The past year has been challenging for businesses, and even more arduous for small and medium-sized companies that likely did not have a business continuity plan or contingency plan in place before the pandemic.
Although Covid-19 hammered the economy and created tough conditions for entrepreneurs, Ghana’s business operating environment was challenging even before the pandemic struck. This is seen in the World Banks’s Doing Business report, which, since 2003, has provided an objective measure of the quality of the business environment across 190 economies and selected cities at the sub-national and regional level.
The 2020 report, which was based on operating conditions in 2019, ranked Ghana 118th out of nearly 200 countries for the ease of doing business. The performance was a deterioration from the 114th position the country occupied in 2019.
As far as the ease of starting a business is concerned, Ghana ranked 116th out of 190 countries. Although the country has taken significant steps over the years to facilitate business registration, there is still a lot to improve, since the current situation does not befit a country positioning itself as the lead destination for foreign direct investment in the sub-region.
The new Companies Act which was passed in 2019 is a step in the right direction to streamline the business registration and operating environment. The Registrar-General’s Department is implementing a number of innovations, like online business registration and digital payments, that aim to simplify the business registration process.
Recently, the Ghana Investment Promotion Centre (GIPC), the state’s chief business promoter, announced that it was liaising with other state regulators to set up a one-stop shop for investors seeking to establish in Ghana. This is expected to reduce the turnaround time for investors as they do not have to complete cumbersome mandatory requirements at various locations.
Ghana’s ranking is relatively better on the ease of getting electricity (79th) and obtaining a construction permit (104th), but it does not do so well on the ease of paying taxes (152nd) and trading across borders (158th). Thankfully, important efforts are ongoing to address these problems. For example, the Ghana Revenue Authority (GRA), which collects the nation’s taxes, is digitising tax payments to reduce taxpayer costs and improve efficiency and convenience.
While the ease of setting up a business is the most obvious measure of the ease of doing business, it is equally important for business owners to have a legal regime that ensures that when things don’t go as planned, they are able to unwind their investment without much trouble.
The Doing Business report’s “Resolving Insolvency” indicator basically measures the time, cost and outcome of insolvency proceedings involving domestic legal entities. Here, Ghana is ranked 161st, bettering the performance of only 29 other countries. This ranking is not encouraging, but it is encouraging to note that Parliament last year passed the Corporate Insolvency and Restructuring Act 2020 (Act 1015) to tackle this problem.
According to Felix Addo, President of the Ghana Association of Restructuring and Insolvency Advisors (GARIA), the act provides a tool for companies in distress to restructure and turn their fortunes around; to preserve their going concern value, either with the same shareholders or new shareholders; to preserve as many jobs as possible; and to continue to play their part in the economic landscape. Hopefully, Act 1015 would improve on the insolvency regime and in the long term improve upon the country’s ranking.
Even before the outbreak of the pandemic, the government was implementing a number of innovations to improve the business environment. These include the Digital Addressing System and mobile money interoperability. The lack of a structured address system has hampered bank lending, for instance, and the digital addressing system should help financial institutions deal more confidently with customers, whose addresses can now easily be found. The mobile money interoperability innovation further deepens financial inclusion and opens up more opportunities for businesses as far as accepting digital payments is concerned.
In the World Economic Forum’s latest Global Competitiveness Report (GCR), Ghana performed creditably on innovation and technological readiness. Although overall, Ghana ranked 111th out of 137 countries for its competitiveness, on innovation and technological readiness, it ranked 57th and 93rd respectively.
Given the adverse impact of the pandemic, countries are priming themselves to attract the most investment to inject life into their ailing economies. And Ghana, like most of these countries, has a lot to do to boost both internal and foreign investment.
The AfCFTA presents immense opportunities for the country’s post-pandemic recovery, but to take advantage of these opportunities, Ghana has to demonstrate it is indeed ready through a set of reforms that would transform the business environment to encourage successful entrepreneurship, business growth, and job creation.