The Report: Ghana 2014

Economy

A few years ago, Ghana’s economy was one of the fastest growing in the world, with GDP growth rates stretching above 14%. But there has been a noticeable change from the unconstrained optimism of recent years. Ghana has missed fiscal deficit targets that, if lower than five years ago, are nonetheless creeping upwards, and the country is beset by rising inflation and a weak currency. As a result, in August 2014, after half a decade of impressive growth, the government entered negotiations with the IMF for fiscal relief. While Ghana is in a difficult position at the moment, its problems are seen as manageable, and the expectation is that the proposed IMF assistance package will help improve the country’s competitiveness on the global market without any undue disruptions.

This chapter contains interviews with Mona Helen K Quartey, Deputy Minister of Finance; Mawuena Trebarh, CEO, Ghana Investment Promotion Centre (GIPC); and Donald Kaberuka, President, African Development Bank.

Banking

For a frontier market, Ghana’s banking system is very developed. The sector has expanded rapidly over the past 20 years, and a number of new banks have been licensed. Six domestic banks were established in that time, while in the 1990s several foreign entrants moved in. Though most of the fundamentals are healthy, there are still a number of challenges that limit overall efficiency and performance. The sector remains unusually fragmented. On the other end of the spectrum, despite the existence of specialist rural banks and non-bank financial institutions, much of the country remains unbanked. As the sector consolidates, banks will get stronger and will be better able to take on larger deals; as regulations are refined, it will be better able to withstand shocks.

This chapter contains interviews with Kofi Wampah, Governor, Bank of Ghana (BoG); and Archie Hesse, CEO, Ghana Interbank Payment and Settlement Systems (GhIPSS).

Capital Markets

For a frontier market, Ghana’s banking system is very developed. The sector has expanded rapidly over the past 20 years, and a number of new banks have been licensed. Six domestic banks were established in that time, while in the 1990s several foreign entrants moved in. Though most of the fundamentals are healthy, there are still a number of challenges that limit overall efficiency and performance. The sector remains unusually fragmented. On the other end of the spectrum, despite the existence of specialist rural banks and non-bank financial institutions, much of the country remains unbanked. As the sector consolidates, banks will get stronger and will be better able to take on larger deals; as regulations are refined, it will be better able to withstand shocks.

This chapter contains interviews with Kofi Wampah, Governor, Bank of Ghana (BoG); and Archie Hesse, CEO, Ghana Interbank Payment and Settlement Systems (GhIPSS).

Insurance

The insurance sector is growing rapidly as a result of reforms, improved regulation and a better understanding of the relevant products on the part of Ghana’s consumers. Business has not only expanded along with the economy, but has outperformed it. The sector saw total premiums growth reach 23% y-o-y in 2013. However, the sector also faces challenges common to many of Africa’s frontier markets. Penetration rates and awareness remain low, and the sector is fragmented at a time when the regulatory framework is robust, but compliance and risk management are still being refined. There is certainly plenty of scope for further growth, even with the high levels of competition in the existing market. For those insurers that are able to expand the client base outside of the corporate, upper and middle-income segments, the likelihood for strong returns is significant.

This chapter contains an interview with Lydia Lariba Bawa, Commissioner, National Insurance Commission.

Energy & Utilities

Roughly seven years after the discovery of oil, Ghana’s hydrocarbons sector has seen significant growth in terms of both production and infrastructure, yet the industry is still very much a work in progress. New projects are being ramped up to develop the sector, including for the downstream segment. Ghana’s proven crude oil reserves were estimated at 660m barrels as of January 2013, which could be higher as exploration is still ongoing. In the near term, the country has begun to shift to optimising the development of its hydrocarbons in a sustainable manner. It also aims to finalise linkages with associated sectors, including the power industry – an objective that the planned gas processing plant, upon completion in late 2014, should start to fulfil. While financial and technical bottlenecks have hampered the pace of refinery activity and new electricity generation, should these challenges be resolved, the country could emerge as not only an exporter of crude, but also as a downstream petroleum products manufacturer and a provider of surplus electricity to the regional power pool.

This chapter contains interviews with Kwesi Botchwey, Chairman, Ghana National Gas Company; Abdalla Salem El-Badri, Secretary-General, OPEC; and Kirk Koffi, CEO, Volta River Authority.

Mining

Mining and quarrying contributed 9.8% of Ghana’s GDP in 2013, up from 9.5% in 2012, according to the Ghana Chamber of Mines (GCM), the main industry association. Nevertheless, the sector had a subdued year in 2013 and was affected by a range of factors that hit the industry globally. So important is mining to Ghana’s economy that its slower performance fed through to lower GDP growth. Total revenue from minerals slid 12% to $4.79bn in 2013 from $5.45bn in 2012, led by the biggest slump in the price of Ghanaian gold in 30 years, according to the GCM. Although Ghana faces increasing competition from other countries in the region, its long history of mining, abundant resources, and security and stability remain significant competitive advantages. 

This chapter contains interviews with Nii Osah Mills, Minister of Lands and Natural Resources; and Johan Ferreira, Regional Senior Vice-President and Head, Newmont Africa, and President, Ghana Chamber of Mines.

Agriculture

As the foundation of Ghana’s economy, agriculture employs more than half of the population and is a key focus for the country’s inclusive economic development agenda. Ghana has 13.6m ha of agricultural land, and cocoa and maize account for the largest areas planted, with 1.6m ha and 1m ha, respectively. Yet as the industrial and services sectors have strengthened in recent years, agriculture’s contribution to overall GDP has steadily declined, falling from 32% in 2009 to 22% in 2013. Moreover, the sector remains underdeveloped, with the majority of rural farmers (accounting for some 90% of all farming employment) lacking the proper techniques, inputs, financing and infrastructure, such as transport networks and irrigation and storage systems. New policy reforms, however, such as seed variation control and biosafety regulations, aim to both enhance yield quality and reduce waste.

This chapter contains an interview with Anthony Pile, Founder and CEO, Blue Skies.

Telecoms & IT

Ghana’s telecommunications industry is mostly driven by activity in the mobile segment. But the business also has a high level of competition that benefits from a liberalised market regime and a robust regulatory framework. The sector is crowded, with six operators in the lower to-middle-income country of 25m people, but this has not stopped operators from rolling out new infrastructure and services. While operators are confronted with cost and operational pressures, Ghana’s scope for growth in data and value-added services is high, and a clear and robust regulatory regime ensures an even playing field for the nation’s six operators. Meanwhile, the coming on-stream of five submarine cables has added considerable broadband capacity and allowed the operators to expand their networks and range of services. Indeed, access over the past half decade has dramatically improved with the landing of undersea fibre links and the introduction of wireless and 3G – and more recently 4G – technologies.

This chapter contains interviews with Paarock VanPercy, Director-General, National Communication Authority (NCA); and Neal Hansch, Managing Director, Meltwater Entrepreneurial School of Technology (MEST) Incubator.

Industry & Retail

In spite of its role as one of Africa’s fastest growing economies, Ghana has yet to fully transition its agriculture and resource commodities base into a vibrant and diversified industrial sector. According to the Ghana Statistical Service (GSS), industry accounted for 28.6% of GDP in 2013. While not the region’s largest market, Ghana does provide a range of competitive advantages, including a transparent regulatory environment, accessible inputs and lower overheads than some of its neighbours. As with many African frontier markets, formal retailing is beginning to capture a greater share of spend as an expanding middle class increases consumption and becomes more demanding in terms of convenience and variety. Setting up shop in Ghana, however, is not without its challenges. A shortage of prime retail real estate translates into high rents, and the fact that a large proportion of consumer goods are imported leaves margins subject to currency volatility, import duties and logistics bottlenecks.

This chapter contains an interview with Mustapha Ahmed, Acting Minister of Trade and Industry.

Transport

As Ghana’s growth has accelerated in recent years, the government has sought to boost investment in all modes of transport through public and private resources. Unlike many emerging markets, Ghana’s transport backbone covers every region of the country, with heavy concentration in the most economically developed areas, such as around the capital, Accra. Oil earnings have stimulated Ghana’s economic growth and provide the resources needed to support infrastructure development. Nonetheless, as the country moves into the middle-income bracket, limitations in infrastructure are becoming increasingly apparent, and in some cases are impeding growth in select sectors. As such, the government is keen to attract more participation from private and foreign partners.

This chapter contains an interview with James Antwi, CEO, Starbow.

Construction & Real Estate

Infrastructure development in Ghana has seen a healthy progression over the past decade, mainly as a result of the Jubilee oil field discovery in 2007. Demand for construction surged in 2011-12 as the government commenced various large-scale infrastructure projects. However, the sector is not without its various challenges. Following the oil discoveries, local financing was readily available. As revenue began to slow and, more recently, the value of the cedi slid, depreciating by 27% against the US dollar from January to July 2014, a number of local banks became reluctant to fund large-scale infrastructure projects, as turnover requires a long-term investment. The recently established Ghana Infrastructure Fund intends to facilitate private investment, with a new public-private partnership (PPP) infrastructure law expected to be passed in late 2014. Capital generated by Ghana’s energy-led aggressive growth from 2010 onwards has both helped attract high-end real estate offerings, largely funded by foreign investors, and stoke home-grown demand. Returns on commercial property are steady but the real growth opportunity lies in the provision of affordable housing to the urbanised middle-income earners.

This chapter contains interviews with David Adjaye, Principal, David Adjaye Associates; and David Morley, Partner and Head of Real Estate, Actis.

Tourism

Leveraging its broad range of attractions and reputation as one of Africa’s safest and most welcoming destinations, the country now has a clear road map for increasing tourism arrivals, boosting revenues, and spreading the geographical and social impact of the sector’s growth. The World Tourism & Travel Council (WTTC) forecasts that Ghana will see 1.19m international tourist arrivals in 2014, up from the 993,600 projected by the government for 2013. This trend has been moving strongly upwards in the past few years. The official Ghana Tourism Authority (GTA) has set a target of 5m arrivals by 2027, and 2m in the nearer term. The challenge now will be to ensure the continued growth of tourism through appropriate investments in infrastructure, amenities and attractions, while revamping and substantially boosting the sector’s promotional and marketing efforts abroad.

This chapter includes interviews with Elizabeth Ofosu-Adjare, Minister of Tourism, Culture and Creative Arts; and Ulrich T Eckhardt, President of India, Middle East & Africa, Kempinski Hotels.

Health & Education

The introduction of structural health reforms and provision management systems over the past decade has enabled the health sector to more effectively confront its persistent challenges. While many indicators are improving, diseases such as hypertension and diabetes are on the rise. There are also persistent concerns about maternal mortality and human waste disposal. The refined roll-out strategy for the National Health Insurance Scheme (NHIS), along with a renewed focus on maternal health, investment in new equipment and overall infrastructural upgrades, demonstrates a positive outlook regarding health coverage and disease prevention for Ghanaians. In education, capacity building and knowledge transfer through new training programmes, private universities and public-private partnerships are a top priority. While the budget is robust, overspending and inefficient allocations still impede optimal growth. Hard infrastructure also remains a key challenge and greater investment from the private sector is part of the government’s strategy.

This chapter contains interviews with Frederik Hsu, Deputy Chairman, NMS Infrastructure; and Mark E Smith, Vice-Chancellor, Lancaster University.

Tax

In conjunction with Deloitte, OBG explores the taxation system, examining Ghana’s investor-friendly environment. OBG talks to Felix Nana Sackey, CEO and Managing Partner, Deloitte.

Legal Framework

OBG introduces the reader to the different aspects of the legal system in Ghana, in partnership with AB & David. This section includes a viewpoint from David Ofosu-Dorte, Senior Partner, AB & David, on attracting private capital to fund public sector projects.

The Guide

This section includes information on hotels, government and other listings, alongside useful tips for visitors on topics like currency, visas, language, communications, dress, business hours and electricity.

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