With a view to attracting the huge quantum of private investment capital, Ghana needs to finance two major development programmes.
Government last week commenced what appears to be a concerted global marketing drive to attract the foreign direct investment that will form the bulk of the requisite financing.
Even as President Nana Akufo Addo himself made an investment sales pitch to German investors – apparently the main purpose of his state visit to that country last week – both Energy Minister Dr Matthew Opoku-Prempeh and the CEO of the Ghana Investment Promotion Centre, Yofi Grant, led Ghana’s delegation to the global oil industry’s flagship Offshore Technology Conference in Houston, United States.
Instructively they will all be joined by several other Ministers including Finance Minister Ken Ofori-Atta in September at this year’s edition of Invest Africa’s annual Africa Debate which will include a dedicated Ghana Investment Forum.
The marketing drive by some of the country’s top officials comprise part of the effort to attract the GHc70 billion in private investment capital required to finance government’s ambitious three year GHc100 billion Ghana COVID 19 Alleviation and Recovery of Enterprises (Ghana CARES) initiative and the even bigger 10 year US$450 billion Sustainable Development Goals financing road map.
The Ghana CARES programme seeks to transform the economic slump imposed by COVID 19 into a sustained transformation of the country’s economic production capacities. The SDG financing roadmap establishes a game plan for raising the country’s service delivery capacities in the social sectors such as education and health, while creating inclusive economic opportunities to dramatically improve living standards, in order to meet the United Nation’s SDGs by 2030.
With government having run out of fiscal space – it is targeting a fiscal deficit of 9.6 percent of Gross Domestic Product this year, down from 11.9 percent last year, even as the public debt to GDP ratio has reached 77 percent – it is necessarily turning to private capital to finance both programmes, and with an abysmally low domestic savings mobilization rate of barely 12 percent of GDP, this means FDI will be absolutely critical.
But this is itself a tall order; the United Nations Development Programme last year projected that COVID 19 would impose a 42 percent slump in global FDI. Nevertheless, Ghana has bucked the trend so far, attracting US$2.65 billion last year, which is 139 percent higher than 2019’s admittedly disappointing outcome. Just as importantly Ghana came flying out of the blocks in 2021, attracting another US$500 million in the first two months of the year, creating the real possibility that it would do even better this year than it did last year.
With President Akufo-Addo himself now leading the marketing drive and many of his administration’s leading figures close behind him that possibility is increasingly looking to be a certainty.
The President spent much of his official state visit to Germany last week wooing investors in that country, assuring the international business community of Ghana’s determination to maintain the conducive investment environment that guarantees the safety of legitimate investments and competitive returns on them.
He gave an assurance that the country would not relent in the effort to preserve the atmosphere of peace, stability and security that had contributed to the increasing presence of German businesses in Ghana.
Addressing the Ghana-Germany Business Forum in Dusseldorf as part of his working visit to Germany he affirmed that since 2017 government had put in place measures to reduce the cost of doing business, had improved the operating environment for doing business, and indeed had made Ghana one of the most business-friendly economies in Africa.
He reminded potential investors that Ghana is one of the fastest growing economies in the world, both before and during COVID 19. Between 2017 and 2019 average annual GDP growth was 7.0 percent, up from 3.4 percent in 2016.
“Indeed with the economies of many countries around the world in recession, having recorded negative growth in 2020, largely as a result of the COVOD 19 pandemic, Ghana’s economy was one of the very few that still managed to record a positive GDP growth albeit a very modest 0.9 percent” President Akufo-Addo said.
“In spite of the ravages of the pandemic, we are working to grow the economy at a much faster rate this year, our target being a five percent GDP growth rate which will enhance the prospects of a win-win environment for both the private sector and the country; an environment where companies do not just survive but actually thrive. In the first quarter of this year the economy grew at 3.1 percent and in the second quarter, at 8.9 percent’ he indicated.
Actually, Germany’s private sector is already quite enthusiastic about Ghana as an investment destination, and is represented by major corporations such as manufacturing titan, ThyssenKrupp; global logistics provider Kuhne & Nagel; and most recently, Volkswagen which is establishing an assembly plant in Ghana.
Indeed, GIPC data shows that German investors have registered a total of 192 projects with a total FDI value of US$83.92 million over the past decade.
But President Akufo-Addo pointed much further afield to buttress Ghana’s credentials as a destination for international direct investment. ”It continues to be an exciting time to be in Ghana and do business in the country. Already other global car manufacturing giants, Toyota and Nissan of Japan, and Sinotruck of China have also established assembly plants in the country” he added.
He reminded investors that Twitter is establishing its African headquarters in Ghana; that Google’s first African Artificial Intelligence Centre is located in Ghana; and that reputed Norwegian Energy Company Aker is well established in the country too.
A key country marketing point which the President drove home was Ghana’s hosting the secretariat of the African Continental Free Trade Agreement, which has created a single market of some 1.2 billion people spread over 54 countries with a combined GDP of US$3 trillion.
He also tried to sell specific flagship investment programmes to the gathered business community.
He recommended government’s flagship policies such as “One district one factory”, “one village one dam”, “planting for food and jobs” as well as investment opportunities in the areas of water supply, health, road and rail infrastructure, transport, industry, manufacturing, agriculture, oil and gas, mining of gold, bauxite and iron ore, renewable energy and ICT,
“We are hopeful that with solid private sector participation, we can develop a modern railway network with strong production centre linkages and the potential to connect us to our neighbours. Indeed, Ralf Blankenbach and Havellandische Eisenbahn of Germany are part of a European consortium engaged in the US$1.8 billion rehabilitation of the existing Eastern Railway line from Accra to Kumasi,” he added.
Meanwhile Energy Minister Dr Opoku Prempeh was at the same time wooing the international oil and gas industry to invest in Ghana, where the global oil and gas industry’s OTC Conference was taking place in Houston Texas in America.
Dr Opoku-Prempeh told international players in the global oil and gas industry about the government’s resolve to become a hub of refined petroleum products in the West African sub-region and beyond by the year 2030.
The hub, he said, involved the development of infrastructure such as refineries, port terminal facilities, storage facilities, petrochemical plants as well as Liquefied Natural Gas (LNG) terminals with a network of pipelines.
“In addition, it is within our plans to develop Compressed Natural Gas (CNG) facilities to serve as alternative sources of fuel for transportation”, he said last Monday when he formally opened the Ghana pavilion at the Offshore Technology Conference (OTC) currently ongoing in Houston, Taxes.
“CNG is a cheaper and cleaner fuel than the other fossil sources and its use is in line with our broader goal transition progressively from the carbon-intensive sources to low carbon sources of energy”, he told the packed crowd of investors who thronged the pavilion to know more about Ghana’s prospects in the petrochemical industry.
As the world looks towards cleaner energy for the future, he said the global advocacy for energy transition and cleaner energy “is not lost on us in Africa”.
He, however, noted that the fact remains that gas, especially Africa’s Liquefied Natural Gas (LNG), was the cleanest of fossil fuel and harnessing it to power generators could make a huge impact on the drive to accelerate universal coverage. According to him, without a clear and purposeful drive towards cheaper electricity through gas exploration, Ghana’s goal of universal coverage and industrialization would make little or no impact.
Ghana, and by extension the rest of oil producing Africa, must be allowed to grow her renewable mix at her own rate while using her natural resources to power her economy and eliminate energy poverty.
Dr Opoku-Prempeh said Ghana sought more, not less exploration, “which is why it takes this event particularly seriously and continues to push for inwards investment in the country’s oil and gas industry.”
The Energy Minister said in the upstream space, Ghana had a lot of untapped hydrocarbon resources, both offshore and onshore, which it hoped to sustainably explore and exploit through partnerships with private companies.
Dr Opoku-Prempeh said there were also farm-in opportunities in some of the existing licences for prospective investors to operate through existing petroleum agreements without having to go through block application and negotiation processes.
He said Ghana’s sedimentary basins were de-risked and highly prospective “and our petroleum industry is regulated by clear, predictable and suitable fiscal, legal and regulatory regimes. In addition to these, the congenial business atmosphere, the hospitality of the Ghanaian people and more importantly our relative political stability should make every investor consider Ghana as an investment destination.”
The Special Advisor and Partner to the McDan Group, Mr Benji Kwesi Tackie, said the group was aligned with government’s vision to support local companies and support the drive for foreign direct investment.
Present at the ceremony were Ghana’s Ambassador to the United States of America, Hajia Alima Mahama; Chief Executive Officer of the Ghana Investment Promotion Centre (GIPC), Mr Yofi Grant; Chief Executive Officer of Bulk Oil and Transportation (BOST), Mr Edwin Provencal; Chief Executive of the Petroleum Commission, Mr Egbert Faibille; the Executive Director of the American Chamber of Commerce (AMCHAM) Ghana, Mr Simon Madjie, among many others from the upstream and downstream petroleum sector.
There are no signs that the intensity of the international direct investment drive that has just commenced will slow down any time soon. President Akufo-Addo, will address international investors and businesses at Invest Africa’s annual Africa Debate from 14th-16th September) as part of government’s drive to diversify the Ghanaian economy and boost foreign direct investment (FDI). The President will be accompanied by the Ministers of Finance, Energy and Food and Agriculture at the dedicated Ghana Investment Forum on 14th September
In speaking directly with over 1000 global businesses and investors, the President and his Ministers aim to ensure that inbound investment aligns with their goals to create jobs and diversify the economy, highlighting opportunities across three key sectors: Agriculture, Energy and Financial Services.
Agriculture is an essential pillar of Ghana’s recovery and better tapping into returns across the agriculture value chain is a clear priority for the government as it looks to mobilize the private sector to invest in agro-processing through the One-District-One-Factory initiative and a recently enacted Public-Private-Partnership law. It is hoped that private financial backing for these initiatives will redress the imbalance which currently sees the country earn just about US$2 billion annual revenues from the US$130 billion a year global chocolate industry despite supplying nearly one fifth of the world’s cocoa.
Similar initiatives are underway in the energy sector where the expansion of renewables presents an untapped opportunity for investors. Already a net-exporter of energy to neighbouring Togo, Benin and Burkina Faso, the Minister of Energy Opoku Prempeh, hopes to secure buy-in to the Renewable Energy Master Plan which will see energy exports increase. The Ministry of Energy is looking to raise US$5.6 billion for renewable energy projects by 2030 with 80 percent of financing coming from the private sector.
Developing local financial services underpins efforts to create a healthy business environment. Ghana has had successes on the international bond market, raising US$3 billion in March this year. The Ministry of Finance now aims to develop local financial services, reducing dependency on foreign debt markets. A 170 million euros loan from the European Investment Bank has led to the creation of the Development Bank of Ghana while the Capital Market Master Plan outlines a blueprint to grow the domestic capital market. Ken Ofori-Atta, Minister of Finance, will take the opportunity of the Ghana Investment Forum to present how these reforms have improved financial options for businesses in Ghana and seek further international financial partnerships.
The immediate task for President Akufo-Addo’s administration will be to raise the FDI component of the over US$10 billion in private capital needed for the financing of the Ghana CARES programme. No specific target for the FDI component has been announced; indeed none has been announced for equity versus debt.
The start up capital for the Development Bank Ghana which has been secured already is a good start and the impending state institution will be able to mobilize a whole lot more over the more than two years still left for that medium term programme.
With the sheer intensity that the government has started applying to the task – with the President himself leading by example and GIPC literally outdoing itself – there is good reason for optimism that Ghana will indeed get the FDI it direly needs for its potentially transformational economic recovery and sustained growth plan.
