Ghana is considered to be one of the leading countries in Africa, even though it is small both in terms of area and a population of approximately 31 million.
Located in the Gulf of Guinea, West Africa, Ghana was the first country in sub-Saharan Africa where Europeans arrived to trade – first in gold, and later in slaves.
Previously known as the Gold Coast, it was the first African country south of the Sahara to achieve independence from colonial rule, in this case the British, in 1957.
A peaceful, well-administered country by regional standards, with a good educational system, Ghana is often seen as a model for political and economic reform in Africa.
It shares borders with Côte d’Ivoire in the west, Burkina Faso in the north, and Togo in the east, its capital is Accra and its official language is English.
“Ghana is a country with very strong democratic credentials, strong rule of law, and a young and well-educated population, and it has a generally resilient economy,” says Seth Asante, managing partner at Bentsi-Enchill Letsa & Ankomah in Accra, a member of the LEX Africa alliance.
He says Ghana is known for its wealth in natural resources. “We have just become the second largest producer of gold in the world, next to South Africa – having been the leading producer until last month.
“We are also the second leading cocoa producer in the world behind Cote d’Ivoire.”
In addition, Ghana started oil production 12 years ago – although not at levels compared with Nigeria or Angola. “But exploration is still going on, so production could potentially increase,” says Asante.
Opportunity areas for the country over the next year include agribusiness, which has a lot of room for growth, says partner and member of the firm’s management executive, Susan-Barbara Kumapley.
“We grow the food, but we don’t add any value to it, for example, by processing and canning tomatoes, for domestic consumption and export. Most of the canned tomatoes in the shops are imported.”
She says this is an export opportunity because, as it is now, fresh produce like this gets rotten before it can be transported to other areas, partly due to infrastructure-related challenges.
There is an infrastructure deficit in Ghana, especially with railways and roads, and the government is keen to improve this, but the key issue is finance, says Asante.
So, the government is looking at bringing in developers who can provide their own financing and recoup their investment over time.
“We have gold, iron ore, and petroleum products that need to be transported across the country.”
There’s a lot that government has to do to ensure that project financing structures can be effectively implemented to allow these investors to put their money into things like this and recoup their investments, he says.
“There’s a current railway infrastructure project going on from Tema port, the biggest and premier port in Ghana, to help transport cargo up north. The project is part of a multi-modal transportation network designed to improve connectivity between Tema Port and the country’s northern regions. It is being financed by the Export-Import Bank of India,” says Asante.
“Tourism is also key, but we don’t have tourism infrastructure, and there are significant opportunities to invest in hotel infrastructure, among other things, including outside of the capital.”
He says there is also a need to build roads to provide access to tourist sites and to invest in promoting Ghana as a tourist destination.
“Infrastructure in our part of the world is mainly financed by governments, which creates a lot of pressure on government funds.
“In Ghana, there is a developing focus to contractors building toll roads, recouping their investment through collecting tolls, and then transferring the roads back to government over time.”
However, he says, people must then be prepared to pay commercial tolls, which will make the use of the roads more expensive.
The question from the investor’s perspective is, “How much can I charge in tolls to make it viable?” And this issue has become more complex due to the recent sharp increase in the cost of fuel.
The point is that government wants to reduce its dependence on borrowing to finance certain types of infrastructure. There is a growing shift towards adopting project financing techniques for key infrastructure projects, without reliance on government credit or financing support.
But certain types of infrastructure will still have to be financed by government, such as that of public health.
“The government is planning to build 100 hospitals across the country and it is trying to find money to finance the construction.”
Other opportunities and challenges
There are also investment opportunities in private health care, says Asante. “There’s a growing middle class who are willing to pay for expensive health care.
“An area that is attracting interest from investors is private health facilities.”
He says Ghana is an attractive proposition for this because it is very peaceful compared to other countries within the subregion. There is talk about it becoming a destination for health tourism.
“We have some private equity investors looking for health facilities in Ghana in oncology, cardiology, and other areas where people needing advanced medical care can come here to get it.”
He says Ghana has the skills to support this. “We have a strong medical training regime.”
Kumapley adds that there are also Ghanaians in the medical field who have been trained abroad and would be willing to come back to the country.
Asante says there is also an opportunity to invest in private education.“The growing middle class want to put their kids in good schools and don’t always want to send them abroad to boarding school.“And we’ve had private equity firms investing in private schools.”
When asked how Ghana’s educational system measures up when compared to other African countries, Kumapley says “Our educational system is good.
“We have private schools that run on the government system, and those that run on international systems, like the Cambridge system, and we have private universities.
“We also have five main public universities and specialist universities, including one focusing on health and allied sciences.”
So, where are those in Ghana’s middle class making their money?
“Mostly in the services sector, including a growing fintech sector that is attracting foreign investment, and a very strong banking sector,” says Asante.
Kumapley says Ghana has an investment promotion law, which seeks to protect investment and promote it in the country. This falls under the Ghana Investment Promotion Centre Act of 2013.
Having such a regime is good, she says. Nevertheless, there are challenges, including the minimum capital requirement attached to foreign investment. The capital needs of some enterprises may be below the minimum thresholds specified in the law, USD 500,000 for a 100% foreign owned entity and USD 200,000 for a joint venture with a Ghanaian.
“There is also a minimum local participation requirement for a joint venture between a Ghanaian and a foreign investor. The Ghanaian must hold a minimum of 10% equity in the joint venture with the foreign owned entity.”
Local content laws
She says the mining, oil and electricity sectors have strong local content requirements, including related services. And telecoms requirements are based on licensing, which includes a local ownership component.
“More recently, the Payment Systems and Services Act of 2019 has imposed a local ownership component for fintech,” she says.
There is a growing focus on local equity and local content participation, says Asante.
But the challenge is, where is the funding for the local participation going to come from?
“The fintech sector has some of the most profitable companies in the country, some with very significant valuations. “So, you are asking a Ghanaian company to come up with 10% of that, which has to be funded.”
Before introducing regulations like this government should think it through more creatively, because there is a dearth of capital in the market to be able to meet the requirements of these laws.
“One of the things I argue for is instead of having local equity requirements, get these companies to list a portion of their capital on the local stock exchange, to allow the public to invest.
“You can get pension funds, and others to buy shares in these companies. Then there will be local participation in a manner that is transparent and makes more sense,” he says.
In terms of local content, mining companies also have to give preference to local law firms. And if they engage an international firm, that firm must work through a local firm.
This also applies to accounting and banking and insurance services. “We’ve always collaborated with international firms, because there are certain transactions where such collaboration is required.”
For example, he says, if a large UK bank wants to do a $100 million finance transaction with an oil company, they wouldn’t engage a Ghanaian law firm to do it.
“You would have an English firm working with a Ghanaian firm on that transaction,” says Asante.
New mobile money law
Kumapley says another, resoundingly significant regulatory happening in Ghana is that in May the government decided to boost its revenue base by taking part in the lucrative mobile money business.
“The government implemented a law in May that if you transfer money electronically you have to pay a levy.”
So, people stopped using mobile money or got around the problem by splitting the total amount of money into a number of small transactions, because transfers under a certain amount are exempt from the levy, she says.
“I think over time, people will decide that the convenience of mobile payments is so overwhelming that they will start using it again as they did before and pay the levy,” says Asante.
He says this legislation had a significant impact domestically and internationally. “Domestically because it increased the tax burden for individuals, and the government struggled to get parliament to pass this law.”
Beyond that, it sent the wrong message to the international investor community, especially those holding government bonds.
“It sent the message that if the government was unable to get this most important economic initiative through parliament to support its financial agenda, how is it going to finance its budget?”
With a debt burden of close to 80% of GDP the government needs to grow its revenues, says Asante.
“The government is between a rock and a hard place. It is not keen about going to the IMF for budgetary support, because it sends a terrible message.
“So, considering its basket of choices, the mobile payment levy was the easiest way to raise domestic revenue. It could have been managed better.”
Bentsi-Enchill is 32 years old with 11 partners, and 40 lawyers in all, counting interns, it is the largest law firm in Ghana, and it is well on track with its growth trajectory, says Asante.
“We have achieved significant growth in revenue over the last five years, despite the pandemic.
“In fact, we had our best years ever in 2020/2021. Investors didn’t shy away from the market and we continued to work on significant transactions.”
Asante became managing partner of Bentsi-Enchill about a year ago, and it was a smooth transition thanks to the firm’s solid succession strategy, he says.
The firm’s previous managing partner Ace Ankomah became senior partner when he retired in 2020. The executive committee consists of Ankomah, Asante, and Kumapley. “The firm is run on a consensus basis,” says Asante.