The Ghana Investment Promotion Centre (GIPC) Act, (Act 865) which requires foreign investors to invest between US$200,000 and US$1,000,000 in the form of equity before undertaking specific ventures in Ghana, has been questioned.
According to the Chairman of Oxford and Beaumont Solicitors, a corporate and commercial law firm based in Accra and London, Mr Elikem Nutifafa Kuenyehia, said “the minimum capital requirements is outrageous and must be revised to attract more investors into the country”.
Speaking at the 15th MTN Business Executives Breakfast Meeting in Accra on June 18, he said “Yes, we need the ‘big’ multinationals to come in and invest. However, that should not be our only focus.”
“SMEs make up about 90 per cent of our private sector. We must therefore not shut out the relatively ‘small’ foreign investors with whom our SMEs can easily partner to do business in Ghana”.
According to him, once the country could be convinced that the funding was from a genuine source, the amount being invested should not be the issue.
“Not every dollar is a ‘dollar’. Every dollar invested in the country must have value to the Ghanaian individual and the economy - create jobs, train locals, improve the business environment for all stakeholders – no matter how huge the investment is”, Mr Kuenyehia said adding that, “That should be the focus of the GIPC Act. It's about creating an ecosystem that encourages more people to invest in Ghana, rather than cut out many foreign investors and admit only a few ‘big’ multinationals”.
What the Act says
As part of government’s measures to prevent foreigners from venturing into businesses that have been exclusively reserved for Ghanaians, it provided for minimum foreign capital requirements under the GIPC Act.
The GIPC Act required that if a non-Ghanaian intended to enter a joint-venture with a Ghanaian citizen, the non-Ghanaian must invest at least US$200,000 foreign capital in cash and/or capital goods by way of equity participation and Ghanaian has at least 10 per cent equity participation in the joint enterprise.
Where the business will be wholly owned by a non-Ghanaian, the non-Ghanaian must invest at least US$500,000 foreign capital in cash and/or capital goods by way of equity participation in the business.
To engage in a trading enterprise, a non-Ghanaian is required to invest at least US$1,000,000 in cash and/or capital goods and services relevant to the business.
Why the Act
It is widely believed that these measures, coupled with the agitations from traders in the country, had caused many foreign investors to stay away, although these investors could have afforded smaller amounts to start small businesses and grow gradually.
But Mr Kuenyehia believed that once the GIPC was able to satisfy itself about the genuineness of the source of the funds being invested by a foreign investor (for instance that the money is not being laundered into the country under the guise of investment), the quantum should not be a hindrance.
He was of the view that although the government intended to protect the business turf for Ghanaian traders, it was necessary to rethink the focus of the Act to allow investors who have smaller amounts to come in to invest and grow their businesses and the economy.
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