It is official, Ghana is open for business. The World Bank’s – Doing Business in 2006 – study ranks 155 countries over 10 categories. In the West African sub region where Ghana has branded itself as the “Gateway”, the country is ranked first in 4 categories – ‘Ease of Doing Business, Protecting Investors, Paying Taxes and Enforcing Contracts’.

However, the study also shows that it is easier to start a business in war ravaged Sierra Leone than it is in Ghana. Dealing with licenses in Ghana takes an average of 71 days, Senegal ranks best in ECOWAS with 68 days. For companies and individuals in Nigeria, the sub region’s largest economy, hiring and firing employees takes 27 days, Ghana follows with 48 days. It is easier to register property in the French speaking countries – Benin comes in first with 72 days, drought torn Niger follows with 90 days, in Mali it takes 91 days. But in Ghana, it takes a crushing 120 days to wade through the maze of bureaucracy and register property.

In the ECOWAS regions, trading across borders continues to take weeks instead of hours. It takes 46 days in Senegal, 85 days in Sierra Leone, 99 days in Togo, 104 days in Benin and 108 days in Ghana. Ghana is the second easiest place to close a business (79 days) behind Nigeria (61 days) but ahead of Guinea (81 days) and Senegal (97 days).

Ghana’s economy grew to 5.8% in 2005 and is expected to inch marginally up to 6% in 2006. However if this government wants to deliver positive change in something other than promises, the economy must grow at 8%.

When asked if Ghana is really open for business, a source from the private sector said, “all the macroeconomic issues are being taken care of and there is stability in the market place. Furthermore, interest rates as well as inflation are declining.” The source continued by stating that “people claim that there is no money in their pockets, macroeconomic stability not withstanding. But, the money in their pockets in the past was money with lower purchasing power because of inflation. Now, with price stability, the money in their pockets can go much further. “

Another private sector commentator stated that, in his business, “he now records foreign exchange gains when opening letters of credit while in the past he recorded foreign exchange losses. These gains are due to the strengthened cedis against other currencies.” The Message – not to take for granted the impact macroeconomic stability has on businesses.

Therefore, a stronger macroeconomic environment is strengthening businesses within Ghana. However, success can not entirely be measured by individual businesses that claim triumph and cheer that Ghana is now open for business. True success comes from a simple statistic – the economy must grow at 8%. Statistics tell it all.

In a World Bank meeting this month, President John Agyekum Kufuor observed that Ghana’s economy was growing, but that, he was “still not satisfied.” The target is to be a Middle Income Country by 2015. And you cannot get there on the back of a growth rate of 6% or less.

President Kufuor holds firm to his belief that this era is the “Golden Age of Business” and that the private sector will be the engine of growth for the Ghanaian economy. In February, the Ministry for Private Sector Development and President’s Special Initiatives will unveil a composite work plan, a time bound and fully budgeted program that essentially details who is responsible for doing what, where and when to improve the environment in which companies local and foreign do business in Ghana.

The Ministry coordinates pro-private sector policies of 17 Ministries, Departments & Agencies such as Trade, Agriculture, Roads Transport, Customs, Land Administration, Attorney-General, and Registrar-General, to name a few. The Minister for Private Sector Development and PSI Kwamena Bartels remarked that monitoring these policies of the 17 MDAs are aimed at the “overall development of the private sector.”

While Ghana may be ‘open for business,’ it also needs to be ready for business. The business environment must continue to be enhanced with improved regulations on Starting a business; Dealing with licenses; Mobility of labour; Registering property; Accessing credit; Protecting investors; Paying taxes; Facilitating cross border trade; Enforcing contracts; and Closing a business. These are the challenges and focus areas for the Government’s Private Sector Development Strategy and World Bank’s ‘Doing Business in 2006’ report.

And, which businesses benefit from the implementation of these pro-private sector policies? All. All businesses from multinationals to corporate to sole-proprietors to small and medium-sized enterprises are suppose to benefit from the coordinated efforts of MDAs pursuing pro-private sector policies.

Pro-private sector policies are intended to reach all four corners of Ghana, regardless of the size of the business. Pro-private sector policies are to enhance the successes of all businesses, and the successes of these businesses are to enhance the country’s economic growth.

A figure of 8% growth tells us, as a nation, that we are on the right path. The constant tie between business and government policies to reach this 8% goal is widely apparent. Greater dialogue and partnerships between the two must be promoted in order for Ghana to reach her goals.

While Ghana has been described as not only the gateway to West Africa, but the gateway to Africa as a whole, inefficiencies that hinder business within Ghana must fervently be discouraged. The World Bank study shows Ghana as a leader and as an example among our ECOWAS neighbours. However, while much has been achieved, much more needs to be done.

Setting Up Business in Ghana

An entrepreneur, irrespective of nationality, can set up a business enterprise in Ghana in accordance with the provisions of any of the following legal instruments:- The Companies Code, 1963 (Act 179); the Partnership Act, 192 (Act 152) and the Business Name Act, 1962 (Act 151).

A foreign investor may team up with a Ghanaian entrepreneur or company for a joint venture, usually in the form of a partnership or a limited liability company.
 
However, under the Ghana Investment Promotion Centre Act, 1994 (Act 478), a minimum equity capital of US$10,000 is required from any foreign investor who intends to enter into a joint venture partnership with a Ghanaian. The foreign shareholder is required to satisfy this minimum equity capital either in cash transferred through Ghana's banking system or its equivalent in the form of goods, plant and machinery, vehicles or other tangible assets imported specially and exclusively to establish the enterprise.

Foreigners are permitted 100-per-cent ownership of an enterprise provided he/she satisfies section 19 (2b) of the GIPC Act, 1994 (Act 478). Wholly foreign-owned enterprises must have a paid-up capital the equivalent of US$50,000.

Application for registration of a company is made directly, or through agents or solicitors, to the registrar-general. A company is duly registered after the company’s regulations have been submitted to the registrar of companies and a certificate of incorporation issued. A specified fee is paid on presentation of the regulations. The information required includes the name of the company with the word “Limited” as the last word in the name; the nature of the company’s business; names of the directors of the company and the shares capital and its division into shares of no par value.

External Companies

An external company is a body corporate formed outside Ghana but which has an established place of business in Ghana. This can take the form of a branch, management, share, transfer, registration office, factory, mine or other fixed place of business, but does not include an agency unless the agent is authorised to negotiate and conclude contracts on behalf of the outside company.

Within one month of the establishment of the place of business, the external company should deliver to the registrar of companies the following: an English language translation of a certified copy of the charter, statutes, regulations, memorandum and articles or other instrument constituting or defining the constitution of the company; nature of business or main objects; name, address and business occupation of the local manager authorised to manage the business in Ghana.

A number of authorised shares, amount paid and what is remaining payable in cash or otherwise and address of its registered or principal office in the country of its incorporation; address including post office box number of its principal place of business in Ghana; name and address in Ghana of a person authorised by the company to accept service of process and other documents on its behalf, particulars and copies of any charges on the property of the company or if no such charges, then statement to that effect.

On receipt of the documents, they are registered in the Register of External Companies and the particulars gazetted.

An external company may invite the Ghanaian public to subscribe to its shares, subject to its complying with requirements of the Companies Code concerning invitations and the prospectus as if it were a Ghanaian company. The registrar, however, has the discretion to waive or modify parts of these requirements.

Annually, or at intervals not exceeding 15 months, the external company must submit for registration, a profit-and-loss account and balance sheet (as in the limited liability return of accounts).

Alterations made in the charter, statutes, regulations, articles or other instruments used in registration should be delivered to the registrar within two months of the effective date of the alteration.

Ghana - Friendliest Country for Investors

The World Bank has rated Ghana as the most friendly country in West Africa to do business in.

Ghana is also ranked ninth out of the 41 African countries surveyed and 82nd among the 155 countries surveyed across the world.

On the list of 10 indicators considered, Ghana placed 131st in starting a business, 71st in dealing with licences, 48th in hiring and firing, 120th in registering property, 116th in getting credit and 28th in protecting investors.
Other indicators are paying taxes, 90th, trading across borders, 108th, enforcing contracts, 28th, and closing business, 79th.

The data for the indicators are benchmarked to a January 2005 World Bank study and in most cases refer to each country’s most populous city.
The World Bank explained in the research report that indicators measured government regulations and their effect on businesses, especially on small and medium-size domestic firms.

It said the data were based on research of laws and regulations, with input and verification from more than 3,000 local government officials, lawyers, business consultants and other professionals who routinely administered or advised on legal and regulatory requirements.

“This approach uses factual information and allows for multiple interactions with local respondents to clarify potential misinterpretations of questions,” the bank said in the report posted on its website. It said standard templates and questionnaires were also developed for all topics.

The bank further explained that it based the findings on aggregate rankings because they were easily understood by politicians, journalists and development experts and therefore created pressures to reform.

Giving details, the report said the ‘starting a business’ indicator identified the bureaucratic and legal hurdles an entrepreneur must overcome to incorporate and register a new firm.

They included the procedures, time and cost involved in launching a commercial or industrial firm with up to 50 employees and start-up capital of 10 times the economy's per capita gross national income (GNI).

The ‘dealing with licences’ indicator also tracked the procedures, time and costs to build a warehouse, including obtaining necessary licences and permits, completing required notifications and inspections and obtaining utility connections.

Another important indicator for investors, hiring and firing of workers, was introduced into the research because it measured the flexibility of labour regulations.

“It examines the difficulty of hiring a new worker, rigidity of rules on expanding or contracting working hours, the non-salary costs of hiring a worker, and the difficulties and costs involved in dismissing a redundant worker,” the report stated.

The ‘registering property’ indicator examined the steps, time and cost involved in registering property, assuming a standardised case of an entrepreneur who wanted to purchase land and a building in the largest business city — already registered and free of title dispute.

The main indicators included the number of procedures legally required to register property, time spent in completing the procedures and the costs, such as fees, transfer taxes, stamp duties and any other payment to the property registry, notaries, public agencies or lawyers.

The ‘getting credit’ indicator is the bane of most enterprises in developing countries, such as those sampled. The topic explored two sets of issues, credit information registries and the effectiveness of collateral and bankruptcy laws in facilitating lending.

The ‘protecting investors’ indicator measured the strength of minority shareholder protections against the misuse of corporate assets by directors for their personal gain.

The main ingredients of that indicator included transparency of transactions (extent of disclosure index), liability for self-dealing (extent of director liability index), shareholders’ ability to sue officers and directors for misconduct (ease of shareholder suit index) and the strength of investor protection index (the average of the three indices).

The research also examined the paying of taxes, addressing the taxes that a medium-size company must pay or withhold in a given year, as well as measures of administrative burden in paying taxes. Also included in the indicators was trading across borders to deal with the procedural requirements for exporting and importing a standardised cargo of goods.

The report stated that every official procedure was counted, from the contractual agreement between the two parties to the delivery of goods, along with the time necessary for completion.

Another factor of importance to entrepreneurs is the issue of contract enforcement, which was also dealt with in the research.

It looked at the efficiency of contract enforcement by following the evolution of a payment dispute and tracking the time, cost and number of procedures involved from the moment the plaintiff filed the lawsuit until actual payment.

The ‘closing a business’ indicator was to identify the weaknesses in existing bankruptcy laws and the main procedural and administrative bottlenecks in the bankruptcy process.

Source: Ghanaemb