Ghana's recipe for investment
Poku Adaa
The PNDC Secretary for Finance & Economic Planning, Dr Kwesi Botchway has described the recently published Code of Investment as a "palliative and constructed investment code which can quickly attract investors". Our correspondent POKU ADAA reports.Delayed several times, its publication postponed, the Investment Code of the PNDC, popularly called Law 116, was published on 17 July, 1985. At a press conference in Accra, the Secretary for Finance and Economic Planning described it a palliative and as constructive investment code which can quickly attract investors. The publication of the code thus ends two to three years of vacillation and uncertainty over what new sets of conditions are going to guide domestic and foreign investments in this country or, indeed, whether it was going to be a blue-print for new sets of ideas to boost the rate of investment and open up business activity in the country.
have definitely come home to roost in that the code has no aura of novelty about it and is no different from similar grand designs of almost all previous governments of the country: the desire to encourage local and Ghanaian entrepreneurship. The main thrust of the code centres on the principle of indigenisation by partnership and offers a blunt instrument for local control over foreign investment, which is no different from similar enactments of The exception, perhaps, is that in this case Law 116 does not cover petroleum exploration and production, and the mining industries.
The code enacts the establishment of a National Investment Centre to be run as a state agency and shall identify and promote investment opportunities, administer all tax concessions, obli- gations and benefits for enterprises established under the aegis of the code. The NIC shall be the institution to ensure that the terms of the code are complied with at all times. (NB: A National Investment Centre (NIC) has been in existence since the time of ex-President Limann when the Capital Investment Board was re-constituted into the NIC.)
Past legislation on investment in Ghana have often times been bedevilled by sheer bureaucracy and long delays in the granting of licences and processing of applications, a practice which easily frustrates any would-be investorv The 20 areas of economic activity which the code has reserved wholly and solely for Ghanaians include: retail and wholesale trading unless such business is carried out as a supermarket or departmental store with more than $10.5 million capital; taxi service and car hire operations; produce brokerage unless employed capital is not less than $0.5 million; advertising and public relations business; booking shops including pool betting and lotteries; estate, travel and lighterage services; commercial land passenger transport business; operation of beauty saloon; manufacturing business involving cement blocks, tailoring, textile printing, tyre retreading, suitcases, bags, etc, other than for export; and agency or representation of foreign companies unless the enterprise has an employed capital of not less than $0.5 million.
Specific concessions and benefits are promised to investors in the "Priority" categories. These are:
(1) Agriculture, including processing: guaranteed land use, custom-duty free imports of machinery and plant equip- £595.00 ment, corporate income tax of 45%, an investment allowance of 10% and special income tax rebates for agri- culture of tree crops, poultry and livestock.
(2) Construction and building especially for road and housing projects: Customs exception on initial imports, investment allowance of 72% p.a. and depreciation of capital allowance of 50% in year of investment and 25% in subsequent years.
(3) Tourism: concessions apply to only where enterprises are net foreign exchange earners in which case there shall be exemptions in custom duties for initial imports of plants and equipment and also there are tax and rate rebates on building properties.
(4) Manufacturing Industries: preference will be granted to (a) where products are for export, (b) where local raw materials are entirely utilised, (c) where the industry produces machinery such as agricultural tools, spare parts and machine tools. Exemption from custom duties, investment allowance of 72% p.a. and capital allowance of 40% in year of investment and 20% in subsequent years.
Apart from specific benefits granted to these 'priority' areas, certain generalised incentives are offered to all prospective investors. These include tax rebates for enterprises which take definite steps to support scientific research, locate themselves in rural areas, undertake development of infra- structure in remote locations and which are labour intensive and able to create employment.
Furthermore the code provides that foreign exchange earning enterprises may be allowed to operate external accounts which can retain at least 25% of earning obtained. Also immigration quotas will be granted for the employ- ment of expatriate personnel who may in addition enjoy what is described as 'selective alien employment taxes'. Transfer of dividend rights, machinery for settling disputes between an investor, local or foreign, and the NIC are enshrined in the code.
The final insertion which will, of course, be of interest to potential investors is the minimum capital of US$100,000 which a non-Ghanaian must possess before even his application for licence to operate can be considered. For a joint venture between a Ghanaian and a non- Ghanaian, the minimum capital of US$60,000 will be required.
Of course, getting lofty ideas onto paper is easy. Seeing that it works is another. Past legislation on investments in Ghana have oftentimes been bedevilled by sheer bureaucracy and long delays in the granting of licences and processing of applications, a practice which easily frustrates any would- be investor.
And frustration there will be because of the unusually large number of re- strictive clauses and tight conditions that might pose real hurdles for foreign investors, especially where a project officer of the NIC will have to use his discretion to decide which are "bad" or "good" projects, or tight time limits within which operations are to commence which may pose problems if an investor decides to take the 40% reduction in income tax to begin from scratch in a rural area.
What the code did not specify is the fate of foreigners who are currently running businesses now solely reserved for Ghanaians. This is a potential source of conflict and a breeding ground for bribery and sabotage of the success of the new code.
