and the spirit of the World Trade Organization to accelerate industrial growth.
6. Right to Private Ownership and Establishment
The laws of Ghana recognize the right of foreign and domestic private entities to own and operate business enterprises. Foreign entities are, however, prohibited by law from engaging in certain business activities in Ghana. (See section 1, paragraph vi.) Also, under the Minerals and Mining Law, non-Ghanaians cannot engage in small-scale mining.
Private entities may freely acquire and dispose of their interests in Ghana. Where a foreign investor disposes of an interest in a business enterprise, the foreign investor is entitled to repatriate his or her earnings in a freely convertible currency.
Private and public enterprises compete on equal basis with respect to access to credit, markets, licenses, and supplies.
7. Protection of Property Rights
Although the legal system recognizes and enforces secured interest in property, both chattel and real, the issue of clear title over land has been a thorny one. A thorough search at the Lands Department to ascertain the identity of the true owner of any land being offered for sale is extremely important. Investors should be aware that, in some cases, land records are incomplete or non-existent and therefore clear title may be impossible to establish.
The concept of mortgages exists in Ghana, and they are regulated by the Mortgages Decree. Mortgages are enforced by judicial sale upon application to the court. A mortgage must be registered under the Land Title Registration Law, a requirement that is mandatory for it to take effect. Registration with the Land Title Registry is a reliable system of recording the transaction.
The protection of intellectual property is an evolving area of law. Progress has been made in recent years to afford protection under both local and international law. Ghana is a member of the World Intellectual Property Organization (WIPO) and the English-speaking African Regional Industrial Property Organization (ESARIPO). The courts have been pro-active in the protection of intellectual property rights. Adequate steps are being taken to implement the WTO TRIPS (Trade-Related Aspects of Intellectual Property Rights) agreement.
8. Transparency of the Regulatory System
The policy of trade liberalization and investment promotion adopted by the GOG is guiding its effort towards creating a clear and transparent regulatory system. There has been sustained effort to repeal all laws that impede and distort investment. For example, the rise in the number labor disputes has called for the review of the Labor Laws.
The GIPC Law codified the GOG's desire to present foreign investors with a liberal and transparent foreign investment regulatory regime. To this end the Ghana Investment Promotion Center has established a one-stop shop to eliminate the bureaucratic bottlenecks investors go through. Under the Ghana Trade and Investment Gateway (GHATIG) Program, time frames within which government officials must perform specific duties have been set and are constantly being reviewed.
New regulatory bodies such as the National Communications Authority, the Energy Commission, and the Public Utilities Regulatory Commission were recently set up to oversee activities in the liberalized telecommunications, power and water sectors. These bodies are still being staffed and equipped, which will affect their ability to deliver the intended level of oversight until they are fully constituted.
9. Efficient Capital Markets and Portfolio Investment
Private sector growth in Ghana has been constrained by limited financing opportunities for productive private investment. Ten years after the beginning of financial sector reforms in 1988, much still remains to be done. Confidence in the financial sector has suffered because of policy interventions by the government, many of which have not facilitated the free flow of financial resources in the product and factor markets. The over 35 percent interest on bank loans (as of July 1999) has been a serious impediment to raising capital on the local market. However, some recent developments have been encouraging. Among the non-banking financial institutions, leasing companies, building societies and savings and loan associations have been innovative in serving savers and borrowers. In addition, the formulation of new regulatory policies for the Ghana Stock Exchange (which has 22 listed companies and 2 corporate bonds at the present time, and oversees portfolio investment) has been promising. In 1998, the Ghana Stock Exchange was adjudged the best performing bourse in emerging markets. It is open to all foreign buyers subject to restrictions in section 5, paragraph iii.
The largest banks in the country, Ghana Commercial Bank and SSB Bank (with net worths of approximately $30 million and $80 million respectively) were state-controlled until the government divested most of its holdings recently. These share sales are likely to be followed by others in the banking sector in the coming months.
Although Ghana's informal financial sector is large, with an estimated 45 percent of all private sector financial savings mobilized initially through informal channels, its capacity to intermediate between savers and investors has been limited. This is due in part to Ghanaians' savings behavior (not using the formal banking system), and in part to the absence of strong links with the formal sector.
The GOG actively encourages foreign participation in the private sector, and there are no efforts to restrict foreign investments.
10. Political Violence
Overall, Ghana offers a relatively stable and predictable political environment for American investors. There is no indication at the present time that the level of political risk in Ghana will change markedly over the near term. Presidential and parliamentary elections will be held in December, 2000. President Jerry John Rawlings, who has been head of state since taking power in a military coup in 1981, is required by the 1992 Constitution to step down after his second four-year elective term in office. Indications are that he will do so, and that elections will be free and fair.
11. Corruption
While corruption exists in Ghana, it is somewhat less prevalent than in many countries, and no U.S. firms have identified corruption as an obstacle to foreign direct investment. Companies should not expect complete transparency in locally-funded contracts, however.
American businesses have reported being asked for "favors" in the past (see Chapter IX. 1, Business Customs.)
Commercial fraud in the form of scams, especially in gold deals, are surfacing in Ghana. While these cases are exceptions and not the rule to doing business in Ghana, U.S. potential gold buyers are advised to deal directly with the Precious Minerals Marketing Company (PMMC) in Ghana. Gold can only be exported from Ghana through the PMMC. U.S firms can also request a background check on companies with whom they wish to do business, using the Foreign Commercial Service's International Company Profile (ICP) service. Requests should be made through the U.S. Department of Commerce Export Assistance office nearest you.
Publicly, the GOG is committed to ensuring that government officials do not use their positions to enrich themselves. At the same time, however, lower level officials dealing with issuing licenses and permits are often poorly paid and see "dash" (tips) as necessary parts of their incomes.
The 1992 Constitution provided for the establishment of a Commission on Human Rights and Administrative Justice (CHRAJ). Among other things, the commission is charged with the responsibility to investigate all instances of alleged and suspected corruption and the misappropriation of public monies by officials, as well as to take appropriate steps, including reports to the Attorney General and the Auditor General, resulting from such investigations. Some of the high-profile corruption cases that have been investigated by the Commission have involved senior-level officials, but the government has exonerated them. The Commission, headed by a respected jurist, has been given the mandate to prosecute alleged offenders if it feels that it has enough evidence to institute legal proceedings. The President himself has publicly discouraged the payment of bribes by urging businessmen and women who are asked for such payments to report the matter to the highest levels of government, including his office.
B. Bilateral Investment Agreements
Bilateral investment agreements exist with the following countries: the United Kingdom, Northern Ireland, Republic of China, Romania, Denmark, and Switzerland. These agreements normally run for ten years and were signed and ratified between 1989 and 1992. Italy and France are currently working on similar arrangements. The possibility of agreements with Germany, India, Pakistan, South Korea, North Korea, and Belgium is being considered. The U.S. signed two agreements in 1998 and 1999: the Investment Protection Agreement, signed by OPIC and the GOG, and the Trade and Investment Framework Agreement (TIFA), signed by the Governments of Ghana and the United States.
C. OPIC and Other Investment Insurance Programs
OPIC is active in Ghana and is interested in expanding its portfolio. OPIC officers visit Ghana periodically and meet with representatives of prominent American and Ghanaian businesses. In addition to OPIC, the African Project Development Facility (APDF), the African Investment Program of the International Finance Corporation, and the Africa Growth Fund are sources of information for interested investors. Ghana is also a member of the Multilateral Investment Guarantee Agency (MIGA).
D. Labor
Ghana has a large pool of inexpensive, unskilled labor. Labor regulations and policies are generally favorable to business. Labor-management relations are fairly good.
E. Foreign Trade Zones/Free Ports
A Free Trade Zone was established in May, 1996. The Free Zone consists of a parcel of land near the Tema steelworks in the Greater Accra Region and two other sites located at Mpintsin and Ashiem, near Takoradi. The seaports of Tema and Takoradi, as well as the Kotoka International Airport, and all the lands related to these areas are a part of the free zone. The law also permits the establishment of single factory zones outside or within the areas mentioned above. Under the law, a company qualifies to be a free zone company if it exports more than 70 percent of its products. Among the incentives for free zone companies are a ten-year corporate tax holiday and zero duty on its imports.
To make it easy for a potential Free Zone developer to acquire the various licenses and permits to operate, the Ghana Free Zones Board provides a "one-stop approval service" to assist in the completion of all formalities. To further facilitate operations in the zones, nationals of OECD countries, Canada, East Asian countries and the Republic of South Africa do not require entry visas to Ghana. However, all foreign employees of businesses established under the program will require work and residence permits.
For the contact address of the Secretariat, see Chapter X.
F. Major Foreign Investors in Ghana
Major foreign investments in Ghana are mainly in mining and manufacturing. Britain is Ghana's main foreign investor with direct investment exceeding USD 750 million. Much of this is attributable to U.K.- owned Lonmin's 31 percent stake in Ashanti Goldfields Corporation.
Major U.S. investors are Volta Aluminum Co. (VALCO) Ltd. (a joint venture with Kaiser Aluminum), Teberebie Goldfields Limited, CMS Generation (independent power producer), Regimanuel-Gray Limited (housing and construction), Coca Cola Company, Pioneer Foods (makers of Starkist Tuna), Phyto-Riker (pharmaceuticals) and Westel (telecommunications). U.S. investments are expected to rise as there have been expressions of interest by American companies in the acquisition of state-owned communications and manufacturing firms slated for divestiture, as well as new investments in the telecommunications sector.
There are significant investments by other foreign nationals made through the GOG privatization program. Norwegian interests are in partnership with GOG in Ghana Cement Works (GHACEM), the only cement manufacturing plant in Ghana; Bau Nord AG (IBN), a Swiss company; and the GOG- owned GAFCO. West Africa Mills is owned by Walter Schroeder, a German company, and the GOG. Telecom Malaysia and the GOG own Ghana Telecom. South African and Australian companies are active in the mining sector.
G. Foreign Direct Investment Statistics
Foreign direct investment is viewed by the Ghanaian government as crucial for development since donor assistance cannot be relied upon to sustain economic growth and development. The Ghana Investment Promotion Center provides the following statistics on private investments, which exclude mining and petroleum investments, between September, 1994 and March, 1999:
Foreign Direct Investment (FDI) (1995 -1998)*** (USD Million)
1995 - 49.07 1996 - 96.40 1997 - 142.25 1998 - 51.68*** Figures do not include investments in the mining and petroleum industries. These are estimated to contribute about 60 percent of the annual total FDI.
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[end of document] Note* International Copyright, United States Government, 1999 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title17, United States Code.
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