A newly-published research paper analyses Ghana’s strategy in attracting FDI and explores opportunities for investment from Gulf Cooperation Council (GCC) countries

Since the global financial crisis in 2008 and its associated food security challenges, the scramble for Africa has intensified significantly. Over the years, Ghana, has seen a policy shift from Neo-Marxist to a more Neo-Liberal capitalist stance which has liberalised its business environment and attracted greater Foreign Direct Investment (FDI) flows e.g. from investors in Gulf Cooperation Council (GCC) countries keen to exploit Ghana’s lucrative natural resources to mitigate against food insecurity.

Ghana’s availability of fertile land, raw materials, market potential, cheap labour and with its reputation as a haven of peace and political stability, provides enormous opportunities for trade and investment from GCC countries such as Qatar. Yet, with Ghana being elevated to a Lower Middle Income (LMI) country, there has been a marked decline in access to external loans which has placed greater emphasis on the need to generate greater FDI flows.

Ghana’s dependency and over-reliance on primary export commodities – gold, cocoa, timber and more recently oil – has created economic uncertainty due to the volatility of global commodity prices which cause other exports to become uncompetitive creating a distortion in the growth of services, transport, and construction whilst, at the same time, discouraging manufacturing and agriculture.

A new published research paper and policy brief by Susan Adwoa Mensah, ‘Generating Investment in Ghana: Exploring Opportunities from Gulf Cooperation Council (GCC) countries’, analyses Ghana’s strategy in attracting FDI, studying the trends and sectoral distribution of FDIs, the investment climate, policies, incentives as well as legal and regulatory frameworks and explores the issue of Dutch Disease phenomenon. ‘Dutch Disease’ - also referred to as the ‘Paradox of Plenty’ or the ‘Resource Curse’ has become a concern for Ghana’s government which seeks to mitigate against the phenomenon by offering incentives to foreign investors to encourage the promotion of Non-Traditional Exports (NTEs) to diversify Ghana’s economy and create greater linkages, local content and value addition and generate local jobs.

The paper highlights current challenges in ‘Doing Business in Ghana’s and the ineffectiveness of Government agencies such as Ghana Investment Promotion Council (GIPC), high interest rates, bureaucratic red tape, lack of pro-activity on the part of civil servants and CSO concerns about the rise in the cost of living, lack of accountability and transparency over oil and gas revenues and Ghana’s persistent power shortage, the ‘dumsor’ energy crisis. Despite these challenges, the paper suggests that new windows of opportunities have opened up for GCC countries to invest in the country in terms of Liquefied Natural Gas (LNG), capital resources, technical know-how and expertise to address Ghana’s power crisis.

Ghana’s citizens now hope that the new NPP administration will place Ghana’s economic woes at the top of the agenda to stem the rising cost of living and high utility bills.

Ghana’s recent Presidential elections saw Ghanaians voting en masse for change and to oust the incumbent President and usher in the New Patriotic Party’s (NPP) and President-elect, Nana Addo Dankwah Akufo-Addo. Ghana’s citizens now hope that the new NPP administration will place Ghana’s economic woes at the top of the agenda to stem the rising cost of living and high utility bills. The paper recommends that the Government of Ghana ensures good governance to adequately manage Ghana’s Heritage and Stabilization Funds for future generations and to allow for more equitable, collective and inclusive efforts involving multiple stakeholders such as Civil Society Organisations (CSOs) and Think Tanks.

The paper also recommends the need for clear regulations on judicial and ethical standards and robust enforcement mechanisms for the transparent management of large-scale foreign investment projects activities so as to mitigate against human rights violations and abuses, environmental damage and degradation to ensure that vulnerable members of the community are not at put at risk of being displaced for new investment projects. In doing so, Ghana could become a more conducive environment for FDI flows, specifically in NTEs promoting the diversified non-oil sectors of Ghana’s economy shielding it from oil revenue fluctuations and mitigating against rising exchange rates and preventing the Dutch Disease phenomenon.

This publication forms part of a series of case studies on natural resource governance in resource-rich African countries. The author, Susan Adwoa Mensah, is an international development consultant and project manager with over 10 years of expertise working on social development and social change programmes in Africa. Susan is currently the Director of Operations & Programmes at the African Centre for Natural Resource Governance (ACNRG). ACNRG and its parent organisation, the Institute for Natural Resource Sustainability and Development (INRSD), is a do-think-tank on natural resources and sustainable development combining research and policy dialogue with the strategic aim of supporting an inclusive, sustainable and a transformative approach to natural resources governance and development. The Institute is strategically aligned with the United Nations Agenda 2030, UN Sustainable Development Goals (SDGs), the Paris Declaration on Climate Change, the African Union (AU) and United Nations Economic Commission for Africa (UNECA) supported by the African Mining Vision (AMV) and Agenda 2063.

Susan Adwoa Mensah: For centuries, Africa has traditionally traded with the West and also with emerging powers such as the BRICS.  However, bilateral trade relations with the Middle East and the role of GCC countries such as Qatar, has not received enough attention.  This policy brief forms part of a wider funded research initiative developed by the University of Ottawa’s Centre on Governance (CoE) and Qatar Foundation which seeks to promote natural resources governance and transparency towards more equitable management of Africa’s resources to encourage economic growth and local job creation.

This research project aims to complement Qatar’s recently affirmed commitment to “development- centred globalization,” made at the UNCTAD conference in 2012 - a commitment which affirms and complements Qatar's National Vision 2030. In short, this research initiative aims to help guide Qatar towards diversification of its economic base from over reliance on oil/gas towards other lucrative natural resources, including minerals, land and water resources found in abundance in Ghana and in other resource-rich countries in Sub-Saharan Africa.

Susan Adwoa Mensah: Some of the key challenges to natural resource governance in Ghana include lack of good governance, accountability, transparency and equitable and inclusive management of the country’s natural resource wealth.  There have been growing tensions from local communities, CSOs and think tanks about the way in which natural resources are governed and managed exclusively by Government agencies and investors alone.

In order to address these key challenges, there is a need for greater emphasis on multiple stakeholder dialogue and collaboration which would include local communities, CSOs, Government agencies, mining companies and the media to bring all parties to the negotiating table to make decisions about the country’s revenue governance and management. CSOs, think tanks, the media and local communities can all play an active role in ensuring Government accountability in the effective management and governance of petroleum revenue and natural resources as well as encouraging State compliance with African Mining Vision's (AMV) principles and with ethical human rights and environmental standards.

For example, CSOs such as Friends of the Earth - Ghana can play an important role in challenging the Government and mining companies on the equitable distribution of mining revenue to ensure that local communities are included in the supply value chain of mining operations and involved in the implementation of local content policies which mining companies should incorporate into their Corporate Social Responsibility practices.

Susan Adwoa Mensah: Ghana’s dependency and over-reliance on primary export commodities such as gold, cocoa, timber and more recently oil and gas continues to create economic uncertainty due to the volatility of global commodity prices.  This means that other exports are at risk of becoming uncompetitive resulting in the “Dutch Disease” phenomenon and thereby creating a distortion in the growth of services, transport, and construction whilst, at the same time, discouraging manufacturing and agriculture.

As Ghana is blessed with abundant and fertile land, in order to mitigate against Dutch Disease, the new administration needs to encourage the promotion of NTEs to diversify the economy and create greater linkages and an increase in local content and value addition. The former NDC administration attempted to create a more conducive environment for investment into Ghana by offering tax free incentives for foreign investors, such as the Qataris, providing opportunities for them to lease land e.g. to support small-scale farmers in the North of Ghana and share part of the produced crops with the domestic market.

Although large-scale land appropriation in Kenya and Tanzania might have had positive benefits for rural agrarian transformation, the benefits of this investment has not always translated into tangible outputs or positive outcomes for local communities.

Therefore, my number one recommendation for the new administration would be to learn lessons and best practices from these countries to ensure that regulatory frameworks for foreign land deals adhere to socially and environmentally ethical policy guidelines on land ownership which are grounded on social inclusivity, equality and transparency.  Prioritising the rights of local communities would help avoid social tensions and civil strife thereby mitigating against placing local communities at risk of being displaced for new investment projects.