In 2023, Ghana recorded one of its lowest levels of foreign direct investment (FDI) in recent years, attracting just US$649.58 million—a significant 55 percent drop from the previous year’s US$1.47 billion, according to data from the Ghana Investment Promotion Center (GIPC). For a country with numerous factors that make it an attractive investment destination, particularly in sectors such as agribusiness and industry, the inability to draw sufficient investment raises serious concerns.
To attract FDI, a country must meet basic criteria, including political stability, economic resilience, developed infrastructure, skilled labor, and a fair judicial and legislative system. While Ghana meets most of these prerequisites, the challenge lies in the country’s failure to attract the required investment levels, especially in key sectors.
Several issues have been identified as contributing to Ghana’s difficulty in securing FDIs. High taxes and levies, depreciation of the local currency, delayed payments, weak economic fundamentals, high electricity costs, limited access to credit, and inconsistent power supply are some of the major barriers. Additionally, conflicts of interest, such as when the government acts as both a regulator and a shareholder in semi-public companies, further deter private sector confidence.
As a result of these challenges, some global companies have relocated their operations to neighboring countries, which could severely affect Ghana’s potential to become a regional hub for investment. Given its strategic location in West Africa, Ghana has the potential to serve as a center for aviation, trade, and logistics. For instance, the country’s Tema Port is a valuable asset for international trade. However, issues like unresolved conflicts between private companies and public entities, particularly in the telecommunications sector, threaten the country’s ability to fully realize its potential.
Another key factor affecting Ghana’s investment appeal is its current economic situation, which led the country to seek a bailout from the International Monetary Fund (IMF). The IMF’s approval of Ghana’s Extended Credit Facility in May 2023 has helped stabilize the economy, with positive outcomes such as a more stable currency, a significant drop in inflation from 53.6 percent in January 2023 to 20 percent by the end of the year, and improvements in the Ghana Stock Exchange. These achievements have contributed to renewed investor confidence, with the GIPC reporting an increase in monthly FDI from US$44.79 million in the first half of 2023 to US$63.47 million in the second half, following the IMF deal announcement.
However, challenges remain, particularly regarding the exchange rate regime. Investors must be assured that after making profits, their funds will not lose value when repatriated. Political stability alone is not enough; reliable and affordable electricity is crucial for industries to thrive. While Ghana has made progress in improving its ICT infrastructure and reducing the cost of doing business through digitization, these efforts must be complemented by addressing the country’s persistent infrastructure deficits and high energy costs.
In recent years, Ghana has made significant strides in improving the ease of doing business. Digitization of government processes, streamlining of business registration, and the enforcement of policies that create a level playing field have contributed to a more business-friendly environment. However, hyperinflation, currency devaluation, and limited infrastructure continue to pose challenges for industry development. These issues are prevalent across multiple sectors, including telecommunications, energy, and manufacturing, and have contributed to declining foreign investments.
Despite these challenges, policy reforms and enforcement provide hope for creating a more enabling business environment. When the government refines and implements policies that resolve disputes fairly, provide tax incentives, and offer favorable fiscal policies, Ghana can position itself as a top investment destination in Africa. However, unresolved or poorly handled disputes can create investor panic, deterring future investment and threatening economic growth.
Industry regulators in Ghana are working to align with global best practices to improve the ease of doing business, but more progress is needed. Public-private partnerships and ongoing dialogue will be essential to strengthen the investment environment and address the remaining challenges.
Africa is on the path to tremendous economic advancement, and Ghana, with one of the highest Ease of Doing Business indices in Africa, remains an attractive investment destination. To maintain and enhance this position, it is essential that both the public and private sectors work together to adopt best practices, ensuring that the country remains appealing to investors and that its industries can thrive on the global stage.
