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Is Ghana becoming Africa’s fading star? Asks the Africa Report.

Over the past five years, Ghana has operated a charitable fiscal regime that encouraged more spending from borrowed funds even as revenues failed to impress. Now the country is roughing its golden hen to help make up for the fallouts.

Ghana hardly struggles to sell itself to the rest of the world. Promoters pitch it with confidence as West Africa’s preferred investment destination and a launchpad to the sub-region’s more than 415 million people and the almost $680bn economy.

Home to about 31 million people, the majority of whom are youth, the country enjoys sociopolitical stability in a region characterised by turbulence. The economic prospects are bright, helping to attract the likes of Kjell Ingn Rokke, the Norwegian billionaire, and Vincent Bolloré into the $82bn economy. FDIs soared to about $2.7bn in 2020 and were projected to close last year at $3bn.

Ghana’s ‘deteriorating business climate’
But despite the impressive showing, businesses and diplomats complain about a deteriorating business climate. Compromised officials apply the laws unevenly and are more of a signal to the targets to meet the terms of individuals rather than for them to comply with laid requirements. They also point to political interferences and deep-rooted nepotism, favouritism and the harassment of genuine businesses. These fuel growing perceptions, and rightly so, that Ghana is gradually losing its reputation as a genuine business destination.

Already, frustrated diplomats and foreign firms have been fretting over the issue but not many are able to discuss it publicly. Most find that the implementation of regulations was fraught with challenges, with companies complaining that they get unequal treatment.

While these are not entirely peculiar to Ghana and other middle-income economies, the magnitude and the audacity are quite curious. In the midst of these, excessive borrowing to fund a buoyant expenditure appetite has bottled up fiscal pressures.The deficit doubled to 15.5% and the debt-to-GDP ratio was around 81% in 2020, putting the country at significant risk of debt distress, according to the World Bank. Inflation resumed an upward trajectory since May last year; it ended November at 12.2% – the highest since a rebased basket was introduced in August 2019.

Revenue mobilisation has also not impressed with the government missing targets in all its budget cycles since assuming office. This has created and sustained the obnoxious rent-seeking culture that questions the country’s enviable image in the eyes of investors.

The problem with the Ghana Revenue Authority
There is more. Revenue officers from the tax agency and the Ministry of Finance have become a special problem for businesses. Rampant audits and arbitrary fines are the order of the day for all sectors and those that seek the long haul of the process end up more bruised. As foreign multinationals with a reputation to keep, the situation has placed them in-between the demands of the Ghana Revenue Authority (GRA) officers and the need to keep to their standards.

The modus operandi is even more telling. After the submission of the annual reports, GRA officers often hunt down the targeted firms with further audits. Spurious findings and tax disputes are then communicated to these victims after which the harassment starts. More often than not, the conversation moves from official to informal and could descend to personal settlements that will suddenly undo a trumped-up crime initially purported to have been committed against the tax laws.

One senior executive said the “GRA is the worst of the rent-seekers” with the practice being widespread in the tax collection and administration body. “It is across all organisations, from junior officers up to the more senior stakeholders.”

The appointment of the leadership of the GRA is purely a political affair. Former and current top government appointees say this arrangement has meant that appointees to the revenue authority have political fathers whom they pay ‘homage’ to in order to ‘keep their backs.’

Nepotism is also an open secret in the government, and it is traceable to almost every position in the public service. Most of the sensitive positions are held by the President’s close family relations and while they may qualify, the practice obviously compromises proper scrutiny.

Bottom line
These should not be allowed to become the norm for one of Africa’s shining stars. While they may be more of a government than a national issue, how the authorities react could define the image of the party in the eyes of investors, and between now and the next elections in December 2024 should be enough to salvage the image.

Story Credit: Eugene B.G Bawelle for the Africa Report
Eugene is an Economist with extensive experience in banking and finance, environmental and social risk management and supporting the growth of small to medium enterprises in Africa. He is currently a Doctoral Researcher at the University of Cape Town, South Africa.

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