Foreign direct investment (FDI) in Ghana

FDI in Figures

According to UNCTAD's World Investment Report 2022, FDI inflows to Ghana increased from USD 1.88 billion in 2020 to USD 2.61 billion in 2021, thanks to projects in extractive industries. The FDI stock reached USD 41 billion in 2021. According to UNCTAD’s Investment Trends Monitor, global FDI momentum weakened in 2022 in the context of the war in Ukraine, rising food and energy prices, financial turmoil and debt pressures. Ghana’s top investing economies are South Africa, the Netherlands, France, Mauritius and China (IMF, FDI position). In 2021, the main investors were Singapore, Australia, India and China (GIPC, FDI flows). FDI flows were mainly directed towards the services, oil and gas, manufacturing, trade, construction and agriculture sectors (GIPC, FDI flows). Ghana hosts annual summits (Ghana Investment Summit) to position itself as a hub in West Africa for foreign investors. The COVID-19 Alleviation and Revitalization of Enterprises Support (CARES) initiative, a USD 16 billion programme over 2020-2024, is intended to attract investment in the agribusiness, fertilisers, automotive assembly, aluminium and steel sectors, through exemptions from charges, specific loans and public-private partnerships (Coface).

The authorities in Ghana have been pursuing efforts to simplify the complex and lengthy procedures while also offering tax incentives. Additionally, Ghana is one of the most democratic countries in Africa, and it counts a large and inexpensive labour force, a substantial agricultural base, numerous natural resources and stable institutions. It is also one of the most open economies to foreign equity ownership in the region. However, the burdensome bureaucracy, corruption, weak productivity, costly and difficulty to obtain financing services, under-developed transport infrastructure, ambiguous property laws, frequent power and water cuts and an unskilled labour force are the main factors that hinder FDI. Major ongoing reforms include dematerialising tax, legal and business registration processes. Also, issuing construction permits, operating permits and identification numbers is being automated and digitalised. In addition to these reforms, a scheme to boost the performances of the power sector was initiated. In January 2022, Ghana was removed from the EU grey list of high-risk money laundering countries.

What to consider if you invest in Ghana

Strong Points

Strong points of investing in Ghana include:

• more developed infrastructure compared to most West African countries
• political stability (ranks 1st for the Global Peace Index in West Africa - IEP, 2020) and steady growth
• skilled and trainable labour
• sizeable consumer base with an emerging middle class
• hub for opportunities in other West African countries and access to other ECOWAS countries
• 100% foreign ownership is permitted
• expanding stock market

Weak Points

Challenges for investors in Ghana include:

• heavy bureaucracy
• high risk of corruption (75th out of 180 on Transparency International's Corruption Perceptions Index 2020)
• inconsistent electricity supply
• underdeveloped capital market
• challenges in emerging markets weighing on the local economy (e.g. recent depreciation of cedi)
• despite improvements in per capita income, poverty persists in some rural areas
• regional instability, particularly in Burkina Faso, Nigeria and Mali.

Government Measures to Motivate or Restrict FDI

A reduced corporate tax rate of 8% is available for companies engaged in “non-traditional exports,” and a 20% rate applies to financial institutions on income from loans granted to farming enterprises and leasing companies.
Free Trade Zone (FTZ) companies have a 10-year exemption period after which they pay corporate tax at 15% on export sales.
A rebate is granted to manufacturing companies located outside Accra and Tema. In regional capitals (other than Accra and Tema), the rebate is 75% of the standard corporate tax rate of 25%, and in all other places, it is 50% of the standard tax rate.

Tax holidays are granted, from the beginning of the operations, in the following cases:

• Agricultural enterprises, agro-processing and waste processing companies, rural banks and venture capital financing companies pay 1% corporate tax for periods ranging from five to 10 years.
• Real estate companies pay 1% corporate tax for five years on income from certified low-cost housing, with some limitations.
• Entrepreneurs aged 35 years and under are granted a five year corporate tax holiday if they are engaged in specific businesses. Businesses that qualify for the exemption include manufacturing, ICT, agro-processing, energy production, waste processing, tourism and creative arts, horticulture and medicinal plants. Such entrepreneurs also enjoy a rebate on corporate tax rates ranging from 5% to 15% for five years after the tax holiday.
• Privately-owned universities are exempted from corporate tax if they reinvest 100% of their profits into the operation of the university.
• Employers receive an additional tax deduction for employing new graduates as part of their workforce that ranges from 10% to 50% of the salaries or wages of such employees.