Ghana Fast Becoming Gateway to West Africa
Business Day (Johannesburg)
ANALYSIS
March 1, 2005
Hany Besada
Johannesburg
A RECENT survey conducted by the South African Institute of International Affairs on the experiences of South African companies and subsidiaries operating in Ghana found that almost all regard Ghana as a friendly investment destination.
Given the Ghanaian government's investment incentives and strong commitments to economic liberalisation, SA's companies are eager to expand existing operations into the region from Ghana.
They say it is a gateway to west Africa.
They perceive the politically stable and economically vibrant Ghana as a safer destination than Nigeria, Côte d'Ivoire or other unstable countries in the region. Many of the respondents were optimistic about its economic and political future.
Smaller South African companies say their market share and revenues will grow in line with the recent economic growth in Ghana, whose gross domestic product last year was $8,3bn, up from $7,9bn in 2000.
The South African companies expect to reap the benefits of a rise in income levels and a thirst for foreign goods and services among Ghanaians.
Meanwhile, the Ghanaian government and the Ghana Investment Promotion Centre have been assisting South African companies investing in that country. Government officials surveyed said they would like South Africans to become leading investors in their country.
SA is perceived to be politically neutral and economically advanced compared with European, North American and Asian countries. The mining sector has attracted the greatest amount of SA's foreign direct investment in Ghana.
In April last year, AngloGold merged with Ghana's Ashanti Goldfields in a deal worth $1,4bn. SABMiller entered the Ghanaian beer market through a merger with the ailing Ghana Brewery in 1997. It invested $9m and by last year the company had doubled operating profit and increased turnover by 60%.
The South African entrepreneurs have poured more than $21m into the services sector, particularly into telecommunications, $5m into general trade, and $4m into the building, construction and manufacturing industries.
In March last year, there were 29 South African investments in Ghana, and SA is the country's 14th-largest source of foreign direct investment.
Business constraints that were cited by South African companies during the survey include a lack of disposable income, bureaucracy, corruption, land tenure and property rights difficulties, a slow legal system, the high cost of financing and a lack of infrastructure outside urban areas.
Starting a business in Ghana is costly and time-consuming - but in comparison with Nigeria, Ghana is competitive and has been identified by the World Bank as one of the least expensive sub-Saharan African countries to start a business in.
SA is becoming an important investor in Ghana, particularly in mining, and is slowly eroding the market share of Ghana's traditional foreign direct investment sources, Europe and north America.
Several South African companies have found a niche for their manufactured products, which are in demand among young Ghanaian consumers.
But Ghana's investment relations with SA are still young, and prospects for expanding these relations are very positive.
--- Besada is a Business in Africa researcher at the South African Institute of International Affairs. ---
