Country risks for investors operating in Ghana

03 October 2019

Country risks for investors operating in GhanaGhana will face a number of security, investment and trading challenges in the coming months. In this article we provide a detailed forward-looking assessment of developments in the country.

Ghana is due to hold presidential and legislative elections by December 2020. The elections are unlikely to generate significant economic or political instability.

The current New Patriotic Party-led government is likely to increase tax demands on key sectors to boost revenues, while also reviewing contracts in the power sector.

Security Environment

Ghana will continue to be a target for Islamist militant groups in West Africa in 2020.

Although the country has not been the target of a successful terrorist attack in recent years, organizations such as al-Qaeda in the Islamic Maghreb (AQIM) have shown the ability to launch terrorist attacks across West Africa.

Country risks for investors operating in GhanaMilitants may seek to launch attacks on churches, restaurants, and/or hotels in Ghana, as well as Benin, Côte d'Ivoire, and Togo.

In an indication of the growing risk, in February 2019 four Burkinabé officers were killed at a border post close to the Ghanaian border.

Attacks by Burkina Fasobased militants are likely to be carried out in northern Ghana, using low-capability weapons, such as firearms.

Locations popular with foreigners are expected to be high-priority targets.

Trading Environment

Ghana’s budget deficit is expected to widen in 2019, reaching 4.2% of GDP, up from 3.9% in 2018.

The July mid-year budget statement showed total revenues were 15.5% below government targets in the first half of 2019, while spending growth outpaced revenue growth.

Elevated spending in Ghana has been driven by insecurity in the wider Sahel region, the payment of wage arrears in H1 2019, and high debt servicing costs.

There is also an elevated risk of fiscal slippage in 2020, as the government expands spending to secure electoral support.

Ahead of the 2016 election, the government reportedly hired several thousand additional civil servants to boost support.

However, the deficit should narrow in the longer term, as the government has implemented several structural fiscal reforms during its participation in an IMF extended credit facility, which concluded in April 2019. Sovereign credit risks are moderately elevated in Ghana.

The external debt burden has risen as a result of US$3 billion in eurobond issuances in March 2019, reaching 30.5% of GDP in April 2019.

Of Ghana’s government debt, 50.7% is US dollar-denominated, elevating exposure to exchange rate risks.

Between January and August 2019, the cedi lost 10.5% of its value against the US dollar, elevating debt servicing costs.

The cedi is expected to depreciate more gradually against the US dollar for the rest of 2019.

Investment Environment

Pricing Outlook GhanaIncreased taxation is likely in the coming quarters, as the government faces pressure to realize key spending pledges amid underperforming revenues.

The government’s 2019 mid-year budget statement included a series of tax proposals targeting the telecommunications and energy sectors.

These included a proposed increase in the communication service tax from 6% to 9%, and increased levies placed on petroleum products.

The government may also look to boost revenues by imposing fines over service provision in the telecommunications, power, and petroleum sectors.

Contractual risks are rising in the power sector as the government looks to address excess supply.

Ghana’s installed electricity generation capacity is currently 5,083MW, significantly above peak demand of 2,700MW.

As a result, take-or-pay contracts, which reportedly cost the government US$500 million a year, are facing additional scrutiny.

In August 2019, the government began a three-month consultation period with gas producers and independent power producers operating in Ghana, with the aim of converting all take-or-pay contracts to take-and-pay contracts.

Ghana’s finance minister has also indicated that the government will seek to suspend or terminate all power-purchase agreements (PPAs) under negotiation, and introduce a moratorium on new PPAs in order to tackle excess capacity.

5 Key Takeaways

  • The external debt burden has risen as a result of US$3 billion in eurobond issuances in March 2019, reaching 30.5% of GDP in April 2019.
  • Half of Ghana’s government debt is US dollar-denominated, elevating exchange rate risks.
  • Between January and August 2019, the cedi lost 10.5% of its value against the US dollar, elevating debt servicing costs.
  • Ghana will continue to be a target for Islamist militant groups in West Africa in 2020.
  • Contractual risks are rising in the power sector as the government looks to address excess supply.

The monthly Risk Outlook is supported by our proprietary country risk rating tool, World Risk Review (WRR) which provides risk ratings across nine insurable perils for 197 countries. The country risk ratings are generated by a proprietary, algorithm-based modelling system incorporating over 200 international sources of data.

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Many of the countries featured in this month’s Risk Outlook could offer rewards for companies that are able to successfully navigate high-risk economic and political environments.

In this month's Risk Outlook, we also provide a detailed forward looking assessment of developments within the security, trading and investment environments for Egypt, Turkey, Kazakhstan and Guatemala and all of which have been the subject of recent enquiries from our client base.

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  • Eleanor SmithEleanor Smith

    Eleanor Smith is a Senior Political Risk Analyst within Marsh JLT Specialty’s Credit Specialties team. At Marsh JLT Specialty, Eleanor analyses developments in political risks, and advises clients on their effect in a range of sectors. Eleanor is also responsible for delivery of World Risk Review, JLT’s country risk ratings platform, to clients and prospects.


    Eleanor has a first-class degree in History with Spanish from UCL, and a Masters in International Public Policy from the same institution. With experience in a range of sectors, including diplomatic missions and not-for-profit, Eleanor can help clients understand their risk exposure.

    If you would like to talk about any of the issues raised in this article, please contact Eleanor Smith, Senior Political Risk Analyst on +44 (0)20 8108 9544.

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