Ghana’s remarkable resilienceJuly 13, 2020
R. Yofi Grant, CEO of Ghana Investment Promotion Centre (GIPC), talks to The Energy Year about Ghana’s resilience for coping with current challenges and how the government can ensure the market remains attractive for FDI. The government established the GIPC Act, 2013 (Act 865) to regulate and promote investment in Ghana.
What sort of resilience does Ghana have for coping with the current challenges?
The pandemic is a truly global force majeure incident and it has affected almost every corner of the world. Its effects are far reaching.
Ghana started the lockdown early because we thought that by doing so, we could track, trace, test and treat the virus. This enabled us to control the spread. Even after three months, we haven’t seen the large number of cases you see in Europe or in America. So, we continue to adopt a trace, track and test strategy where there is a lot of contact tracing to find out who met who and then treat.
There are major disruptions in the global economy, especially in global supply chains. It started off in China, and we all know the impact that the Chinese manufacturing industry has on the global supply chain. Subsequently, with countries closing their borders, there has been a major trade disruption.
The Ghanaian economy has, however, managed to continue to “sail” even in the face of these disruptions and other impacts felt including in the capacity of our health system and infrastructure for the fight against the pandemic and the socioeconomic effect on livelihoods.
Measures have been put in place to prevent a total halt of the economy. These include the mandatory order to observe all Covid-19 preventive protocols, employers adopting flexible staff rotation systems and work from home policies to ensure business continuity and the government’s introduction of the Covid-19 Alleviation Program (CAP) to help sustain the SMEs.
The government realised that it needed to immediately manufacture some of the required PPE [personal protective equipment]. That led to the beverage and pharmaceutical industries beginning to manufacture basic drugs, alcohol and sanitisers, based on licences. The textile industry started making masks and coveralls to help those fighting on the frontline against Covid-19.
What opportunities are there now to enhance local content while maintaining the country’s attractiveness for FDI?
The government interventions have been spot-on and have limited the disruptions to the economy. We started the lockdown at the right time, then eased it to let people live their lives and go back to the market. We, as GIPC, are continuously engaging. We have had many conferences and webinars reassuring investors that the opportunity is still there.
According to a World Bank report, due to the impact of Covid-19, growth in sub-Saharan Africa is projected to decline from 2019’s 2.4% to between -2.1% and -5.1% in 2020 depending on measures taken. This is the region’s first recession in 25 years. However, Ghana is one of the very few countries where there will be some growth even though there has been a massive impact on the economy. There is the waiver of VAT on stocks of equipment and goods for fighting Covid-19 to increase patronage and interest.
Year-end GDP projection was 6.8-6.9% and the post-Covid-19 projection for 2020 has been brought down to 1.5-2%, whereas in many countries we see negative growth projected.
The challenge is how we set things back into motion and make sure we recover what we lost. Thankfully, we are still a resource-rich country and have very attractive investment policies. We are continuously engaging in reforms to make sure that post-Covid-19 we stay attractive.
How do you assess the government’s emergency response to help the economy?
The government’s emergency response to this pandemic has been to firstly save lives and secondly to stabilise the economy and this has turned out well and received the WHO’s commendation. The government has provided free water for households in the months of April, May and June and free electricity for those they consider to be lifeline consumers – those who are at the bottom end of the consumption curve – as well as a 50% discount for all other users for those three months. Additionally, the government waived personal income tax for all the frontline health workers and made a 50% addition to their basic salary for four months.
The government has also put in place a GHC 600-million [USD 103.5-million] stimulus package, which comes in the form of a soft loan for small and medium-sized enterprises. In addition, it has implemented an ambitious health infrastructure programme, which includes the construction of 88 district hospitals, six regional hospitals and one rehab centre. The private sector will also build one 100-bed emergency/serious disease hospital. This should be completed by the end of June 2020.
The Bank of Ghana has announced an amount of GHC 10 billion [USD 1.72 billion] as a Covid-19 Relief Bond. An amount of GHC 5.5 billion [USD 948 million] was released as the first tranche of the Covid-19 Relief Bond on May 15, 2020. Additionally, the World Bank gave Ghana GHC 500 million [USD 86.2 million] from the development policy instrument.
Apart from this, some of the financing measures identified by the government include the IMF Rapid Credit Facility for USD 1 billion, World Bank Development Policy Operation (DPO) for USD 350 million, Stabilization Fund for USD 219 [million] and other funds to be sourced from both domestic and external markets to reduce the residual financing gap.
To what extent has Ghana leveraged digitalisation to mitigate the impact of the crisis?
There are significant opportunities for doing this. Without being in the office at the same time, we can still effectively create an impact using technology. The telecom service companies were giving extra bandwidth for free to enable them to support people and business continuity. For example, when schools closed, they moved to an online education platform, resulting in a heavy use of bandwidth and data.
We have also seen an escalation in e-commerce, creating another supply line business, which is good for the economy as courier companies have jobs to do. All in all, there has been a certain level of preparedness and ability to leverage technology. Additionally, technology has been used for contact tracing. I think the future can only be brighter, as technology opens significant opportunities.
Considerable progress has been made in financial inclusion through a three-pronged digital agenda resting on a national biometric ID, a digital address system and mobile money interoperability. Ghana is the first country in Africa to link mobile wallets to bank accounts, allowing anyone who either has a mobile money wallet or a bank account to receive payments from government bank accounts, and to pay government taxes and fees for services, such as passport and driving licence renewal. Having these in place has helped in the reduction of human interactivity and hence reduced the risk of infection.
Where do you see Ghana’s role in the global oil and gas industry if prices remain depressed?
The low prices represent a serious threat to almost every country in the supply business. But for major consumers and offtakers, this is a good sign, as it means that the cost of operations for corporations in the private sector will go down.
For Ghana, the strategy is to use our gas reserves to support the energy sector for a cheaper and more reliable source of energy. It is a double-edged sword. Since we are an oil producer, there is a severe disruption in our revenues, and a 53% drop in oil revenues is projected for 2020.
Ghana will continue to increase its competitiveness, as we have engaged in significant reforms to make it more attractive to enter the country and do business here. We view FDI not as an act, but as a relationship. We constantly talk to our investors and we’re currently conducting a survey to assess the impact of Covid-19 on foreign direct investors doing business in the country, knowing that there has been a significant drying up of available FDI because markets lost a value of USD 10 trillion globally.
It is important to keep the investors who are here happy and make sure their businesses survive, while also highlighting the opportunities going forward for them to expand and diversify. For Ghana, it is not just the local market but also the continental free trade market which is going to be huge. What Covid-19 has taught us is that we should be looking inwards – at whether we can do import substitution and manufacture what we need on the continent.
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