GHANA: An Introduction to Corporate/Commercial
Ghana
The country has recently come out of another successful general election which retained the President in power but with the legislature essentially split in the middle. Like most countries, Ghana also suffered the economic effects of COVID-19 but the economy is nevertheless expected to grow at 7.6% (4th edition of the World Bank’s Ghana Economic Update 2021). Of course, a lot will depend on post pandemic economic recovery measures. The effect of the COVID-19 slowdown of the economy will, however, have multiple related impacts.
The Impact of COVID-19 on industry
To mitigate these effects, the government in both its 2022 and 2021 budgets put in place a support plan to alleviate the effects of the pandemic. Some of the key measures in the 2022 budget include the following:
(a) Youstart Initiative (in the 2022 budget) under the COVID-19 Alleviation, Revitalization and Enterprise Support Programme (CARES) which was introduced under the 2021 budget with the objective of creating 1 million jobs for the youth from 2022;
(b) The local production of vaccines to combat the spread of the COVID-19 virus.
(c) Start of operations of a Development Bank Ghana (DBG);
(d) The transformation of the Ghana Amalgamated Trust (GAT), a special purpose vehicle established by the Government to support selected indigenous banks into a permanent company to, amongst other things, strengthen the financial sector post COVID-19.
(e) The potential introduction of an electronic transaction levy of 1.75% to expand the tax net; and
(f) Proposal for the implementation of a Tax Exemptions Bill aimed at attracting foreign direct investments.
The Impact of the African Continental Free Trade Area (AfCFTA)
Ghana is the host country for the African Continental Free Trade Area (AfCFTA) Secretariat which many pundits believe will be a game changer for the continent. The location of the Secretariat provides the opportunity for Ghana to lay a foundation that may eventually make it one of the new commercial capitals of Africa.
The AfCFTA itself is positioned as the start-gun that will trigger a continent-wide economic take-off. With a combined population of more than one billion people and a GDP in excess of USD3.4 trillion, the AfCFTA is expected to change how business is done in Africa, and could potentially transform some businesses on the continent into major global players and some local businesses into regional players of the future. The immense opportunities that the AfCFTA presents, across a wide range of sectors, include agri-business, manufacturing, consumer goods, telecommunications, financial services, transportation, infrastructure development and tourism.
Value Addition and the Industrialisation Agenda
The expected boost in demand for Intra-Africa exports pursuant to the AfCFTA may spur industrialisation. Ahead of the AfCFTA, Ghana’s government launched an industrialisation agenda which focused on the private sector dubbed the One District One Factory (‘1D1F”) project. The 1D1F seeks to decentralise industrial development by encouraging public and private sector investments in existing and new enterprises, the promotion of “strategic anchor industries”, including agro processing, pharmaceuticals, integrated aluminium, iron and steel, automobile and vehicle assembly, textiles, garments, industrial salt, petrochemicals, machinery and machinery component manufacturing, industrial start and palm oil in industrial parks and special economic zones.
Integrated Aluminium Industry
Ghana is also exploring options for creating what has been called the Integrated Aluminium Project, which centres around:
(a) Bauxite mining;
(b) An alumina refinery;
(c) Expansion of the existing aluminium smelter operated by the Volta Aluminium Company;
(d) Downstream aluminium industries; and
(e) Other allied industries.
The government has commenced the process to drive private sector involvement in all core areas of the bauxite and aluminium sectors. For this purpose, the government set up the Ghana Integrated Aluminium Development Corporation (“GIADEC”) to coordinate the public sector agencies and private sector parties to help realise the goal of the Project. On a related note, the Ghana Iron & Steel Integrated Development Corporation has been established to develop and promote an integrated iron and steel industry. The entity will hold the government’s full interests across the integrated iron and steel industry value chain. Dubbed as one of the major pillars to accelerate the government's industrialisation and economic growth agenda, this initiative will also encourage investment in the iron and steel sector. Additionally, as part of the government’s vision to make Ghana a fully integrated and competitive industrial hub for the automotive industry in West Africa, some policy measures were launched recently and this, together with related measures have already led to the set-up of automotive assembly plants such as Nissan, Volkswagen, Suzuki and Toyota Tsusho.
Increased Oil & Gas Capex spending
The government plans to increase its shares in the upstream oil and gas sector by acquiring additional stakes. As a result, the government has hinted at a strategy to assist the Ghana National Petroleum Corporation’s (GNPC) and its exploration subsidiary (GNPC Exploco) to become an operator. GNPC has already indicated that it has identified potential targets for acquisition including a proposed 37% stake from Aker Energy in the Deepwater Tano Cape Three Points (DWT/CTP). Overall, the outlook of Ghana’s upstream petroleum sector is positive with planned investments (in the Jubilee and TEN fields) in the two largest fields offshore Ghana, set to increase by over 50% and the prospect of commencement of the development of the Pecan Project. This shows much more promise compared to the low-oil price environment of the previous couple of years.
Other related developments in the sector, based on public information, include the following:
• Tullow, the operator of the TEN and Jubilee fields, has awarded a USD370 million contract to Maersk Drilling (Maersk) for the provision of the ultra-deepwater drillship Maersk Venturer and additional services for a development drilling campaign at the TEN and Jubilee fields. Under the four year contract commencing in April 2021, Maersk is expected to drill a total of four wells in 2021, consisting of two jubilee production wells, one jubilee water injector well and one TEN gas injector well. The planned spending, will provide the much needed stimuli in the country’s upstream sector following the 2020 lull due to disruptions caused by the COVID-19 pandemic and the postponements and suspension of projects.
• The anticipated Final Investment Decision as well as government approval of the plan of development of the 110,000b/d Pecan field are also expected to occur this year and will provide additional boost to the sector. The field is an ultra-deepwater play in the DWT/CTP block offshore Ghana and is estimated to contain about 334 million bbl of oil equivalents. A successful development of the Pecan Field will present significant upside for Ghana’s crude oil production. The project will involve over 2,000 service contracts to be serviced by both local and international subcontractors in the sector.
• Eni, the operator of the Cape Three Points (CTP) Block 4 offshore Ghana, in July 2021, also announced a significant oil discovery in its Eban-1X well which is the second well drilled in the CTP Block 4, following the Akoma discovery in 2009. Preliminary estimates indicate that the Eban-Akoma complex may potentially produce between 500 million and 700 million barrels of oil equivalent.
The Petroleum Hub Development Corporation
In October 2020, the Parliament of Ghana passed the Petroleum Hub Development Corporation law which is the legal framework that will promote the Hub. The law also establishes the Petroleum Hub Development Corporation (PHDC) as the entity responsible for creating a petroleum and petrochemicals hub (the Hub) in the country. It has been estimated that as a minimum, the hub will attract over USD60 billion worth of investments cutting across enabler investments in infrastructure that will support petrochemical industries including the refining of crude as well as discharge, storage, distribution and trading of petroleum products using Ghana as a hub for the West African sub-region.
New Companies Act and New Corporate Insolvency Act
Recognizing the central role that a strong regulatory framework plays for the success of businesses, Ghana passed a new Companies Act and a new Insolvency Act in 2020. The two new laws are being operationalised as part of Ghana’s efforts to accelerate reforms through the introduction of best practices and the removal of unnecessary impediments to corporate entities in Ghana. Amongst others, the changes are aimed at enhancing the ease of doing business in Ghana as part of efforts to ensure Ghana becomes a competitive and transparent investment destination.
Major changes introduced include the option to register a company without specific objects that were hitherto required, which had the effect of limiting diversification of enterprises. This change has made it possible for companies to readily pursue new opportunities without the need for prior amendments of a company’s business objects. Inroads have also been made in the area of corporate governance. The role of a company secretary, which tends to be central in the scheme of corporate governance, has now been linked to the need to belong to a specified class of professionals such as lawyers, accountants and chartered company secretaries. In a separate, but corporate governance related move, the Bank of Ghana has introduced comprehensive directives namely:
• Corporate Governance Directive; and
• Fit and Proper Persons Directive
The objective of setting out these directives (which follows recent restructuring of the banking sector) is to enhance corporate governance of regulated financial institutions as a means of promoting the development of appropriate internal structures and also ensure persons “fit to be directors” are appointed for the director role and to key management positions.
On the other hand, the new insolvency regime has given extensive opportunities for companies to undergo restructuring to enable their survival in difficult times. Companies have been provided with extensive protection against quick liquidation.
Ghana’s position in Africa FDIs
A number of countries in Africa have been successful in attracting FDIs and the aggregate FDI inflow data shows Egypt remained the largest recipient in Africa, albeit with a significant reduction. Ghana has emerged as one of the biggest recipients of foreign investment in West Africa, with a strategy to become the prime regional hub for financial services, logistics and manufacturing. Investment always comes with attendant challenges but businesses which secure the right legal assistance are more likely to succeed with the complexity of investing in Africa; the need for the right legal assistance cannot be overemphasised.
Authors:
Sena Abla Agbekoh
Nana Serwah Godson-Amamoo
Benjamin Sackar