FINANCE FORUM
Ghana's heavy reliance on primary commodities, including
cocoa, gold and oil (which are all prone to the volatility of
international commodity prices) create uncertainty about its
actual future paths for growth, inflation, export receipts and
domestic revenues. In an attempt to improve the economy's
competitiveness for the private sector-led investments in
non-natural resource sectors, the government has introduced a
number of agriculture and industry related policy initiatives that
are expected to drive economic growth.
Economic transformation
Ghana has an open economy with few areas closed off to
foreign participation. Restricted segments are typically aimed
at ensuring employment opportunities for Ghanaians at
the lower end of the income scale, rather than protecting
largescale industries from foreign competition. Ghana has been
making intensive efforts to attract foreign investment since
the introduction of the Structural Adjustment Programme
in 1984, and more recently, through the Ghana Investment
Promotion Centre Act 865 of 2013 (GIPCA). Under the GIPCA,
various incentives are available to encourage strategic and
major investments in the country, particularly in the areas of
agriculture, manufacturing, construction, mining and tourism.
Economic challenges
Although the country is experiencing rapid growth, Ghana is
running a large fiscal deficit and a large balance of payments
deficit. In spite of the growing revenues from the oil and gas
sector, the fiscal deficit surged to 3.7% of the gross domestic
product at the end of March 2019 and public debt level inflated
to 59.6% of the gross domestic product, over the same period.
This is largely due to the high capital imports for the
development of infrastructure and the petroleum sector, on the
one hand, and the government's increased spending on public
sector wages and subsidies, on the other. As such, Ghana's
economic prospects over the medium term lie in its ability to
regain and sustain its economic stabilisation programme. In an
attempt to strike a balance between addressing development
needs and containing public debt levels, Ghana has used
favourable global financing conditions to improve the maturity
structure of debt by replacing short-term debt with longer-term
debt, thus reducing rollover risk.
In addition to steep fiscal consolidation (as evidenced in the
half-year fiscal performance), there is a need to invest Ghana's
current natural resource wealth in non-natural resource sectors
to ease the effects of the anticipated decline in oil production
and achieve sustainable growth in the medium-to-long term.
Itumeleng Mukhovha is the Corporate M&A Associate at
Baker McKenzie.
Incentives generally include exemption from customs import
duties on plant and machinery, favourable investment and
capital allowances on plant and machinery, guarantees against
expropriation by the government, guaranteed free transfer of
dividends or net profits. In addition, companies that operate in
sectors other than mining, petroleum or timber can obtain a
license from the Ghana Free Zones Board (GFZB), to operate as a
free zone entity. Registration with the GFZB enables companies
to enjoy a tax holiday for a period of ten years, and thereafter,
such companies will be required to pay corporate tax not
exceeding 25% on local sales and 15% with respect to exports.
To qualify for this, a company needs to export at least 70% of its
annual production of goods and services.
www. africanmining.co.za
African Mining Publication
African Mining
African Mining October 2019
53