Where to Invest in Africa 2021: A focus on Ghana

Ghana in sixth place for investment-attractiveness in Africa

Operating environment, fiscal scores and development plans – key to investment-attractiveness in a Covid-19 world.

RMB’s Where to Invest in Africa 2021 ranks Ghana in sixth place this year across the continent. Ghana entered the current crisis on a relatively stronger footing than its African peers. The economy managed to avoid a recession in 2020 and registered growth of 0.4% — outperforming the SSA economies, which contracted by 3.2% on average. Based on the rankings, Ghana has further outperformed other west African countries in terms of its investment-attractiveness, emerging as the top destination, followed by Côte d’Ivoire, Senegal and Nigeria.

Structurally, Ghana’s economy has seen major shifts over the past few years, positioning it for significant growth going forward. This is supported not only by primary-sector industries like oil and gold but accelerated development in the tertiary sector. We see the construction, agriculture, and services sector as the main catalysts for strong 4.2% average growth between 2022 and 2023.

This year, the economy has shown a steady recovery, with the GDP print in 2Q21 at 3.9%, supported by performance in both the secondary and tertiary industries. Over the next few years, oil production output will pick up in the near term, supported by higher oil prices that should encourage further oil exploration in Ghana. There are similar expectations for gold production, which is further supported by government efforts to curb illegal mining activity, thereby promoting the formal sector.

According to the author, RMB Africa Economist Daniel Kavishe, this year’s report assesses the extent of the pandemic’s impact by sketching the landscape of the continent pre-COVID-19, and then painting a picture of both its actual and potential outcomes through and post pandemic. “We created a new set of rankings that incorporated some of the unavoidable COVID-19-induced challenges, of which the operating environment score was one.”

The report also included an appraisal of governments’ ability to support their various economies during such periods. As such, a fiscal score was also part of the methodology. This, says Kavishe, was essential because “fiscal scores are important indicators of how governments respond to COVID-19.” For Ghana, the next few years will centre on government’s ability to consolidate fiscal spending over the next few years, undoubtedly necessary to alleviate the country’s debt burden.

Overall, the report further explored key themes emanating from Africa’s developmental aspirations. “Of these, three are central to fighting the pandemic and resuscitating economic conditions,” contends Kavishe. “They are government intervention, a focus on our triple-threat sectors, and healthcare.”

In this video clip Daniel Kavishe, RMB Africa Economist and author of the Where to Invest in Africa 2021 report, takes a closer look at the extent of the pandemic’s impact and other factors affecting Ghana’s investment-attractiveness ranking.

Transcript

Country number six on our rankings, in our 'Where to invest in Africa 2021' is Ghana.

During the pandemic and during the course of this year, there's been quite a bit of interest around the Ghanaian economy, not only because they expected to bounce back from this crisis with having very high growth rates, anticipated to be over 5%, the latter part of our forecast horizon.

But more importantly, because they have managed to enter again this crisis with a strong fiscal position. Yes, they have managed to absorb debt over the past few years, supported not only by multilateral and bilateral international payments and lending.

It is an economy that has over time given a strong testament to the ability of converting their borrowings into actual economic growth. So we think it'll be an economy to watch over the next few years.

Top sectors will not only see the improvement across the export earnings, but we further think that government will take a very dedicated approach in boosting infrastructure development across the country.

Notwithstanding, politically they are on a good footing. We saw rather smooth transition of the elections towards the end of 2020 for the testament to the ability of this economy to both have a strong political backing, economic one, but then additionally, to be able to prove that in terms of operating environment, it is quite easy for businesses to operate in Ghana.