Final week in Tokyo, in the course of the TICAD 2025 Convention, His Excellency the President introduced that Ghana is about to abolish the minimal capital requirement for overseas traders who need to enter our market. The proposed modifications might be mirrored within the new GIPC Act, which is anticipated to be handed into legislation earlier than the top of the 12 months. The announcement has already sparked debate throughout the coverage, enterprise, and funding neighborhood, with GUTA and AGI expressing some reservations.
Below the GIPC Act of 2013, overseas traders face a tiered construction of minimal capital: USD 200,000 for joint ventures with Ghanaians, USD 500,000 for wholly foreign-owned enterprises, and USD 1 million for buying and selling firms. These thresholds have been meant to guard sure sectors from being dominated by overseas capital and to make sure that native entrepreneurs might nonetheless compete. On the similar time, these thresholds have lengthy been criticized as disincentives to funding, particularly when put next with different African nations, lots of which have abolished capital necessities altogether.
CUTS-GIPC-WEF Examine in 2019
At CUTS Worldwide Accra, we examined this very query in a 2019 research on Sustainable for Ghana: Insurance policies and Measures for Consideration, supported by the World Financial Discussion board and in partnership with the GIPC. That research really helpful that Ghana take into account decreasing and differentiating the minimal capital requirement for foreign-owned companies. The proof confirmed that prime entry limitations, notably the USD 1 million threshold for retail buying and selling, restricted Ghana’s attractiveness in contrast with nations that impose no such restrictions. We additionally noticed that expertise companies, that are usually asset-light, have been being discouraged from entry by necessities designed for extra capital-intensive industries.
It’s towards this background that the President’s proposal to take away the minimal capital thresholds totally should be examined. Whereas the intention to draw extra overseas direct funding (FDI) is laudable, a wholesale elimination of those necessities dangers unintended penalties. Ghana has develop into one thing of a metropolis on a hill in West Africa, attracting the eye of worldwide traders. With no rigorously designed framework, we danger dislodging indigenous companies from sectors the place they’ve historically been energetic, notably retail commerce and companies.
There’s a coverage rationale for sustaining some type of capital requirement in chosen sectors. The problem is how to take action in a method that strikes a stability between selling FDI, defending home enterprise, and advancing the broader nationwide curiosity. That is the place a sector-by-sector method turns into crucial. As a substitute of making use of a blanket rule throughout the financial system, we should always determine the sectors the place home traders have adequate capital and capability, and the place safety is warranted. In these areas, minimal capital necessities can proceed to function a protect for indigenous companies. Conversely, in sectors the place Ghana lacks enough home capital or technical know-how, necessities ought to be relaxed or abolished to encourage overseas entry.
Greatest Follow: Vietnam, Rwanda and South Africa
Worldwide finest practices supply invaluable classes right here. Vietnam, as an illustration, tailors its minimal funding guidelines to particular sectors, requiring the next bar for hospitals however far much less for lighter industries like software program improvement. This focused technique has helped Hanoi appeal to FDI whereas nurturing native well being and tech ecosystems. Rwanda, usually hailed as Africa’s funding darling, abolished basic minimal capital necessities years in the past however maintains safeguards in strategic areas like mining and tourism to forestall over-dependence on outsiders. In South Africa, differentiated thresholds defend small companies in retail whereas welcoming large overseas gamers in mining and finance. The OECD and UNCTAD funding frameworks equally advise towards arbitrary excessive limitations to entry, urging as an alternative that guidelines be proportional, clear, and aligned to respectable coverage goals. Ghana retains the complete coverage area to resolve how finest to manage overseas entry underneath ECOWAS and the AfCFTA guidelines.
Proof and Rule-Primarily based Strategy
What we want is an evidence-based calibration of our funding regime. A panorama research ought to map which sectors require safety and which of them ought to be opened up. For instance, in high-innovation, low-capital industries like fintech, IT companies, and start-ups, insisting on USD 500,000 earlier than entry makes little financial sense. Then again, in buying and selling actions the place native entrepreneurs are energetic however weak, it might nonetheless be prudent to keep up a threshold to forestall displacement.
The broader problem just isn’t solely about how a lot overseas capital Ghana can appeal to but additionally about how effectively Ghanaian companies are supported to develop, scale, and ultimately make investments overseas. If our native companies reach establishing themselves regionally or globally, they may repatriate income residence, strengthening the cedi and contributing to long-term financial resilience. For this reason, alongside reforming capital thresholds, the federal government should put equal effort into grooming native champions who can compete successfully. Nigeria succeeded in elevating Dangote. South Africa has additionally succeeded in creating Shoprite, GAMES, and the vast majority of the businesses in our malls.
FDI undeniably creates jobs, transfers expertise, and will increase output. However Ghana mustn’t develop into a market the place solely overseas capital drives each type of funding. A wholesome financial system requires stability, the place each overseas and home enterprises contribute to progress. By adopting a surgical, sector-by-sector method to minimal capital necessities, Ghana can obtain that stability. Such an method ensures that overseas traders are welcomed in areas the place they carry clear added worth, whereas indigenous companies retain area to flourish in sectors the place they’ve comparative power.
Conclusion
As the brand new draft GIPC invoice makes its strategy to Parliament, the talk ought to due to this fact transfer past a easy binary of “abolish or retain.” As a substitute, we should always ask which sectors want what type of safety, what proof helps such distinctions, and the way the foundations might be designed to advertise sustainable and inclusive improvement. That may mirror the very best of each worlds: openness to overseas funding and dedication to nurturing home enterprise.
NB: The author is a lawyer and a contest economist, and a client safety advocate. He’s the West Africa Regional Director of CUTS Worldwide. He might be contacted by way of e mail: apa@cuts.org or www.cuts-accra.org or 0302-254-5652.
DISCLAIMER: The Views, Feedback, Opinions, Contributions and Statements made by Readers and Contributors on this platform don’t essentially characterize the views or coverage of Multimedia Group Restricted.
DISCLAIMER: The Views, Feedback, Opinions, Contributions and Statements made by Readers and Contributors on this platform don’t essentially characterize the views or coverage of Multimedia Group Restricted.
Source link
