It was a case of third time lucky for Nana Akufo-Addo, leader of the official opposition (New Patriotic Party) this past weekend as he claimed victory in Ghana’s general elections against President John Dramini Mahama (National Democratic Congress). Although most political commentators were reluctant to predict a likely winner beforehand, it seems that Afuko-Addo’s campaign made a greater impact on the Ghanaian people, winning a decisive 54.2% of the vote, while Mahama only garnered 44%.
As befits one of Africa’s most lauded democracies, the elections in Ghana were mainly smooth, transparent and peaceful, even in the face of delays caused by the Electoral Commission’s (EC) electronic results transmission system being compromised. This delay was an ultimate win for free and fair elections, as the EC committed to releasing results only when it received physical documents from the voting centres, emphasising the importance of accuracy over speed. The EC tweeted, "The duty we owe the people of Ghana is not to declare results quickly but to declare accurate results that reflect the will of the people.”
Democratic stability + strong governance = a good investment destination
Ghana has been a trailblazer for democracy in West Africa, having voted in its first multi-party government in 1992. Since then, there have been five free and fair elections and two peaceful transfers of power in the country, an exceptional achievement for an African nation. Democracy seems to have served Ghana’s people well – the country is ranked 7th by the Mo Ibrahim Index of African Governance for 2016, which assesses the performance of African countries by measuring the extent to which they meet the political, social and economic expectations of their citizens.
Ghana’s impressive list of democratic credentials also extends to its judiciary and media. The 2016 World Press Freedom Index ranks Ghana 26th globally out of 180 countries and 2nd in Africa. In addition, the judiciary has proven to be mostly independent and government has speedily addressed any weaknesses identified in the system.
This kind of stability, independence and transparency has gone a long way towards making Ghana a good investment destination for global companies interested in West Africa. Its large and inexpensive labour force, tax incentives and sizable agricultural base has attracted much foreign investment. It is not surprising then, that Ghana’s GDP growth rate averaged 7.72 percent from 2000 to 2013.
The discovery of oil in 2007 in the form of the impressive Jubilee Oil Field, just off the coast of Ghana, was a definite accelerant for global interest in this West African country. Other industries, such as real estate, also benefited greatly from this discovery.
Ghana’s bright light fades
However, Ghana’s outlook dimmed somewhat in 2014 as commodity prices fell, which affected more than just Ghana’s oil and gold exports. There was high inflation, rising petrol prices, increasing public debt levels and regular power cuts – so much so that President John Mahama was assigned the nickname ‘Mr Power Cut’. The Ghanaian government even had to ask for a $918 million bailout from the International Monetary Fund in early 2015.
In the face of this economic decline, foreign direct investment receded. Ghana’s onerous bureaucracy, costly financial services, underdeveloped infrastructure and weak productivity were now a more prominent barrier to foreign investment. The country’s economic growth slowed to 4.0% in 2014, and then further to 3.7% in 2015. Unsurprisingly, then, foreign direct investments into Ghana declined by 31% between 2014 and 2015 – down from 3.4 billion dollars to 2.3 billion dollars – according to the Ghana Investment Promotion Centre (GIPC). This is in stark contrast to Ghana’s status in 2013 as the fourth largest recipient of foreign direct investment in sub-Saharan Africa.
The tough economic climate has been the backdrop to Ghana’s elections, with all of the candidates focusing on eradication of poverty and economic development. The two primary contenders were both keen to turn the plight of their country around, albeit with different focus areas. President Mahama promised to launch more infrastructure projects in order to create jobs, while Akufo-Addo believed that Ghana’s woes can be best addressed with his "one district, one factory" policy that focuses more on accelerating Ghana’s industrial development and easing the economy’s reliance on raw materials. Both scenarios needed foreign investment to succeed, albeit in different industries.
Jumpstarting Ghana’s economy again
Even though the past three years have been difficult for this West African nation, 2016 has shown that their economic fortunes may be turning once again. The World Bank’s 2017 Doing Business classification ranked Ghana 108 out of 190 countries for ease of doing business, an improvement on the previous year’s score of 111. Ghana was also ranked the best place for doing business in West Africa, ahead of Nigeria and Cote d’Ivoire. GDP growth projections are projected to be 5.8% for 2016 and 8.7% for next year.
According to the Ghana Investment Promotion Centre (GIPC), foreign direct investments during the second quarter of this year increased by over 400% compared with the corresponding quarter of 2015. In addition, 12 more projects were recorded in Q2 2016 compared to Q1 2016 and over 4,000 jobs are expected to be created by these projects. Of the 51 new projects registered during Q2 2016 (worth around $1.45 billion dollars in total), 40 were wholly foreign-owned companies, while 11 were joint ventures with Ghanaians. The country seems to currently be most favoured by China as an investment destination, followed by India, the UK and the US. In addition, in March 2016, four agreements were signed between Ghana and Turkey, in order to promote foreign direct investment from the European nation.
The result is…
Ghana’s new president will played a prominent role in reaffirming the country’s proud democratic heritage over the past 24 years, and already seems committed to its continued economic development. He has invested over two decades, and three presidential election campaigns, into devising strategies to improve the lives of Ghanaians, and he will now have an opportunity to put those plans into action.
So although Nana Afuko-Addo’s appointment as Ghana’s new president will usher in a changing of the guard, it is unlikely that he will do anything to rock the boat when it comes to foreign direct investment into the country. His proposed focus areas for economic upliftment may be different to those of outgoing President John Mahama, but his “one district, one factory” plans for Ghana will also need foreign investment in order to come to full fruition. President Afuko-Addo will want to continue the positive investment path that Ghana is currently on, and he appears committed to maintaining his country’s stable democracy to create a conducive climate for doing business. Will he successfully achieve where others have failed? Only time will tell.
