Inward FDI as the share of GDP declines

Company News on Tuesday, July 16, 2019

Source: goldstreetbusiness.com

2019-07-16

Although in 2018, Ghana consolidated its position as the most attractive destination in West Africa, foreign direct investment (FDI) outstripped neighboring Nigeria, but its share in the domestic product Gross Domestic Product (GDP) was down, according to statistics. from the World Bank. This means that growth in FDI inflows to Ghana does not match overall economic growth.

It is important to note, however, that the measure used effectively tracks FDI inflows rather than FDI commitments as monitored by the Ghana Investment Promotion Center. Using the latter, the ratio increases.

For the third consecutive year, the share of FDI in GDP – measured by actual inflows – rose from 6.49% in 2015 to a slight recovery from the previous period to reach 6.34%, 5.5% and 5.28% in 2016, 2017 and 2018. fiscal years, respectively.

However, according to the investment report of the Ghana Investment Promotion Center (GIPC), FDI commitments reached US $ 3.54 billion for the year ended December 31, 2018.

Financing flows have been largely driven by the hydrocarbon sector, as the country has experienced significant FDI inflows in recent years, although 2018 was a major exception, with new FDI by the Petroleum Commission being negligible. Indeed, in 2018, GIPC had to bear the burden of attracting FDI almost on its own because the other institutions – the Petroleum Commission of the Petroleum Commission (for solid mineral mines) and the Council of Petroleum the Ghana Free Zone – all had relatively poor performance.

Indeed, the International Monetary Fund (IMF), in its final badessment of Ghana, predicted that FDI would gradually decline as oil production peaked and eventually remain at around 4 percent of GDP in the long run.

At the beginning of 2018, GIPC planned to record US $ 10 billion in FDI based on discussions with investors targeted on strategic investments in the One District, One Factory and Selected Sectors program, including railways, oil and gas. Mines and energy.

The Center indicates that discussions with potential investors are still ongoing and that, based on negotiations, these strategic investments should be registered in the course of 2019.

Foreign direct investment is the net inflow of investment to acquire a sustainable management interest (10% or more of the voting shares) in an enterprise operating in an economy other than that of the investor. It is the sum of capital, reinvestment of profits, other long-term capital and short-term capital, as it appears in the balance of payments.

In reality, however, the GIPC measure does not include re-injection of profits or new foreign investment into existing foreign firms. If this were the case, the number of GICI FDI would increase significantly.

For 2018, GIPC has secured commitments of US $ 1,417.58 million in the services sector, which is expected to generate 7,780 jobs; US $ 1,101.87 million for the general trade sector, which is expected to create 1,687 jobs; $ 715.41 million for the manufacturing sector, which is expected to generate 4,859 jobs; US $ 137.51 million for the export trade is expected to generate 217 jobs; $ 93.66 million for the construction and construction sector is expected to generate 259 jobs; US $ 65.65 million for liaison offices, generating 2,086 jobs; and $ 8.91 million for the agricultural sector, generating 946 jobs.