The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world. They analyze a variety of economies that are or could be markets for U.S. businesses. The Investment Climate Statements are also references for working with partner governments to create enabling business environments that are not only economically sound, but address issues of labor, human rights, responsible business conduct, and steps taken to combat corruption. The reports cover topics including Openness to Investment, Legal and Regulatory Systems, Protection of Real and Intellectual Property Rights, Financial Sector, State-Owned Enterprises, Responsible Business Conduct, and Corruption.
Executive Summary
Ghana’s economy encountered strong headwinds in 2022. Gross Domestic Product (GDP) growth which reached 5.4% in 2021, is estimated to have slowed to 3.2% in 2022, with projections of 1.6% GDP growth in 2023, according to the International Monetary Fund (IMF). However, rising inflation, which reached just over 54% in December, but has since moderated slightly, and the rapid depreciation of the Ghanaian cedi, along with global supply chain constraints and fiscal shortfalls, have affected the economic outlook. Russia’s invasion of Ukraine exacerbated these strains, provoking food and gas price hikes. With international capital markets closed and domestic financing drying up, in July 2022, the President authorized the Finance Minister to enter into talks with the IMF to address the balance of payments crisis and the Government of Ghana (GOG) concluded a Staff-Level Agreement (SLA) for a $3 billion, three-year arrangement under the Extended Credit Facility (ESF) in December, pending IMF Board approval. Ghana suspended debt service payments on the majority of its external debt on December 19. Among the burdens weighing heavily on government finances are the sizeable arrears in the energy sector due to excess generation capacity, excess gas supply, high technical and commercial losses, and declining oil production.
The economy remains highly dependent on the export of primary commodities such as gold, cocoa, and oil, and consequently, is vulnerable to slowdowns in the global economy and commodity price shocks (but also benefits from high oil and gold prices). In general, Ghana’s investment prospects are in flux, as the Government of Ghana seeks to attract FDI in agro-processing, mining, and manufacturing but investor confidence is relatively low. It has made attracting foreign direct investment (FDI) a priority to support its industrialization plans and to overcome an annual infrastructure funding gap.
Challenges to Ghana’s economy include high government debt, particularly energy sector debt, low revenue mobilization, corruption, and inefficient state-owned enterprises. Ghana has a population of 31 million, with over 14 million potential taxpayers, but only six million of whom file their annual tax returns. As Ghana looks to spur economic recovery and move beyond dependence on foreign aid, it must develop a solid domestic revenue base, while also reducing government expenditures. On the energy front, Ghana has enough installed power capacity to meet current demand, but it needs to improve the management of its state-owned power distribution system to reduce financial and technical losses.
Among the challenges hindering foreign direct investment are costly financial services, lack of transparency and stakeholder engagement, corruption, under-developed infrastructure, a complex property market, costly and intermittent power and water supply, the high costs of cross-border trade, a burdensome bureaucracy, and an unskilled labor force. Enforcement of laws and policies is weak, even where good laws exist on the books. Public procurements are sometimes opaque, and there are often issues with delayed payments. In addition, there have been troubling trends in investment policy over the last seven years, with the passage of local content regulations in the petroleum, power, and mining sectors that may discourage needed future investments.
Despite these challenges, Ghana’s abundant raw materials (gold, cocoa, and oil/gas), relative security, and political stability, as well as its hosting of the African Continental Free Trade Area (AfCFTA) Secretariat make it stand out as one of the better locations for investment in sub-Saharan Africa. Investment laws protect investors against expropriation and nationalization and guarantee that investors can transfer profits out of the country, although international companies have reported high levels of corruption in dealing with Ghanaian government institutions.
Among the most promising sectors are agribusiness and food processing; ICT and business-related services; textiles and apparel; downstream oil, gas, and minerals processing; construction and real estate; and mining-related services subsectors.
The government has acknowledged the need to strengthen its business enabling environment to attract FDI, and is taking steps to overhaul the regulatory system, improve the ease of doing business, and restore fiscal discipline.
To access the full text of the 2023 ICS, visit the U.S. Department of State Investment Climate Statements