Ghana, once a promising investment hub in West Africa, is now witnessing a troubling economic climate. According to a report by USAID, Ghana’s economy, was described by the World Bank in 2019 as the world’s fastest-growing economy. However, in 2022, it all came crashing down. The government blamed external factors such as COVID-19, the Russia-Ukraine War, and global inflation on the downward trajectory of the economy. In as much as these factors cannot be ruled out, it is worth noting that the government’s mismanagement, overspending, and excessive borrowing coupled with systemic corruption, set the stage for disaster.
The government has been on a mission to restore the economy since. This has partly necessitated the imposition of high taxes on businesses operating in the country. In effect, the cost of doing business in Ghana has become unnecessarily high.
The high cost of doing business in Ghana has led to some multinational companies’ exodus and some local businesses’ collapse. This has seen the likes of Glovo, Nivea, Jumia Foods, Lipton Tea, Dark and Lovely, Bet-365, Game, and Bic all having to shut down their operations or relocate to neighboring countries. These companies cited issues such as profitability cost, tax burden, rising utility cost, inflation, power outages (Dumsor/Dumsiesie), and currency depreciation as part of the reasons for leaving. Also, interest on loans remains astronomically high making it difficult for companies to finance their operations and expansion plans, inflation has driven up the cost of raw materials, labor, and logistics squeezing profit margins and leading to unsuitable operation costs. This isn’t the plight of just multinationals but local businesses as well.
The exit of these companies have a significant impact on the economy including job losses, reduced competition, increase in prices for consumers and also struggle for local businesses to fill the gap in the shortest possible time. This outflow is a direct consequence of the government’s overreach into the economy, creating a hostile business environment characterized by excessive taxation, burdensome regulations, and inconsistent policies.
Multinational corporations are catalysts for economic growth, bringing capital, technology, and job opportunities. Their presence stimulate competition, leading to lower prices, improved product quality, and greater consumer choice. Moreover, these corporations often serve as incubators for local businesses, transferring valuable skills and knowledge. A thriving private sector, fueled by competition and innovation, is essential for sustainable economic development.
However, the government’s heavy hand has transformed Ghana into an increasingly unattractive investment destination. Exorbitant tax rates, coupled with complex and ever-changing regulations, have eroded the profitability of businesses. This stifling bureaucracy has created a breeding ground for corruption and inefficiency, deterring both domestic and foreign investors. The government’s penchant for interventionist policies has distorted market forces, hindering competition and innovation.
A free market economy, characterized by limited government intervention, is essential for unlocking Ghana’s full economic potential. By reducing the regulatory burden, reducing corporate tax rates, and eliminating redundant levies such as the COVID-19 levy will go a long way to creating a leveled playing field for businesses, both domestic and foreign. This would stimulate entrepreneurship, job creation, and technological advancement.
In conclusion, Ghana must shift its economic paradigm from one of government control to one of market freedom. By embracing free market principles and limiting its interventionist role, the government can create an environment that fosters entrepreneurship, innovation, and economic prosperity. A vibrant private sector will drive competition, leading to lower prices, better quality goods and services, and greater consumer choice. However, the government’s current policies have failed to deliver these benefits to the Ghanaian people. By stifling business activity, discouraging investment, and creating an unfavorable economic climate, the government has hindered the nation’s progress. A fundamental change in approach is imperative to unlock Ghana’s full economic potential.
Article by
Richard Nyarko
He is a passionate geographer with a strong interest in poverty alleviation. He leverages his spatial understanding to advocate for solutions that address global challenges. He is a beneficiary of YAFO Institute’s Working with Web3 project and actively participates in the Cardano Project Catalyst, a blockchain community.
