Africa's Golden Gateway

To be published in

Ghana, once known as the Gold Coast, celebrated its Golden Jubilee on March 6, 2007 under the theme “Ghana@50: Championing African Excellence”.

Fifty years ago, Ghana became the first country south of the Sahara to gain independence from colonial rule, under the founding President Dr. Kwame Nkrumah. At present, Ghana has a democratically elected government under President J. A. Kufuor, who is currently serving his second term of office. Ghana's year-long jubilee celebrations will equally mark the success of its fiscal reforms over the last two decades.  The nation's economic efforts have resulted in comprehensive debt relief and an across-the-board improvement in Ghana's external debt rations.

Moreover, Ghana is hosting the African Union Summit from June 25 to July, 3, 2007 in Accra under the Chairmanship of H.E. President Kufuor. The summit would be devoted to a grand debate on a continental Union Government and would also help African leaders to identify the strategic goals, objectives and actions needed to fulfil the dream of an African common market, with free movement of people, goods and services.

Economy

With the recent moderation in oil prices, Ghana is set to achieve single digit inflation by the close of the year. The Gross International Reserves (GIR) currently, stands at $2.07 billion. Also the MPC of the Bank of Ghana has kept the prime rate unchanged at 12.5% as of May, 2007.

Plans are also underway to re-denominate the cedi in July and this will consolidate the country's rapid economic transformation. The Bank of Ghana will re-denominate the current cedi by setting ten thousand cedis to one Ghana cedi (GH¢) which will be equivalent to one hundred Ghana pesewas (GP). That is ¢10,000 = GH¢ 1 = 100 GP.

The need for the re-denomination is to cut the burden of the current note regime on the economy in terms of transaction costs, inconvenience and high risk of carrying loads of currency. The new notes and coins will be issued to replace the existing ones over a period of at least six months, starting from July 2007.

The cedi has remained stable against its major trading partners since 2001, despite the external pressures it suffers as a result of the volatile nature in the prices of imported oil. Prospects for nominal cedis appreciation are once again favourable. Despite significant cedis appreciation in real terms since 2001, there is little evidence of declining competitiveness.

Concurrent plans for long overdue privatisations in a number of companies – the list of expected Initial Public Offers (IPOs) including Ghana Telecom, Tema Oil Refinery and the State Insurance Corporation, should also help to attract foreign exchange inflows.

Exports continue to rise strongly. Last year's exports rose 44.9 per cent on year-to-year in the January to October period, compared with a 27.2 per cent rise in imports, attributed mainly to the increase in the price of oil.

The exports of gold and cocoa rose above the $1 billion mark – an important achievement for Ghana. In spite of this achievement; remittances continue to be the country's top foreign exchange earner, with private inward transfers rising to 26 per cent in the January-October period. Given the expected easing of restrictions on financial inflows, this encouraging performance looks set to be improved.

Industrial Policy and President's Special Initiative (PSI)

The Ministry of Trade, Industry and President's Special Initiative (PSI), has been playing a leading role in enabling the private sector to invest, create wealth and generate employment, thereby helping to achieve the 8-10% growth per annum needed for the attainment of a middle income status. The Presidential Special Initiatives are also aimed at helping to implement an export-led growth strategy. At present, there are four priority areas, such are; Cassava and Starch, Textiles and Garments, Salt and Oil Palm.

Available statistics on PSI on textiles and Garments as of the end of last year indicated that there are eight wholly Ghanaian factories – four in operation and employing 1,200 workers. Also 1100 people were provided with skills in clothing technology to support these factories.

Between June 2005 and June 2006, a total of 911,210 hybrid oil palm seedlings were planted to boost the PSI on Oil Palm. Currently, two million seedlings have been nursed and will be ready for planting throughout the year 2007.

With the PSI on Cassava and Starch, the 7 million US-dollar Ayensu Starch Factory is projected to operate at 70 percent of its installed capacity by May-June this year. The Company which was established under the PSI to export industrial starch has been operating at 20 percent of its installed capacity since September 2006.

Ayensu Starch Factory was established seven years ago, however, the factory was forced to close down due to operational difficulties and low export prices offered at the European market.

Africa Growth and Opportunities Act (AGOA)

Ghana, which has always been the leader in Africa and a star in liberalized economics as attested by multinationals and financial institutions, is hosting the Sixth Africa Growth and Opportunities Act (AGOA) meeting in Accra from July 16 – 19, 2007.

AGOA is an opportunity for African governments and private sector entrepreneurs to take opportunities by producing and exporting high quality and competitively priced products which will increase trade and investment between African and the US.

US President Bill Clinton issued a proclamation on October 2 nd , 2002 designating 34 countries in Sub- Saharan Africa, including Ghana, as eligible for the benefits of AGOA. The expiry date for this programme has been extended from 2008 to 2015.

Energy

The current energy crisis started in September 2006, when the water level in the Akosombo Dam dropped to one of its lowest in recent times. Since then, the Electricity Company of Ghana has been rationing the supply of electrical power to the various parts of the country. Preliminary findings of a recent survey conducted by Databank, a financial institution indicated that, industries and corporate institutions such as the financial, pharmaceutical, manufacturing, mining and agricultural sectors spend more than $120 million on fuel every month.

The Volta River Authority operates a total installed electricity generation capacity of 1,432 Megawatts. Also the Akosombo and Kpong Dams generate 912 Megawatts and 160 Megawatts respectively. Currently, the government has signed an agreement with Synohydro- a Chinese consortium firm- to build the Bui Hydro Electric Dam to generate 400 megawatts of power in the Brong-Ahafo Region at a cost of US$600 million before the close of the year.

After almost 20 years of oil exploration, Ghana has struck high quality light crude oil in commercial quantities. The discovery was made on June 23 rd 2007 by a United States company, Kosmos Energy, in collaboration with Ghana National Petroleum Company (GNPC). In July 2004, the government signed an agreement for oil exploration with the Kosmos Energy of USA, Ghana National Petroleum Corporation (GNPC) and E.O. Group of Companies. The agreement which was reached within a record time of three months was based on previous seismic data provided by the GNPC and valued at an initial cost of $30 million. Although the company began operations in 2004, the actual drilling of the well by the “Belford Dolphin”, a dynamically positioned fifth-generation deepwater drill ship, started on May 28, 2007. The delegation presented a sample of the oil in its raw state to the President John Agyekum Kufuor to ascertain the veracity of the discovery.

Investment Opportunities

Ghana, as a preferred investment destination, professes multi-party democracy which has given birth to sustainable political stability, peace and security. The nation's stability is founded not only on well functioning institutions of governance such as the judiciary and the legislature, but also the prevalence of the rule of law and the existence of independent electoral commission as well as press freedom.

In terms of investment benefits, one can have ownership in companies and joint start-ups. The minimum required equity for foreign investments in a joint venture is US$ 10,000 while wholly owned (non Ghanaian) investments require equity of US$50,000.

Under the Ghana Investment Promotion Centre Act 1994 (Act 478), there are a lot of investment incentives and benefits which include exemption from import duties on plants, machinery, equipment and accessories imported for established enterprises. Also, investors benefit from depreciation or capital allowance of 50% in the year of investment and 25% in subsequent years for plants and machinery. They also enjoy 20% depreciation in the first year and 10% in the subsequent years for building.

- Corporate tax rebates between 40% and 75%

- Investment allowance of 7.5% per annum

- And full repatriation of earnings

The Free Zone Board (FZB)

The Ghana Free Zone Board (GFZB) is the channel through which export-led development is achieved. It has an integrated programme to promote the processing and manufacturing of goods through the creation of export processing zones and also to stimulate the development of commercial and service activities around the sea port and airport areas to facilitate export.

The thrust of the programme, therefore, is to open Ghana up to potential foreign investors who can use free zones as focal points to produce goods and services for export to the sub region and beyond.

The designated four areas of Export Processing Zones (EPZ) are Tema, Ashiama, Sekondi and Shama. Among these, the Tema EPZ has been well-developed and equipped with adequate infrastructure, such as access to roads, drainage system, waste processing plant, water reservoir, telecommunication facilities and reliable power supplies.

Some incentives include:

- Complete exemption from payment of income tax on profits for a period of 10 years.

- Complete exemption from payment of dividend taxes arising out of free zone investments.

- No import licensing requirements.

- 100% ownership of shares in the business entities by the investor

- No conditions /restrictions on the repatriation of dividends and profits and guarantees against naturalization and expropriation.

GFZB- last year licensed 150 companies with a total work force of 35,621 with production worth $2.5 billion from 1996 to 2006.

Ghana- US Relations

Ghana- USA relations received a major boost when the US Government allocated US$547 million to Ghana under the Millennium Challenge Account (MCA), to help in the transformation of agriculture in Ghana. The MCA initiative was established by the US Government in March 2002 among other things to reduce poverty around the world.

Furthermore, a new embassy complex for the USA was inaugurated on May 24 th 2007 in Accra at a cost of $100 million dollars. The inauguration coincided with the Golden Jubilee celebrations of Ghana's independence and 50 years of fruitful relations between Ghana and USA.

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