Ghana’s attractive investment climate

Ghana

George Arhin, partner at PwC Ghana, talks to The Energy Year about what makes Ghana a comparatively attractive investment destination in the region and trends in the local demand for consultancy services. PwC offers assurance, business advisory and taxation services to businesses across various sectors globally.

How do you assess the resilience of the domestic energy value chain as we emerge from the pandemic?
If this pandemic had happened five years ago, we would have struggled because we didn’t have the required skills to navigate it. We were dependent on importing knowledge and flying experts in, and the support service sector relied heavily on foreigners. However, we’ve built a base of skills and resources over time, and that is us today. It’s also cheaper to use locals compared to foreigners in the long term to provide certain key services.
Beyond that, the recent findings are contributing to our ability to build the industry and move forward. We have made more discoveries and built in-house capacity and so we are not too dependent on importation of expertise in certain areas. While we still work with expats who are still involved, the pandemic has reduced the number of foreigners in the country and empowered the local workforce.

How does Ghana measure up to its neighbours in terms of oil and gas’ cost of production and margins?
Ghana is cheaper in terms of cost, and has higher margins than neighbouring countries. In addition, it’s more stable and businesses thrive easily here.
To offer a regional comparison, Nigeria is more expensive and has higher overhead costs. It’s relatively more expensive to do business in Nigeria due to a number of factors, especially on the operational side, such as the security situation creating the need to constantly monitor wells and pipelines.

How difficult is it for domestic companies to get financing?
It is difficult. Some companies are having challenges securing funding because the banks want near zero risk and the cost of borrowing is relatively high. Sometimes the potential lender must have a binding revenue-generating contract in place with a “big” organisation and if you are lucky, then you can secure funding. However, before you get that contract you must demonstrate that you can do the work based on prior experience and current capacity. So you are caught in a vicious cycle. The banks want you to grow before they lend you money. Nigerian businesses do not face such challenges to a certain degree as they have a wider pool to raise funds from.

What are the main queries new entrants have about this market?
They want to know about the tax regime and regulatory regime in Ghana, as well as about how big and reliable the banks are and what kind of requirements they have for financing. Political risk is also key. Local content laws and transfer pricing regulations are important as well because these companies after incorporation often transact with and leverage the resources of their related entities abroad.

How did Covid-19 affect PwC’s working relationship with the oil and gas industry?
We have set up a lot of systems that help us work with our clients remotely. Through our Connect collaboration platform, we can request and receive data and documents securely from our client. The platform also enables our clients to see the status of information requested and progress of the assignment in real time. It has enhanced our service delivery, and our productivity has gone up.
In terms of performance we are doing better than before the pandemic. We were already structured to work remotely; every staff member had a laptop and a modem. Our systems are also cloud-based. Thanks to this, we’ve been able to offer help continuously.

How is PwC helping oil and gas companies to enhance cost optimisation?
A lot of contracts were held back because of the pandemic, and now that the government has begun to ease restrictions people have to go back to work. There are a number of regulatory requirements in the oil and gas industry, such as health and safety training requirements and other certifications that need to be in place before people can restart work.
Leveraging our technology-enabled solutions, we are able to deliver trainings remotely, saving our clients travelling cost and time. We have also been involved in a number of cost optimisation reviews focusing on the supply value chain among other business processes for our clients.

What upcoming trends do you foresee in demand for consultancy services?
A growing trend has to do with ESG: environment, social and governance. It’s a hot topic globally and discussed in many boardrooms today. Companies are expected to report on their ESG impacts. However, many companies don’t know how to gather the data to report on this because it’s new. We are supporting them with systems and training to enable them to generate appropriate data to disclose to their stakeholders.
We’re also helping a lot of companies digitalise and operate effectively in the new normal. Data analytics and cyber security are some of the areas we are supporting our clients in.
Inside PwC, digital upskilling of our people is a key priority and we have invested heavily in this area over the years.

What are Ghana’s most pressing challenges that could diminish investor interest?
One big challenge is changes in agreements signed by previous administrations when there is a change in government. We’ve seen this in the case of take-or-pay clauses in certain power purchase agreements with independent power producers. Overall, the biggest concern investors have is what will change as a result of future changes in government.

Where does the country’s attractiveness lie in the eyes of international investors?
Politically, Ghana is a very stable country. It’s one of the most peaceful in the world. It’s a democratic country and is very friendly for business. The location in the region is useful for most companies. Many have their sub-regional head offices here, and as long as you pay the relevant taxes, it’s easy to repatriate. Also, the workforce in the industry is mature – available and reliable. You don’t struggle to find people who can work.
Local content is always a challenge. You need a local partner to set up, but it’s not mandatory that they bring the required funds; it’s just to show you have a local person to work with. There are many international banks in Ghana, so if you don’t want to use the local banks, the international banks are available. The tax regimes are quite strict, but transparent, so if you do the right thing, you’ll have no problems.

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