Ghana Country Profile
General Information
Political Climate
Ghana emerged from British rule in 1957, becoming sub-Saharan Africa's first European colony to achieve independence. Since then, Ghana has remained a relatively peaceful country in a region plagued by conflict and instability. The past decade has seen a significant improvement in the country's economic management and a degree of economic stability has been restored. Ghana is a stable and functioning democracy, especially in relation to other political systems in Western Africa. This was most recently demonstrated in December 2008, when a former university professor and self-proclaimed social democrat, John Evans Atta Mills from the National Democratic Congress (NDC), won the presidency in a second run-off with a very narrow margin against governing party candidate Nana Akufo-Addo from the National Patriotic Party (NPP). Despite some allegations of fraud during the registration process, the elections themselves occurred peacefully and were widely regarded as free and fair. Atta Mills has now taken over the presidency from John Kufuor, who served two terms in office and has generally been well-reputed for boosting Ghana's economy, reducing poverty and, to some extent, curbing corruption. However, while his government introduced a range of anti-corruption initiatives, graft and corruption have remained widespread and political patronage systems deep-rooted.
Throughout his two terms in office, Kufuor ran a zero-tolerance of corruption policy and established several anti-corruption initiatives, such as the Office of Accountability. Although it is not clear whether such an initiative has had an impact on the general level of corruption in Ghana, it is widely agreed that it has a great symbolic value in the fight against corruption. Whether or not the level of corruption is decreasing, it is commonly acknowledged that corruption in Ghana remains prevalent in the interactions that companies and the public have with public officials. President Atta Mills has taken some steps towards fighting corruption. According to a February 2009 article by Afrique en ligne, a first step has been to direct all his appointees to declare their assets within seven days instead of six months as stipulated by law. Also, a legislative draft which will ensure the declaration of assets for all public office holders has been sent to Parliament, and the Minister of Interior, Cletus Avoka, has urged senior police officers to sign 'performance contracts' to inject more competence and professionalism into the police force, as reported by Al Jazeera in a December 2009 article.
Ghana holds relatively good positions on various indices of corruption and governance when compared to other countries in Africa, and donors and international financial institutions have jumped at the opportunity of supporting political will in Ghana to curb corruption. In Transparency International's Global Corruption Barometer 2010, 35% of the surveyed households consider the government's efforts in fighting corruption as ineffective, while approximately 53% consider them effective. According to the same survey, approximately 37% of the households report having paid a bribe the previous year. The Afrobarometer 2008 reveals that the government's anti-corruption initiatives have not had much effect on ameliorating the perception of local government in Ghana. According to the study, 70% of Ghanaian households perceive local representatives of municipal and metropolitan district assemblies to be corrupt, and both rural and urban respondents are of the opinion that operations of these assemblies and their agents lack transparency and accountability. The study further points out that the perceived corruption among local assembly representatives has worsened by 10% from 2005 to 2008. Moreover, the credibility of the President Atta Mills' anti-corruption platform was questioned, as his appointed Minister of Foreign Affairs, Alhaji M. Mumuni, according to a March 2009 article in The Huffington Post, was indicted in accordance with an audit report suggesting he made unapproved payments. Adding to negative public opinion is the fact that despite the country's economic progress, many Ghanaians have not experienced much improvement in relation to living standards, while still high levels of poverty and unemployment and an unequal distribution of wealth between the northern and southern regions persist. In 2007, Ghana discovered large oil reserves in its western region, which has been the cause of much optimism on the part of the country's economic future and social welfare. However, it has also raised much debate on the need to avoid political mismanagement of the expected oil revenues. International agencies have expressed their concern about whether Ghana's institutions are ready to secure a transparent and accountable development of the oil industry. An independent body to manage Ghana's oil revenue and ensure transparency was expected to be set up by the government, but no progress was made in this regard as of March 2011. A positive step with regards to revenue transparency of its mining, gas and oil sectors was reached in October 2010, as Ghana achieved full compliant status with the extractive industries transparency standard EITI. See the Ghana Extractive Industries Transparency Initiative (GHEITI) or the Public Anti-Corruption Initiatives' section of this profile for more information on this. In addition, the government passed the long-awaited Petroleum Revenue Management Bill in March 2011, which outlines clear rules for petroleum revenue inflows and outflows and seeks to bring greater transparency and accountability to the sector, according to Peace FM Online.
Business and Corruption
The liberal government of former President Kufuor paved the way for revitalising the private sector, liberalising markets and privatising several public companies. However, problems remain in relation to formalising business operations in the country and corruption continues to be a problematic factor for doing business in Ghana. The informal sector in rural and urban areas continues to provide more than 90% of employment opportunities and, according to the World Bank & IFC Enterprise Surveys 2007, 69% of service companies report that they have to compete against unregistered or informal companies.
Many of the problems companies encounter stem not from regulations, but rather from continuing administrative inertia and corruption. Despite efforts made to make public administration more effective and to increase its outreach to the most remote parts of the country, the visibility of the state administration in rural areas is still limited and the issue of corruption has reportedly not been tackled successfully. The legitimacy and image of state officials are therefore seriously hampered in these areas, and companies are often subject to local rules and regulations and experience a greater corruption risk if they choose to operate in rural areas.
Transparency International's Global Corruption Barometer 2010 reveals that 12% of the surveyed households consider the business/private sector to be 'extremely corrupt'. In the World Economic Forum Global Competitiveness Report 2010-2011, the surveyed companies cite corruption among the five most problematic factors for conducting business in Ghana. According to the report, companies consider the occurrence of irregular payments and bribes in Ghana as not uncommon. In addition, companies behave unethically in interactions with public officials, politicians and other companies to the point that their behaviour constitutes a competitive disadvantage for the country. In the World Bank & IFC Enterprise Surveys 2007, more than a third of the surveyed companies expect to make informal payments to get things done, while 10% see corruption as a major constraint to doing business in the country. Reports of continuing systemic corruption and expectations of facilitation payments, as well as continuing deficits in business financial management, accountability and integrity should be taken seriously. For example, the US Department of State 2011 reports that foreign companies have been asked for 'favours' from contacts in Ghana, in return for facilitating business transactions. Given this environment, foreign investors considering establishing themselves or that are already doing business in Ghana are advised to consult with experienced attorneys, to develop, implement and strengthen integrity systems, and to carry out extensive due diligence.
Regulatory Environment
The government of former President Kufuor showed great commitment to attracting foreign investments by improving the regulatory environment for the private sector. The Ministry for Private Sector Development was created in 2000 and was mandated to coordinate efforts to strengthen the private sector and reduce bureaucratic restrictions and impediments to private investment. The Ghana Investment Promotion Centre (GIPC) functions as a one-stop shop to eliminate some of the bureaucratic obstacles facing investors, but continues to experience resistance from the various ministries, agencies and authorities responsible for the procedures it covers. The GIPC provides companies with information on and access to investor registration forms, start up procedures, a land bank database, and general and sector-specific laws and regulations. Foreign investors are required to satisfy the provisions of the Investment Act as well as the provisions of sector-specific laws regulating banking, non-banking financial institutions, insurance, fishing, securities, and real estate. The Ghana Investment Advisory Council (GIAC) was also created to assist the government in developing policies aimed at improving the investment environment. However, despite the various initiatives to streamline private sector regulations, bureaucratic processes remain relatively slow. According to the World Economic Forum Global Competitiveness Report 2010-2011, inefficient government bureaucracy ranks among the most problematic factors for doing business in Ghana, and the World Bank & IFC Enterprise Survey 2007 reports that senior management can expect to spend only 4% of its time dealing with the requirements of government regulation.
Ghana has continued to increase the efficiency of its public services and has cut delays in property registration from six months to one. Starting a company, paying taxes and trading across borders have also been made easier. Transparency International Global Corruption Report 2009 reports that the promotion and facilitation of registering a company and passing from informal to formal business have resulted in a decrease in corruption, according to business executives' perception. However, despite improvements, the administrative procedures related to starting a company and obtaining various licences and permits remain time-consuming and costly compared to OECD countries. For example, according to the World Bank & IFC Doing Business 2011, starting a company in Ghana requires the entrepreneur to go through 7 procedural steps, a process which takes 12 days on average at a cost of approximately 20% of GNI per capita, while OECD countries average 5.6 procedures and 13.8 days at a cost of slightly over 5% of GNI per capita. Further reform efforts include government plans to increase infrastructure investment and revenue mobilisation through improved administration of the tax system with reduction in leakages and corruption.
According to the US Department of State 2011, high interest rates and limited access to capital can constitute restrictions for growth for local companies. For foreign companies, on the other hand, the most important obstacle for investment is the insecurity resulting from traditional land ownership structures and the complex legal system. Land ownership is based on traditional laws, which creates a high level of insecurity for investors and restricts access to finance, since land is generally not accepted as bankable security. Ghana's traditional court system and British-based 'modern law' legal systems exist in parallel, creating insecurity, especially among foreign investors, and sometimes making contract enforcement difficult. Delays in courts have led the government to introduce several initiatives to enhance investors' confidence in Ghana, including strengthening the legal framework regarding the settlement of commercial disputes. The GIPC Law, the Free Zones Law, the Labour Law, the Minerals Law, and the Mining Law outline dispute settlement procedures and provide for arbitration when no other means of dispute settlement can be agreed upon. New civil procedure rules and mandatory arbitration and mediation have reportedly reduced the time it takes to enforce contracts. The Ghana Arbitration Centre, an autonomous and non-profit institution, provides for arbitration and specialises in commercial and investment laws. Ghana's Commercial Court that is a division of the High Court in Accra tries cases in relation to commercial arbitration, intellectual property rights, commercial fraud, tax and insurance. The court uses mediation and other alternative dispute resolution mechanisms in the pre-trial stage. In many cases, foreign companies may also choose to settle commercial disputes through international arbitration bodies. Ghana signed and ratified the Convention on the Settlement of Investment Disputes in 1966, which allows for arbitration under the International Centre for the Settlement of Investment Disputes (ICSID). However, the government has expressed a strong preference for handling disputes related to the energy sector under United Nations Commission on International Trade Law (UNCITRAL) rules. Ghana is also a signatory and contracting state to the New York Convention 1958. Access the Lexadin World Law Guide for a collection of legislation in Ghana.
