Europe is highest foreign investor in Ghana

A survey conducted by the Bank of Ghana shows that Europe is the highest source of private foreign capital inflow to Ghana. In the highlights of the survey, it shows Europe as making the highest foreign direct equity investments (FDEI) to Ghana representing 60.7%. Investments from the African continent consist of 38.0%.

The top ten sources of FDEI inflows in 2007 were Mauritius, 27.9%; France 19.4%; British Virgin Islands 18.4%); United Kingdom 16.9%; United States 5.9%; Togo 3.4%; Norway 3.3%; Israel 3.2%; Nigeria 2.1%, and Switzerland 1.9%.

In a press release from the central bank copied to ghanabusinessnews.com, Wednesday June 18, 2009, the survey conducted between October and November 2008 with a high response rate of 81.47% shows that private foreign capital inflow into Ghana amounted to GH¢1.5 billion in 2007.

And the survey also shows that the business entities that were covered gave strong signals to expand in the next three years.

The survey according to the release was conducted to monitor the scale and composition of private cross border capital flows and investor perception in Ghana. It was intended to help improve coverage in compiling Balance of Payment (BOP) statistics; provide estimates of Ghana' International Investment Position (IIP) and provide a basis for formulating policies that would improve the investment climate.

A representative sample of 286 business entities in nine major sectors of the economy was covered in the survey.

According findings of the survey, Ghana had a sizeable private foreign capital inflow of GH¢1,538 million equivalent to 10.9 per cent of GDP or US$1,589 million in 2007. This brings the stock of such inflows to GH¢4,328 million or US$4,471 million at the end of 2007, it says.

The inflows, it adds, comprised direct equity investments of GH¢854 million, including reinvested earnings of GH¢330 million; trade credits of GH¢304 million; and loans totaling GH¢361 million. Private foreign capital outflows were estimated at GH¢98 million in 2007 raising the stock of private cross border assets to GH¢597 million.  The net International Investment Position (IIP) of the private sector stood at GH¢3,731 million at the end of 2007.

The survey identifies the following sectors to have contributed the highest foreign direct equity investment flows in 2007; these are transport, storage and communication, a total of GH¢163.4 million; banking contributed GH¢58.9 million, and mining and quarrying brought in GH¢48.1 million, which together accounted for 82.0 percent of total FDEI flows. Other sectors that benefitted from such flows were real estate/property services GH¢20.8 million; construction GH¢12.4 million and manufacturing GH¢13.8 million.

Despite the strong signals that the businesses gave regarding the desire to expand in the next three years, some negative perceptions of businesses were captured. The survey of investor perceptions signaled inflation as the main economic factor which impacts negatively on business activities.

Labour market rigidities such as staff turnover, wage levels, costs of skilled labour, and restrictions regarding hiring of expatriates also had negative effects on enterprises.

Domestic market size, access to international, regional and domestic finance and credit, and efficiency of banking, telecommunication and internet services were viewed as positive, the survey shows.