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Foreign investors plan to inject US$1.4bn
 
Posted on: 02-Jul-2013         Source: thebftonline.com
 
 
 
Foreign direct investors in Ghana could potentially re-invest some US$1.4billion in the economy, if favourable conditions prevail, a survey of the companies has shown.

A large majority of the firms said they are planning to invest more, despite around 40 percent indicating that their past performance fell short of expectations.

The survey was sponsored by the United Nations Industrial Development Organisation (UNIDO) and presented in Accra last week during the launch of the United Nations Conference on Trade and Development’s (UNCTAD) World Investment Report 2013.

The report said foreign direct investment (FDI) in Ghana rose by 3 percent to US$3.3billion in 2012, defying a general decline in the sub-region that saw FDI to oil-rich Nigeria decline by 21 percent, grossing US$47billion.

Foreign investors that were surveyed ranked political and economic stability, transparency of regulations, and local market conditions as the most important factors influencing their investments, said Frank Van Rompaey, UNIDO Representative in Ghana. They worried, however, about increasing raw material costs and deteriorating incentives, he added.

Parliament is considering new legislation, the revised Ghana Investment Promotion Council (GIPC) bill, to regulate FDI in the country; but aspects of the bill have been criticised for their propensity to slow down FDI -- which is currently concentrated in low-tech and low-skill sectors.

This type of FDI concentration results in a “lower share of skilled employees, lower wages and lower training expenditures,” said Mr. Van Rompaey.

India, Lebanon and China are the main sources of FDI in Ghana, the survey found, and the structure of the companies is dominated by small, young and entrepreneurial firms. Investors also prefer to invest in Greenfield projects and to wholly own their enterprises.

The new bill in Parliament however seeks to encourage joint-ventureships, as it reserves the rapidly expanding retail sector to joint ventures in which the foreign partner contributes a minimum capital of US$ million, up from US$300,000 in the old legislation.

An amendment proposed by a senior Member of Parliament to the bill also seeks to restrict the manufacture of furniture and wood products, as well as the provision of services in the mining and oil and gas industries, to locals. Analysts fear however that this is the wrong approach to building local capacity and expertise in the critical but nascent oil and gas industry, which has been fuelling Ghana’s economic growth since hydrocarbons production began in December 2010.

Though the mining and oil and gas industries account for a significant share of Ghana’s FDI, there is a gradual increase in consumer-oriented manufacturing businesses and services, UNCTAD’s report noted.

This trend is also apparent across sub-Saharan Africa, the report said, reflecting the growing purchasing power of the continent’s emerging middle-class.

“Investors in Africa are becoming increasingly aware of the positive demographic outlook for the continent. The roughly-one-billion population is predicted to swell by a quarter in the next 10 years and more than double by 2050,” the report stated.

“The share of the population that is 25 years or younger currently stands at about 60 percent, and is projected to remain at that level over the next few decades. These features, coupled with a positive economic outlook, raise the prospect of an increasingly dynamic African consumer market,” it added.