Ghana’s investment visionDecember 20, 2021
R. Yofi Grant, CEO of the Ghana Investment Promotion Centre (GIPC), talks to The Energy Year about what Ghana needs to do to attract investment and the resiliency of the country’s economy throughout the Covid-19 pandemic. The GIPC, being the lead investment promotion agency for Ghana, was established in the 1960s to regulate and promote investments in Ghana.
What does Ghana need to do to attract investment in the energy industry?
If we want to industrialise, we must ensure we can power industrial sectors. There have been several initiatives, but we have structural problems. We signed several power purchase agreements on a take-or-pay basis, which is not sustainable.
In 2017 and 2018, the government had to pay almost USD 500 million each year for energy not consumed. In 2019, the government paid USD 1 billion. This amount could have been channelled towards our country’s development.
We cannot keep paying because someone signed the wrong contract. The government put a hold on those contracts and decided to renegotiate. For many investors it was a blow because they were happy with the take-or-pay contract, but it did not make sense. We had a supply of close to 5 GW (4,990 MW) and the total peak consumption was 2.7 GW (2,612.6 MW).
Going forward, if we embark on an industrial growth pathway, we must have enough energy at the right price. Also, if we advocate for sustainable development goals, we should raise renewable energy in our power mix to at least 10% in the short term and 35% in the long term, as in the African Union’s Agenda 2063. The government’s energy agenda should consolidate, clean out and show that we are investing more in distribution. A major challenge is that the distribution network is outdated.
How resilient is Ghana’s economy?
Ghana has performed well. Prior to 2020 we had a robust economy that was one of the fastest growing in the world. Between 2017 and 2019, we had an average of 7% GDP growth per year. We posted positive GDP growth in 2020 of 0.4%. While it was a far cry from the predicted 6.8%, compared with our peers our recovery has been much more rapid. Inflation has dropped to single digits and is still dropping. It was predicted FDI would fall by 42%, but at the end of 2020 we were close to 140% above what we did in 2019. We ended 2020 with a total FDI of USD 2.65 billion.
The Ghanaian cedi is more stable than it was in the past. It was one of the best-performing currencies against the dollar in Q1 2021. The challenge is that we need to spend to build our infrastructure. The government has opened the doors for private-sector participation in infrastructure through public-private partnerships. There is a new public-private partnership law enabling partnerships in infrastructure development.
Will the African Continental Free Trade Area (AfCFTA) increase the volume of investments in the continent?
The AfCFTA will increase investments, especially in Ghana because we’ve had a transformative impetus for redirecting our economy. In 2017, the president went on a serious crusade for Ghana and for Africa, saying that we have the people, resources and energy and that we should convert our resources before exporting. We are a continent that is rich in resources, but we export them. They are converted offshore, and we import the finished goods.
His view is that we should move towards a Ghana without aid, meaning not taking handouts and gifts but rather using our resources to grow from partnerships and FDI. His drive was an important signal for us. The AfCFTA will create a huge market. By 2050 it will contain a quarter of the world’s population and be bigger than China or India. We need to create a manufacturing economy, which is what Ghana is doing through policy.
What policies are in place to attract investment in renewables?
The government policy gives tax exemptions for renewable energy investments. Within the REMP [Renewable Energy Master Plan] and as an investor, certain types of relief are prescribed. REMP is a USD 5.6-billion investment plan in which every year we expect USD 460 million to be invested in renewables.
As for connecting energy sources to consumers, the aim is to have a decentralised distribution system. There will be around 1,000 off-grid communities and plants. It is a systematic means of tax exemptions for competence and materials used to make renewable energy and exemptions of import duties for renewable plants and plant parts for renewable energy.
How has Ghana faced the hurdles put in place by the Covid-19 pandemic?
We are focused on the Ghana CARES programme. This initiative ensured survival and stability from July 2020 to December 2020. The government went out and did direct interventions, gave small companies support, brought down interest rates, deferred taxes and gave cooked food to the homeless. Their efforts strengthened the economy.
The programme also focused on Covid-19 alleviation and the revitalisation of enterprises. The revitalisation phase began in January 2021; it aims to regrow industries that were affected by the pandemic to rapidly return our economy to where it was before the crisis. The entire programme is valued at GHS 100 billion [USD 16.4 billion], of which the government brings 30%, with the remainder coming from the private sector supported through FDI and led by the Ghana Investment Promotion Centre and others such as public-private partnerships (PPPs), strategic partnerships, venture capital and private equity funds.
What government policies were put in place to regrow the economy?
We started with a free senior high school education policy to ensure we train young people to have a capable workforce. The One District, One Factory policy ensures we have manufacturing enterprises all around the country. We also implemented a new policy for filling jobs, which will translate to better agriculture extension, better policies for fertilising and assistance for small farmers. We have a One Village, One Dam policy to make sure farming areas have what they need for irrigation so they can plant all year and not have to rely on rainfall.
The specific strategic areas where we want to attract investors include energy, industrialisation, agro-processing technology, hospitality and infrastructure through public-private partnerships.