Ghana is among the fastest growing economies in Africa, experiencing strong growth over the past decade with per capita income of US$1,410, higher than the regional average of US$1,257.
But the plunge in oil and gold prices between 2014 and 2016 had induced fiscal pressures and foreign currency shortages, and spilled over to non-oil sectors, tipping the country’s economy into low growth.
The economy grew at 3.5 percent in 2016 down from the 3.9 percent in 2015.
However, following the recent improvement of commodity prices on the international market, the economy has returned to robust growth of 9.3 percent in 2017, according to the Ghana Statistical Service.
The real GDP growth for 2017 is provisionally estimated at 7.9 percent, with non-oil GDP growth of 4.8 percent. This compares extremely favourably with a real GDP growth target of 6.3 percent and a 2016 outturn of 3.7 percent, according to the Minister of Finance, Ken Ofori-Atta.
At the sectorial level, the Industry Sector recovered from a negative growth of 0.5 percent and was expected to grow by 17.7 percent in 2017 due to increased production in upstream oil and gas.
Growth in the agriculture sub-sector was expected to be broad-based, despite the initial alarm associated with the army worm invasion. While the services sector remains the dominant sector with an estimated share of 55.9 percent.
Ghana is a major exporter of commodities such as cocoa beans, gold, crude oil, among others.
With the improvement in commodity prices and improved macroeconomic management, Ghana will recover faster, World Bank Country Director for Ghana, Henry Kerali says.
The country’s medium to long term prospects look optimistic, with solid macroeconomic fundamentals underpinning growth expectations.
This is consistent with the government’s medium-term development policy framework. It has set the following macroeconomic targets for the medium term (2018-2021): real GDP to grow at an average rate of 6.2 percent between 2018 and 2020; inflation to stay within the target band of 8±2%; overall fiscal deficit to remain within the fiscal rule of 3-5 percent; primary balance expected to improve from a surplus of 0.2 percent of GDP in 2017 and remain around 2.0 percent in the medium term; and Gross International Reserves to cover at least 4 months of imports.
Attractiveness
Currently, Ghana is the 18th most attractive economy for investments flowing into the African continent, according to the 2017 African Investment Index (AII) conducted by Quantum Global’s independent research arm, Quantum Global Research Lab.
In 2016, Ghana attracted a net foreign direct investment (FDI) of US$3.5 billion. But recently, the Ghana Investment Promotion Centre (GIPC), the government agency established to encourage, promote and facilitate investments in all sectors of the economy except mining and petroleum, indicated in its third quarter 2017 report that close to US$3.4 billion FDI was realised in nine months (January-September) as against US$2.4 billion recorded in 2016.
Officials of the centre were confident of achieving their US$5 billion target for 2017, depicting a more than 108 percent increase from the 2016 FDI figure.
In the period under review (2017), the GIPC recorded a total of 139 new investments. Out of this figure, the manufacturing sector recorded the highest number of investments (37 projects), followed by the services sector with 34 projects.
The agriculture sector recorded one project. Surprisingly, no investment was made in the tourism sector.
Again, the manufacturing sector topped with US$ 2.65 billion in terms of the estimated value of investments, while there was a joint venture investment from Netherlands with an activity of manufacturing power for sale to Electricity Company of Ghana (ECG).
The Chief Executive Officer of GIPC, Yoofi Grant said: “We at GIPC are indeed encouraged to work harder to exceed our targeted FDI of US$5 billion for the year. The GIPC continues to be a central pivot of government in facilitating foreign direct and domestic investments to support development of our economy.”
Foreign exchange market conditions have remained broadly stable supported by improved liquidity conditions, despite increased demand pressures observed over the past two weeks, the previous Monetary Policy Committee (MPC) report of the Bank of Ghana (BoG) noted.
In the year to 23rd November 2017, the Ghana cedi cumulatively depreciated by 4.6 percent against the US dollar, unchanged from the pace of depreciation recorded in the corresponding period of 2016, it added.
Agric
Agriculture, including agribusiness and downstream processing activities, is the largest sector in the West Africa’s second economy – Ghana. Agribusiness accounts for 25 percent of GDP, employs nearly half the workforce and, with 35 percent of exports, is Ghana’s main exporter. The sector has been growing at more than five percent annually since 2008.
Because of its capacity for job creation and its importance in producing inputs for manufacturing products, agribusiness has high desirability in terms of its potential for development impact. It has the highest multipliers and creates 750 jobs for every additional US$1 million of output. Two-thirds of non-oil manufacturing depends on agriculture for raw materials, a new joint International Financial Corporation (IFC) and World Bank study titled Country Private Sector Diagnostic (CPSD) for Ghana revealed.
Cocoa remains the main export crop, accounting for 25 percent of foreign exchange earnings and 81 percent of agricultural exports, at nearly US$3 billion in 2016.
The second most important export earner in the food category was fruits (US$227 million), dominated by bananas, mangoes, cashew nuts and pineapples, while fresh vegetable exports were in fifth position (US$35 million, mostly yams). Juice products alone earned US$8 million in 2016, it indicated.
Most agricultural products are exported to the United States, the European Union (EU), and Japan, but regional markets are growing and cashew nuts have found new markets in India and Vietnam.
ICT
Ghana’s ICT sector is a new driver of growth, offering unprecedented opportunities for investment and job creation. Growth of the ICT sector in Ghana has been spectacular and far higher than that of the overall economy. The ICT sector contributed 10.6 percent of GDP in 2016, up from just 2.8 percent in 2006. Average annual growth of the ICT sector over 2009-14 was 30 percent, which has been led by the revolution in mobile voice telephony, the IMF and World Bank, noted.
Progress in digitization has been fostered by the government’s universal access strategy, which includes service to over 200 community and regional centres. While infrastructure is adequate, with five submarine cable landing stations, black spots and a serious geographical divide remain.
The government is investing further in fibre optic backbone projects along the eastern and western corridors, and in data centres in Accra and Kumasi.
For rural and underserved areas, such as the Northern Region, the Ghana Infrastructure Fund for Electronic Communications (GIFEC) is a key player. The private sector has been active in deploying mobile solutions to rural areas, such as the MTN Ghana and Ericsson Rural Telephony Project.
Experts observed that nonetheless, while broadband is growing in Ghana, it has not yet triggered a digital transformation on a broader economy-wide level. Despite increases in the provision of lower-priced internet bandwidth, Ghanaians have not yet fully adopted ICT into their daily lives or business operations.
One reason is the insufficient provision of broadband internet. In 2015, less than 1 percent of households had access to fixed broadband services. While mobile coverage is very good, broadband access is largely unavailable in rural areas, which means fewer opportunities there, according to reports.
ICT applications in education, agriculture, health and e-government would also contribute to more inclusive growth in the country.
Moreover, the ICT sector has yet to realize its potential in job creation. While not directly a large provider of employment (1.2 percent of jobs in business establishments), it is estimated that for each ICT job up to eight jobs may be created.
The sector is also a positive force for inclusion and has provided opportunities for women and youth.
The digital economy is growing at 15 to 25 percent a year in developing countries. It is not only an important source of growth, but it also benefits other sectors of the economy and is a driver of competitiveness.
Tourism
Ghana’s tourism industry is expected to expand by 5.6% in 2016 and maintain an annual growth rate of 5.1% per annum from 2017 through to 2027, the World Travel & Tourism Council (WTTC) disclosed.
A number of internationally-branded hotels are based in Accra. As at May 2017, there were 2,723 hotels and lodges in Ghana.
The number of business travellers to the country is expected to increase as the government embarks on a number of initiatives to stimulate economic growth.
The government is also making improvements in transport infrastructure, with the construction of a third terminal at Accra’s Kotoka International Airport and allocation of funds for the repair of roads to popular tourist destinations.
The hotel sector in Ghana has remained resilient despite recent global economic challenges.
The government has taken steps to diversify the economy, including promoting the hospitality and tourism sector.
Ghana’s hospitality industry grew 1.2% from 2015 to 2016. The country’s hotel industry is expected to grow 1.1% in 2017, 2.1% in 2018 and 2.3% in 2019.
“Having regard to the investment by foreign investors in the industry through the establishment of high-rated hotels, and an increasing number of tourists and business travellers, it is expected that there will be continuous growth in the industry,” Pietro Calicchio, Hospitality & Gaming Industry leader for PwC Southern Africa said.
The hospitality sector in Africa’s emerging markets including Ghana looks set to profit from foreign investment and an influx of foreign travellers.
The emerging markets are set to post faster growth in revenue than their counterparts in developed countries, making them integral to the expansion strategies of some of the world’s leading hotel developers.
Mr Calicchio noted: “The growth potential of Africa is high mainly because of the rapid economic growth in some economies, a growing middle class and an increase in visits from foreign visitors.
“The emerging markets are a sought after destination for foreign investors – it is in these markets where there is continued economic growth and a need for additional infrastructure. In addition, governments and policy makers are introducing a range of tax incentives and other incentive schemes to foreign investors.”
Outlook
Ghana boasts of abundant natural resources such as gold, oil and gas, bauxite, and agricultural products including cocoa, cocoa, fish and livestock. Fortunately, more than 60 percent of the country’s land supports any type of agric.
The country is also strategically located. Because of this unique location, many people refer to it as the Gateway to West Africa. It is bordered to the west, east, and north by Ivory Coast, Togo, and Burkina Faso respectively. The country is also bordered to South by the Atlantic Ocean; that makes it the hub of fishing activities.
Oil and gas is big business in Ghana – and it is only getting interesting day by day. With an oil sector that is celebrating its first decade in Ghana, there is still a lot to be done – and a lot to be won – in this sector.
Recently, Ghana’s parliament passed extensive amendments to its Petroleum Revenue Management Act and the Petroleum Exploration and Production Bill that hadn’t been updated since 1984.
These amendments ensures that the management of Ghana’s oil and gas resources are more transparent than ever before. The amendments received support from across the board of stakeholders in the industry.
In addition to the now famous Jubilee field, Ghana is said to gain 80 square kilometres (sqkm) of territorial space after the delimitation of its maritime boundary with Cote d’Ivoire.
On Saturday, September 23, 2017, Ghana emerged victorious in its three-year long maritime boundary dispute with its neighbour Cote d’Ivoire.
The Special Chamber of the International Tribunal for the Law of the Sea (ITLOS) was set up to hear the dispute unanimously declared that Ghana had not violated Cote d’Ivoire’s sovereign rights with its oil exploration activities.
The ruling has lifted the initial moratorium placed on Ghana which prevented it from drilling more wells in the disputed area.
This therefore implies that Tullow Oil Plc can now begin to add 13 more wells to improve its production, an estimated addition of 80,000 barrels per day.
Generally, Ghana is known for being the best place to be for western companies in West Africa. Renowned for the low crime rates, astonishing growth rates in the later years and a well-functioning democracy, Ghana is often called one of the success stories of Sub-Saharan Africa.
The local businesses are in desperate need of foreign partners with the knowhow and experience in these fields. For some portions of the oil and gas sector, at least 10% of equity will have to be held by domestic Ghanaian firms.
On the governance front, issues related to corruption and political vigilantism are on the rise but the government is taking the bull by the horn to address these challenges.
In spite of these, the country continues to present tremendous medium and long-term investment prospects for investors.
