By: Anthony Sedzro
The Ghana Investment Promotion Centre (GIPC), and by extension, the government has been advised to stop traversing worldwide seeking foreign direct investors because there is capital that can be tapped locally.
Over-concentration on foreigners has contributed to making local investors and Micro, Small and Medium-scale Enterprises (MSMEs) uncompetitive.
Nana Osei Bonsu, the president of the Private Enterprises Federation (PEF) made these points at the Citi Business Festival’s ‘Investment Opportunities’ forum held at the Alisa Hotel, Accra on June 6. The ‘Investment Opportunities’ forum is part of a month-long festival of business activities put together by Accra-based Citi FM.
Speaking passionately to a packed audience of investors, diplomats, business people and the media, Nana Osei-Bonsu enumerated the many challenges faced by indigenous MSMEs and argued that provisions in the GIPC Act, 2013 (Act 865) and its generous tax exemptions favours foreigners, not the Ghanaian business person.
He said foreign investors borrowed from their home countries at the rate of about 3 percent while their Ghanaian counterparts did so at about 30 percent and from the on-set the local investor cannot compete.
“So between the 3 percent to 27 percent margin in cost structure added to the 25 [percent] additional tax exemption enjoyed by the foreign strategic investor, the Ghanaian investor is disadvantaged at 52 percent. We cannot compete, that is why we need support from government to undertake everything that we need to do to allow us to be able to be competitive,” he argued.
Currently, Act 865 classifies any investor who invests more than US$50 million as a strategic investor. The PEF boss also criticised this ‘strategic investor’ category as unfavourable saying not making indigenous entrepreneurs could raise that amount to enjoy 25 percent exemption.
“The minimum requirement for a strategic investor [per the Ghana Investment Promotion Centre] is GHc50 million,” he narrated, and queried rhetorically: “How many Ghanaian businesses have GHc50 million?
“So, automatically we have side-lined our own people. When [foreign] businesses come on-shore, they apply to GIPC and they get tax exemption. The tax exemption which is 25 percent. The Ghanaian [investor] doesn’t have US$50 million to qualify as a strategic investor so they don’t get the tax exemption.”
Osei-Bonsu advised the government to tap into local pension funds like SSNIT and other mutual funds as long-term sources of capital for investment instead of pursuing foreign capital.
“Let me also advise all of us who work, (you) have the chance to set aside 35 percent of your income from taxes in pension schemes. So, if you do that and you go into the third-tier of the pensions and set aside 25 cedis for let us say, 4 million of our population, we can generate GHc2billion a year for long-term pull of funding for investment. These are resources that … the private sector (can) tap into,” he reasoned.
He continued: “…the asset value [of SSNIT] is not even US$6 billion for a country of 27 million people. I had a meeting with the minister for agriculture of Botswana and, in a country of 2 million people, Botswana’s pension [fund] is about US$8 billion compared to us. Why can’t we do capital mobilisation in our environment?” he asked.
“So the money is here, we don’t have to travel around the globe for foreign direct investors to come. For every US$1 that comes from overseas, US$5 goes outwards,” Osei Bonsu said.
Ghana as an attractive destination
In his presentation, Reginald Yofi Grant, the CEO of GIPC explained that GIPC will work to make Ghana the favourite investment destination in West Africa and also the best place to do business in Africa. He said he believed the passage of GIPC Act, 2013 (Act 865) had certain provisions that contributed to reducing foreign direct investment into the country and it will be looked at.
Grant said the needs of local investors will be addressed and they will be appropriately consulted in GIPC’s investment efforts. He revealed that the GIPC will establish offices in each of the 10 regions in Ghana.
Henry Wientjes of African Tiger Limited, speaking at the forum, said that agriculture can be key for the development of the country. He explained that the exchange rate regime, if well addressed, could better the lives of hundreds of thousands of local farmers.