Ghana is one of the fastest growing emerging markets in the world, with a diversified economy and a government committed to pro-business macroeconomic reforms. Growth will accelerate in 2019 due to growing oil and gold production, while foreign investment in infrastructure, mining and manufacturing is also set to increase.
In the one-year outlook, protests and riots are likely to be driven by the rising cost of living and tougher economic conditions, such as increases in electricity tariffs and petroleum products.
Whilst protests are usually peaceful, outbreaks of violence do occur. In March 2018, approximately 300 supporters of the opposition National Democratic Congress (NDC) party staged violent protests in front of the police headquarters in Accra.
This followed the arrest of the party’s deputy general secretary. Protests are likely to be held on main transport routes such as the Kwame Nkrumah Circle-Central Business District road, causing traffic and cargo disruption of up to seven hours. Foreign business travellers and tourists face risks of theft, though incidents of kidnap for ransom are rare.
In January 2018, Ghanaian security forces announced the arrest of three men in possession of hand grenades and other explosives.
They were suspected of intending to carry out a terrorist attack in the Odorkor area of Accra.
The three suspects were Ghanaian nationals, who had returned from fighting in Libya.
There are approximately 50-100 extremist Islamist fighters of Ghanaian origin fighting for Islamic State in Libya and their likely return in 2019 will pose increased risks for restaurants, entertainment venues, and hotels frequented by Westerners in the major cities of Accra and Kumasi.
Ghana will become one of the top five oil producers in sub-Saharan Africa by 2020 with production output of approximately 250,000 barrels per day (BPD), driven by increased production at the Sankofa oil field which came online in 2017.
The expanding oil and natural gas sector will support exports and fiscal revenue, reducing macroeconomic risks and providing a substantial boost to growth. GDP growth is set to average 6.5% in 2019 supported by strong performance in the cocoa, gold and tourism sectors.
Ghana is also gradually building industrial capacity, and growth in the manufacturing industry is projected at 9.8% in 2019 and 5.9% in 2020.
In January 2019, the Bank of Ghana (BoG) cut interest rates by 100 basis points (bps) to 16% in a bid to ease domestic financial conditions.
The move caused the cedi to fall by 9.8% against the US dollar. Foreign investors currently hold 30.6 % of Ghana’s local currency bonds, among the highest rates of foreign ownership in emerging and frontier markets.
There is a significant risk of capital flight if investors lose confidence in the central bank’s commitment to tackling inflation.
Nevertheless, Ghana’s US$3 billion Eurobond offering in March 2019 attracted an orderbook of US$20 billion, a sign that appetite for risk in Ghana in still strong.
Firms operating in Ghana face structural challenges resulting from burdensome bureaucratic procedures and high import reliance – particularly for consumer goods, machinery and fuel, all of which raise operating costs.
The threat of contract alteration in Ghana has increased given the ruling New Patriotic Party’s (NPP) stated aim of increasing indigenous equity participation in foreign firms.
Foreign firms in the petroleum industry must incorporate a joint venture company with an indigenous Ghanaian company and afford that company an equity participation of at least 10%.
However, the NPP has concluded the majority of its value-for-money audits of contracts in the telecoms, energy, infrastructure and cocoa sectors, decreasing the risk of contract alteration threats in the short-term outlook.
Investors in Ghana benefit from a strong road network in comparison to regional peers, ensuring access to the country's major cities and most rural areas. An estimated 90% of domestic freighting in Ghana is conducted by road.
Major upgrades to the country's road network, such as expanding the Accra-Tema Highway, have been initiated, yielding significant benefits for road-reliant firms in the long term outlook.
Ghana's ports and waterways also play an important role in both domestic and regional supply chains.
In addition, businesses benefit from inland lake transport systems to service the maritime needs of landlocked regions to the north of Ghana, as well as to receive vessels looking to avoid the heavily bureaucratic ports of Nigeria.
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.
5 Key Takeaways
- Ghana is one of the fastest growing emerging markets in the world
- Ghana will become one of the top five oil producers in sub-Saharan Africa by 2020 with production output of 250,000 barrels per day (BPD)
- Firms operating in Ghana still face structural challenges including burdensome bureaucracy
- In January 2019, the Cedi fell 9.8% against the US dollar
- Contract alteration threats have decreased following the conclusion of the government’s value-for-money contract audits in telecoms, infrastructure and cocoa.
In this month's Risk Outlook, we also provide a detailed forward looking assessment of developments within the security, trading and investment environments for Brazil, Egypt, Mexico and South Africa, all of which have been the subject of recent enquiries from our client base.
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