The Report: Ghana 2016

Situated on the Gulf of Guinea in West Africa, Ghana’s natural resource wealth and status as a stable democracy have helped make it a prominent player in the region. It is the world’s second-largest exporter of cocoa, behind Côte d’Ivoire, and one of the continent’s largest gold producers. Recently discovered reserves of oil and gas have powered the economy to double-digit growth in the past decade.

Country Profile

One of the principal attractions of Ghana as an investment destination is its status as one of the most well-governed and stable states in the region. It has been more than two decades since the multiparty system was re-established by a new constitution, and during this time there has been a consolidation of democratic principles, the establishment of greater trust in the nation’s independent judiciary and the development of a vibrant parliament that has proven itself an effective forum for legislative activity.

This chapter includes a viewpoint from President John Dramani Mahama, and interviews with Cecilia Malmström, EU Trade Commissioner, and Alan Yarrow, Lord Mayor of the City of London.

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The Ghanaian economy is strongly correlated to global commodities such as cocoa, gold and oil, which are the three main sources of income and foreign currency. Price swings for these three resources, increased spending on domestic public sector wages, an electricity shortage and other external factors have combined to slow the pace of development in recent years, leading to a depreciating currency and a budget shortfall. According to provisional statistics, GDP for 2014 was estimated at $33.4bn, indicating year-on-year growth of 4%, while non-oil GDP totalled $31.12bn. New offshore oil and gas fields are expected to accelerate economic growth starting in 2016, with energy set to contribute 2% to GDP in 2016 and 4.1% by 2017.

This chapter includes interviews with Seth Terkper, Minister of Finance, and Mawuena Trebarh, CEO, Ghana Investment Promotion Centre (GIPC).

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Despite the challenges faced in the economy in general – for example, the decline in the currency, the rise in government debt, low commodity prices and a persistent deficit – the Ghanaian banking sector has remained profitable and well capitalised. The country’s lenders have managed not only to survive but also to thrive. The banking sector is highly competitive and open, albeit somewhat crowded. The country has 28 deposit money banks, 60 non-bank financial institutions, 138 rural and community banks, and 503 microfinance institutions.

This chapter includes an interview with H A Kofi Wampah, Governor, Bank of Ghana (BoG).

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Capital Markets

After rising 71.8% in 2013, Ghana’s stock market had a modest 2014, with the benchmark index up just 5.4% (and most of that rise seen in the beginning of the year following on the 2013 rally). To a great extent, the muted performance reflected external circumstances, namely the drop in commodity prices and the prospect of rising interest rates in the US. Currency depreciation against the US dollar was an issue as well. Nevertheless, Ghana’s markets are developing in spite of the limited trading volumes, with momentum building and a solid foundation being set for future growth. Companies are continuing to list on the Ghana Alternative Exchange (GAX), the depository is installing a new working platform and an electronic bond market is being created. In addition, a new and far-reaching Securities Law is in the works that could result in a wider range of products on the market, better and more effective regulation, and more flexibility for investment funds.

This chapter includes a viewpoint from William Adjovu, CEO, Liberty Capital.

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Growing at one of the fastest rates in Africa, Ghana’s insurance sector continues to do well despite the headwinds faced by the overall economy. Analysts and market participants are expecting years of solid performance as awareness, penetration and density increase and converge towards global averages. Companies in the sector are reporting strong profits and good premium growth, while interest is high from international investors, with 2014 and 2015 characterised by a series of major transactions. Insurance in Ghana is set for continued growth, mergers and acquisitions, and improved coverage, and the country is likely to be one of the better performing markets in the region.

This chapter includes an interview with Ivan Avereyireh, President, Ghana Insurance Association (GIA).

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Energy & Utilities

Ghana’s energy sector is both young and growing fast, with a second major oil and gas field set to commence production in 2016 and a third to follow soon thereafter. Legal and regulatory regimes are still being established, while improvements are being made to infrastructure to catch up with a rise in demand. This will help to remove obstacles to the use of domestic energy supply to speed up development. In the downstream market, deregulation is likely to be the highlight of 2015, after a decision to end government price setting for main consumer fuels. Increasing oil production, even in a lower price environment, will be particularly valuable at a time when Ghana is grappling with a budget deficit estimated at 7.5% of GDP.

This chapter includes interviews with Joe Mensah, CEO, Kosmos Ghana; William Amuna, CEO, GRIDCo; and Samuel Nana Brew-Butler, Chairman, CenPower Generation.

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Once known as the Gold Coast, Ghana is a key player in the international gold market and Africa’s second-largest producer. In 2013, 86.6% of export revenues from the mining sector came from gold, making the metal the top export and source of foreign currency. Gold generated $4.2bn in 2013, compared with $3.2bn from oil and $1.3bn from cocoa. Growth has been hampered in recent years by external factors such as lower metal prices and internal ones like the rising cost of electricity and illegal mining. These difficulties have combined to boost costs and lower profit margins in the sector, and legal and regulatory changes are in the works. For now, exploration activity is minimal, but authorities hope that when global conditions for mining improve a boost in activity will follow.

This chapter contains an interview with Sulemanu Koney, CEO, Ghana Chamber of Mines.

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Even as Ghana’s oil and gas industry continues to expand, the agricultural sector remains a vital contributor to economic activity, employing more than half of the working population. The country cultivates a rich array of staples and cash crops, and is the second-largest producer worldwide of cocoa. The sector experienced a year-on-year growth rate of 4.6% in 2014, according to the Ghana Statistical Service, compared with 5.7% in 2013 and 2.3% in 2012. This was lower than the targeted 5.2%, and down from the earlier estimate of 5.3%. However, the sector remained the second-fastest-growing part of the economy, behind only services (5.7%).

This chapter contains an interview with Peter Ndegwa, Former Managing Director, Ghana Breweries Limited.

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Rapid economic development, demographic growth and regional dynamics have put increasing pressure on Ghana’s transportation system over the past decade, and it has at times struggled to keep pace. Rather than allow the transportation sector to become a victim of the country’s success, the government has pushed forward infrastructure development projects, with the private sector encouraged to take a major role in finance, construction and management. The importance of private participation in transport infrastructure has become ever more apparent in recent years. Although Ghana’s public resources remain limited, pressure on its transportation system has increased due to economic and population growth, as well as a rise in visitor numbers and trade, including with the landlocked countries to the north.

This section contains interviews with Peder Sondergaard, CEO of Africa and Middle East Region, APM Terminals, and Geoffrey White, CEO, Agility.

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Telecoms & IT

Dynamic and competitive, Ghana’s telecoms sector is one of the brightest spots in an economy that has had a bumpy ride over the past two years. Demand for mobile services in particular is resilient and rising. As of June 2015, Ghana had a total of 32.36m mobile subscribers, indicating theoretical market penetration of 119.41%. The market is appealing, as evidenced by the strong international presence and competition. In IT, the government, international institutions and the private sector are increasingly convinced of the market’s potential, and the importance of the ICT sector in broader social and economic development. However, more investment in infrastructure, products, and services is needed to capitalise on this potential, with many residents, businesses and parts of the government still lagging behind in technology adoption.

This chapter contains an interview with Jonathan Tawiah, Managing Director, Ostec.

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Industry & Retail

While Ghana boasts a number of advantages for manufacturers, including access to a 300m-person regional market, a host of raw material inputs and competitive labour costs, 2014 was a particularly challenging year for the industrial sector. In large part this was due to a declining currency, power shortages, limited credit and high overhead costs. Nevertheless, industry still accounts for 28.4% of GDP and generated output worth $8.5bn in 2014. The government’s goal is to increase annual revenues from non-traditional exports from $2.3bn to $5bn by 2017, as well as reduce the trade deficit. While the Ghanaian retail market is relatively untapped, rising incomes suggests its time is coming. Research indicates that over 479,000 households, or 9% of the total, will be in the $10,000-per-year-plus bracket by end-2015. With a large and growing middle class benefitting from higher disposable incomes, retail spending is expected to reach $11bn by 2019.

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Construction & Real Estate

Growing year-on-year as a contributor to the economy, Ghana’s construction sector is increasingly dynamic and led by private sector participants. While parts of the real estate market have slowed in recent years, demand for low-cost housing remains as strong as ever. Government investment is a major driver of growth, with a substantial pipeline of projects in transport infrastructure in particular expected to be rolled out in the coming years, often using public-private partnership models. Construction activity contributed $3.8bn to GDP in 2014 at current prices, according to the Ghana Statistical Service. This was equal to 12.7% of GDP and up 26.9% from $2.9bn in 2013. The sector has grown strongly over the past decade, up from $280.3m in 2006, and has become of increasing importance to the broader economy, more than doubling as a contributor to GDP from 5.7% in 2006.

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Over the next 12 years Ghana aims to move from an off-the-beaten-track locale to a major player in African tourism. Ambitious plans are afoot to increase visitor numbers five-fold by 2027, capitalising on the country’s natural beauty, cultural heritage, hospitality, and safety and security. The World Travel & Tourism Council forecasts that the tourism sector will grow by an annual average of 4.5% per year between 2014 and 2024. This is in line with broader economic growth: the council expects tourism and travel to contribute the same 3% to GDP in 2024. A new, well-financed tourism authority is already implementing a detailed strategy emphasising private sector leadership and investment.

This chapter includes an interview with Charles Osei-Bonsu, CEO, Ghana Tourism Authority.

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Universal access to basic education has been a key goal for Ghana, and the country has continued on its path towards full enrolment. At the same time, Ghana has focused on improving and expanding its existing school infrastructure, particularly at the senior high school level through its Secondary Education Improvement Programme, launched in May 2014 and aimed at increasing access to senior secondary education in underserved communities. Educational enrolment levels have continued to improve, in part due to the success of government efforts, and the country has moved closer to achieving the Millennium Development Goal of universal primary education by 2015. Regardless, performance rates have left many in Ghana concerned about the readiness of graduates entering the university system.

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More than ever before, Ghanaians have seen their access to health care improve, and as a result they are living longer, healthier lives. Since the roll-out of the National Health Insurance Scheme (NHIS) in 2005, 10.2m active subscribers had been added to the scheme as of end-2014, out of a total population of 25m. This has led to improvements in average life expectancy, which, in the decade leading up to 2014, rose from 57.79 years (2003) to 61.1 years (2013). The maternal mortality rate has declined steadily as well, to 380 deaths per 100,000 live births in 2013, down 49% from 1990, though the country is still some way off from reaching the UN Millennium Development Goal of 185 deaths per 100,000 live births. The health care system is currently dealing with considerable financial challenges, but ongoing developments suggest a positive, and healthy, future for the sector.

This chapter includes an interview with Nathaniel Otoo, Chief Executive, National Health Insurance Scheme (NHIS).

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OBG’s partner Deloitte lays out what investors need to know about income tax legislation in Ghana.

This section also includes a viewpoint from Felix Nana Sackey, CEO, Deloitte Ghana.

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Legal Framework

AB & David, OBG’s legal partner, provides a guide to Ghana’s legal framework and relevant statutes for investors.

This section also includes a viewpoint from David Ofosu-Dorte, CEO, AB & David.

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This chapter includes hotel listings for discerning travellers, useful telephone numbers, and information for both first-time and repeat visitors.

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