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GHANA
SA investment up in Ghana

Published: 01-MAR-04

Ghana's business relations with South Africa are still in their infant stage but already Ghana's younger generation are savouring the taste of South African goods and services, reports Nana Mensahensah.

According to statistics at the Ghana Investment Promotion Centre (GIPC) between 1994 and 2003 a total of 35 multinational and small-scale companies were registered in Ghana. This amounts to an estimated capital injection of over US$36m from South Africa.

The service industry topped the list, with more than US$21m worth of investment, particularly in the telecommunication sector. A US$5m investment in the general trade category was next, trailed by building/construction and manufacturing, which recorded US$4m and US$3m respectively. Tourism accounted for just under US$1.5m.

South African investment in Ghana, mostly in the mining sector, accounts for over 60 per cent of total foreign direct investments with the acquisition of some goldmines such as Goldfields Ghana in 1992, and the proposed merger of Anglogold and Ashanti goldfields which will be worth over US$1.4bn.

Economic revival

Even though formal trade between Ghana and South Africa began only nine years ago, post-apartheid political ideology and pan-Africanist developments now are manifested in economic revivalism, says Dr. Kweku Frempong, Chairman of the Ghana South Africa Chamber of Commerce (GSACC).

In fact the Chamber was officially launched during a state visit of the South African President Tambo Mbeki.

Today, South Africa is Ghana's main trading partner, possibly a result of the bond between the two countries which was forged during the struggle for independence by the Late Osagyefo President Kwame Nkrumah in the late 1950s. Ten years ago a new era was born for economic and trade revivalism in Ghana.

Political will needed

However, according to Dr. Frempong, not only political idiosyncrasies have dictated the trade pattern between the two countries; strong political will to promote south-south cooperation is the main factor. He points to the fact that South Africans have competitive products that meet the needs of the emerging Ghanaian market, compared with products and services from the western hemisphere.

Unfortunately, bilateral trade between Ghana and South Africa favours South Africa, as Ghana has a serious trade deficit, in spite of the strong presence of South Africans in the relatively peaceful West African country.

Compared with other African countries, South Africa tops them all, both in volume of investment as well as spread, with a estimated annual rate of over US$5m. For example, fresh fruit imports, particularly apples, to Ghana accounted for over half the income in that sector for the year 2003. Clothing and textiles head the list of imported items, followed by household appliances and automobiles and parts.

Some high-performing companies, both nationals and multinationals, such as Multi-Choice, welcome doing business in Ghana. Anne Sackey of Multi-Choice notes that the company's success is driven by a business-inducing business climate, which is favourable to their operations. The company expects to triple its subscriber base in the medium term. She maintains that Ghana's main strengths are good working relations with state regulators, a strong focus on publicity, and commitment to social responsibility.

Multi-Choice expects a relatively stable exchange rate to cushion the cedi against the US dollar, as the company's billing and inputs are dollar-denominated.

Few limitations

The availability of foreign exchange on a regular basis to avoid delays in settling inter-company accounts is among Multi-Choice's top priorities, as delays may expose the company to exchange losses. "But we can count on not being overburdened in terms of fees, content, foreign ownership restrictions and issues relating to exclusivity," she says.

Breweries turnaround

In the brewery industry, South Africa's majority shareholding in Accra Brewery Limited (ABL) has substantially affected the financial situation of the industry in less than two years.

SAB Miller PLc of the UK, which owns South African Breweries, took over ABL, when it was suffering from low capital and ageing equipment. But today, Mr. Kweku Agyeman, the financial controller says, the company has recorded a 60 per cent increase in turnover, and profits have doubled. A steep rise in the consumption of its beer, at 35.5 per cent, outstripped the overall 27 per cent growth recorded in the industry between April 2002 and March 2003. With an impressive 34 per cent of the total market, ABL ranks second, after Ghana Breweries, its main rival. This figure is expected to double in 2004. According to the company's financial controller, the new owners have a performance-enhancing corporate scheme that contributes greatly to the company's successes.

In the retail and supermarket sector South Africa dominates other investors, although it does fall behind its European rivals in poultry products and textiles from Dubai and the Far East. In the petroleum industry new entrant Engen is the latest venture.

While most South African investors have succeeded, others have not been that fortunate. In 2001, for example, though the number of investors grew by a sixth, Pep Stores, which had a chain of clothing and footware shops in major cities in Ghana, collapsed. According to Dr. Frempong, their demise was due largely to the fault of an over-liberalised economy with weak regulators specifically in the bulk and wholesome dumping of used clothing.

Banking

In the banking sector, Stanbic, a majority-owned South African bank, is progressively fast-tracking its operations after being in Ghana for only three years. Stanbic suffered initial negative returns on its investment, but is slowly making progress, says a banker.

Out of a total of 175 projects registered in Ghana between January 2000 and March 2003 for the service industry - a total value of US$170.66m - a significant contribution came from South African companies. The aviation industry has also seen immense investment from South Africa, bringing it to the top of the list of most reliable African Airline, and providing uninterrupted service flights for passengers and cargo.

Dr. Frempong believes that South Africa has made major inroads into Ghanaian business, and into the homes of consumers. Technology, prudent management and fiscal discipline are, he says, the secret, but most of all, he trusts in technology from the south, "because as they were the first nation to conduct a successful heart transplant, I have no reservations about the efficacy of their drugs and their experience," concludes Dr. Frempong, himself a doctor.

High costs

Improving macro-economic indicators, lowering inflation, relatively stabilising cedi and reducing interest rates have supported the private sector in Ghana, but businesses would prefer a more friendly business environment, as the present environment has been responsible for high prices and the cost of goods and services. For example most of the fresh apples found in the streets of Accra cost an average of 3000 or 40 cents, above the reach of the public servants who are most likely to buy them.

South African products do not have the most publicity; highly subsidised advertisements from super multinational companies and cartels from the EU and Europe still dominate the media.

The outlook for South African investment is, however, bright, says Mr. Thulani at the Economic Desk of the South African Embassy. According to him the embassy is focusing on organising trade fairs specially aimed at penetrating the Ghanaian market, to meet consumers' needs and - above all - provide them with choice.

This will be done in collaboration with the Department of Trade and Industry, which will be responsible for facilitating the fairs by providing special tax exemptions. This will be backed up by exchange visits in the areas of information, technology, tourism, energy and agriculture. South Africa is not only exporting goods and services to Ghana, but also human capacity and the skills to beef up local expertise and labour.

In the next few years, under the umbrella of NEPAD, the Commission seeks to consolidate, strengthen and diversify trade between the two countries. Export and import laws and duties will be harmonised, and taxes and procedures developed that are key to facilitate trade.
Name of company (US$ '000)Total cost of projects
Steeledale (GH) Ltd 415.00
Hume Fulgrip Company Ltd 1,700.00
Vanguard Properties Ltd 1,938.65
Tata Ghana Ltd 300.00
Supreme Furnishers ghana Ltd 1,300.00
Tamrock Ghana Ltd 3,576.00
Medpro Ghana Ltd 365.00
Shoprite Ghana (Pty) Ltd 303.86
3M South Africa (Pty) Ltd (Ghana branch) -
Pacific Paper Technologies Ltd -
Group Five International Ltd -
Multi Choice Africa Ltd -
Ominigraphics Commercial West Africa Ltd 2,337.16
Karnebo Textiles (Pty) Ltd 1,200.00
Mframa Airlines Ltd 8,500.00
Global Asset Management Ltd 20.00
Mainstream Reinsurance Co. Ltd 1,168.07
Performance Laboratories (Ghana) Ltd 649.99
Hydratech Services Ltd 12.61
Insight Advertising -
Map Shipping Co. Ltd 58.82
Engen Ghana Ltd 600.00
Force Five Engineering (GH) Ltd 780.00
Dart Communications Ltd 890.71
Africa Pay Television (GH) Ltd 3,757.13
Africa Distribution Centre (GH) Ltd 45.00
Hytec Services Ghana Ltd 124.40
Crusader health (GH) Ltd 760.00
Alliance Media Ltd 72.83
Comutanet Ghana Ltd 50.00
Afripa Telecom Ghana Ltd 2,550.00
Multotec Ghana Ltd 60.00
Enterprise Life Assurance Co. Ltd 1,041.67
Kairo International (Ghana) Ltd 1,200.00
Blue Marlin Fishing Charters (GH) Ltd 300.00




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