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Ghana - Country Guide

Market Overview

In 2009, Ghana was the UK’s 10th largest goods export market in Africa and 12th largest import market in Africa.

Well endowed with natural resources, Ghana has roughly twice the per capita output of the poorest countries in West Africa. Even so, Ghana remains heavily dependent on international financial and technical assistance. Gold and cocoa production and individual remittances are major sources of foreign exchange. The domestic economy continues to revolve around agriculture, which accounts for about 43% of GDP and employs about 55% of the work force, mainly small landholders. Real GDP growth over the past ten years has averaged 5.1%.

With the 2007 confirmed discovery of commercially viable offshore oil reserves in Ghana (Jubilee Field) and predicted production set for late 2010 or 2011, there has been increased international interest in the Ghanaian market on the part of oil and gas and auxiliary services sectors – as well as companies from unrelated sectors anticipating future economic growth in the country. Further oil and gas exploration continues and optimism is high for further discoveries.

Ghana’s main export partners (2007) were the Netherlands (11%), the United Kingdom (9%), France (6.2%), the United States (5.9%), Germany (4.6%) and Belgium (4.4%).

Ghana’s main import partners (2007) were Nigeria (15.1%), China (14.9%), the United Kingdom (5.2%) and the United States (5.1%).

Market Challenges

Relatively strong economic growth over the past few years has created capacity issues in some sectors – notably electrical power. The government of Ghana has invested significantly in generation, distribution and transmission recently, with further investment expected in the near future. Nonetheless, access to the electrical grid and to consistent power remains a challenge for many businesses in the country.

Even before the financial developments at the end of 2008, access to lending for Ghanaian businesses was relatively challenging. The cost of credit is also relatively high. For this reason, attractive financing can be a significant decision-making factor for Ghanaian buyers of international products and services.

Ghanaian buyers are price-sensitive and thus, while western products and services are perceived as high quality, cheaper (often Chinese) products are sometimes purchased for cost reasons. Although new U.S. and European equipment is bought by Ghanaian companies, re-conditioned goods (e.g. vehicles and equipment) have been particularly successful in the Ghanaian market.

While the vast majority of Ghanaian business partners are reliable and legitimate, the proximity of other countries well-known for fraud does mean that reasonable caution needs to be exercised when dealing with new companies or individuals.

Market Opportunities

With oil and gas production, opportunities for auxiliary services to the industry will increase. Although Nigeria remains the sector hub for West Africa, the relative ease of doing business in Ghana combined with relatively pleasant living conditions, may attract a greater number of companies to establish a local presence in the market.

The mining sector – particularly gold – but also bauxite, manganese and diamonds, are a significant part of the Ghanaian economy. Goods and services to this sector represent a significant opportunity for western companies. The Ghanaian government is also hoping to encourage the expansion of local value added processing.

The Ghanaian construction industry has grown in recent years, with activity in the areas of roads, highways and bridges, coastal works and residential accommodation. Construction equipment, particularly re-conditioned equipment, is likely to continue to be a promising sub-sector.

As the result of the government’s liberalization of the telecommunications sector, growth has been significant. Popular imports include switching and transmission equipment, telephone and fax machines, radio and television equipment and cellular telephones.

Market Entry Strategy

For most Ghanaian business sectors, there are no laws requiring the retention of a local agent or distributor when exporting to Ghana. However, increasingly, such regulation is being discussed (particularly with regard to the extractive industries). Companies who retain an experienced agent or distributor (who has a thorough understanding of the local economy) are less likely to experience problems entering the market.

Using an Agent or Distributor

Companies who retain a local, experienced representative in Ghana face fewer problems and a greater level of success when entering the market. Companies are recommended to use a local business partner to help them succeed in the Ghanaian market. An additional reason for this recommendation (which may become even more relevant in the future) is that there has been public discussion recently by the government of Ghana regarding the possibility of instituting/increasing local content requirements (especially for the extractive industries).

When choosing a Ghanaian business partner, some important factors may be:

• The agent or distributor chosen understands the local economy and import/export regulations;
• The potential business partner has sufficient experience working with international companies in the same or a related sector;
• If the exported product requires maintenance and servicing, that qualified personnel and a reasonable inventory of spare parts will be available for buyers;
• Whether exclusivity is a priority for a distributor or agent (note that most agents and distributors in Ghana represent several product lines so an exclusive agent/distributor may be more difficult to find);
• The agent or distributor has been subject to a thorough due diligence.

Establishing an Office

Forms of Business in Ghana

The main types of businesses in Ghana (similar to those found in the United States) are:

• Companies, including branches of foreign firms,
• Partnerships and joint ventures, and
• Sole proprietorships.

Under the companies’ code, the following forms are allowed:

• Limited Liability Company – liability of members limited to amount, if any, unpaid on shares respectively held by it;
• Company Limited by Guarantee – liability of members limited to amount they respectively undertake to contribute to the assets of the company in the event of its being liquidated;
• Unlimited Company – no limit on liability of members.

Ghana does not allow limited liability partnerships. A company may be registered as a public or private company. Every company with limited liability must include the word ‘Limited’ as the last word of its name. Companies incorporated in Ghana must have at least one shareholder and two directors, with one director resident in Ghana. Companies must file annual returns with the Registrar of Companies.

Franchising

South African franchises in particular have been active in the Ghanaian market in recent years. Some have been successful (notably some retail grocery outlets), while some have failed (e.g. some fast food outlets). Because of the overall improvement in the Ghanaian economy and optimism about the future, interest in franchising is growing.

However, numerous challenges remain:

• Under-capitalization of many local businesses and high cost/poor availability of finance mean that many international franchise master licenses are unaffordable for Ghanaian buyers;
• Difficulty in maintaining reliable supply chain (especially cold chain) – for franchises with specific and regular needs for perishable items imported from abroad;
• Scarcity of experienced, specialized staff – for some sectors this is not an issue but for other franchised businesses this can be a stumbling block.

Direct Marketing

Direct marketing is not a popular business method yet in Ghana. There are a very limited number of international direct marketing companies with an established presence. However, a recent increase in interest on the part of international direct marketing companies may indicate a future increase in this business method.

Joint Ventures/Licensing

While the Ghanaian Investment Code encourages joint ventures, companies should take care that any join venture arrangements clearly delineate the respective areas of responsibility for each party. In particular, financial arrangements should be discussed in detail and in advance. Some local entrepreneurs expect the foreign investor to bear all costs while their contribution is limited to local market expertise. Due diligence on the prospective partner is always advisable, as is retention of a local attorney.

Selling to the Government

Government ministries, departments, agencies and local governments have their own tender committees, which buy directly from suppliers. Ghanaian law stipulates that purchases below a certain threshold are reserved for local companies. There is no requirement to have a local agent to be able to sell to the government. However, local agents can be useful in providing leads and contacts.

Distribution and Sales Channels

The distribution channels available for suppliers of goods and services include: wholesalers, retail outlets and agents/distributors. When talking to potential distributors/sellers in Ghana, an important issue to consider is potential changes in product shelf life given the warm and humid environment in the country.

Major cities in Ghana for goods and services roughly correlate with population size:

• Accra/Tema Metropolitan area (3.8 million people),
• Kumasi (1.3 million people),
• Shama-Ahanta East Metropolis (400,000 people),
• Tamale (320,000 people),
• Sunyani (195,000 people),
• Cape Coast (140,000 people).

Goods primarily enter Ghana via sea or air (including air freight, courier services, air parcel post and express). Because deliveries can sometimes be delayed, it is important to allow some extra time when preparing delivery timetables. Also, it is advisable to ensure that required documentation is in order prior to transit – as incorrect or incomplete documents can also add extra time to delivery schedules. A freight forwarder is often recommended to increase the chances of a smooth transit of goods.

Currently, virtually all goods enter Ghana through either one of two main sea ports (Tema or Takoradi) or via Kotoka International Airport. Problems have been reported with expeditious clearing of goods through the ports with some reports of solicitations for bribes from port and customs officials.

Imported or locally manufactured goods can be stored under customs control in a government or private bonded warehouse without payment of import duty or other taxes to allow deferment of tax liabilities until the goods are needed for consumption or are exported.

Selling Factors/Techniques

Ghana has strong historical ties to Britain (and to a lesser extent with Europe generally). There is also an increasing appreciation for U.S. made goods. Face to face contact is the preferred method of transacting business in Ghana. While Ghanaians are accustomed to dealing over email, telephone or fax – face to face contact is the most effective way of building long term business relationships. While personal visits to potential business partners may seem an inefficient way of doing business, over the long term such courtesies can yield rewards in the form of loyal business contacts.

Electronic Commerce

There has been significant improvement in the availability of Internet services over the past few years. Although some rural communities are not yet part of the telecommunications network, many more Ghanaians have telephone and Internet service than was the case even five years ago.

Services for business people have also improved. Until very recently, credit cards were unavailable to most Ghanaian businesses, making business travel abroad difficult. Local banks however, have now introduced special credit card services for this purpose, with tailored credit limits based on account balances and other factors, making business travel much more feasible for Ghanaian companies.

Trade Promotion and Advertising

There are several advertising agencies in Accra. A few of the larger agencies offer a full range of publicity and sales promotion service in the country’s main population centres. Three of them, Lowe Lintas Ghana Limited, Design & Display Publicity (DDP) and Media Majique are affiliates of U.S. companies. While many of the smaller agencies market themselves as ‘advertising’ agencies, they are not full-service ad agencies in the sense that is familiar to most U.S. companies. Rather, they are engaged primarily in collateral design and printing. The U.S. Commercial Service Ghana can be of assistance in identifying suitable companies for brand representation and leading publications with general or targeted readership.

The following is a list of major newspapers and business journals:

• Daily Graphic
• Ghanaian Chronicle
• Ghanaian Times
• Business and Financial Times

The Daily Graphic and Ghanaian Times are state-owned daily newspapers and have the largest circulation base while the other publications listed above are privately owned and circulate mainly in metropolitan areas. Ghanaians own more than four million television sets and over 13 million radios. There are five free-on-air television networks currently broadcast in Accra (GTV, TV3, Metro TV, TV Africa and Viasat 1) and over 20 pay-per-view networks re-broadcast by satellite. There are also 86 FM radio stations and three short-wave stations.

Ghanaians are increasingly media-savvy and accustomed to advertising across a full range of media. In addition to television, print and radio, point of sale advertising and outdoor posters are also common. The popularity of trade shows is also growing and can sometimes be a useful means of reaching consumers.

Pricing

Ghanaians are price conscious for most product categories. At the same time, when higher quality products mean longer replacement intervals or better product performance, Ghanaians are often willing to consider factors other than price alone.

Access to commercial credit in Ghana is poor and the cost of credit is very high. Exporters are advised to utilize an irrevocable, confirmed letter of credit, especially if they are non-resident and new to the Ghanaian market. Product costs should be computed on a CIF (cost, insurance and freight) basis.

Sales Service/Customer Support

Readable service manuals, frequent personnel training and an adequate inventory of spare parts can all create an advantage for a U.S. company selling into Ghana. Among the business community and individuals who have lived abroad there is an increased expectancy for good quality after sales service and customer support. This is particularly the case for goods from the following categories: high tech (e.g. computer hardware/software or telecommunications), heavy industrial equipment (e.g. mining, earth-moving or construction), office equipment (e.g. photocopiers), cars/trucks and air-conditioning/refrigeration units.

Protecting Your Intellectual Property

It is important to have an overall strategy to protect IPR. Rights must be registered and enforced in Ghana, under local laws. Companies may wish to seek advice from local attorneys or IP consultants. It is vital that companies understand that intellectual property is primarily a private right. It is the responsibility of the rights' holders to register, protect, and enforce their rights where relevant, retaining their own counsel and advisors. It is always advisable to conduct due diligence on partners. Negotiate from the position of your partner and give your partner clear incentives to honour the contract. A good partner is an important ally in protecting IP rights. Keep an eye on your cost structure and reduce the margins (and the incentive) of would-be bad actors. Projects and sales in Ghana require constant attention. Work with legal counsel familiar with Ghanaian laws to create a solid contract that includes non-compete clauses, and confidentiality/nondisclosure provisions.

t is also recommended that small and medium-size companies understand the importance of working together with trade associations and organizations to support efforts to protect IPR and stop counterfeiting.

Ghana is a member of the World Intellectual Property Organization (WIPO), World Trade Organization (WTO) and the English-speaking African Regional Industrial Property Organization (ESARIPO). Laws affording protection for intellectual property have improved in recent years.

Leading Sectors for Export and Investment

• Oil and Gas Industry
• Power and Electrical Supply
• Telecommunications
• Automobiles/Light Trucks/Vans
• Construction and Earth Moving Equipment
• Mining Industry Equipment
• Food and Agriculture