The President Nana Akufo- Addo administration had wanted to see a new GIPC law passed before the end of its first term – to both advance its liberal economic policy agenda and have a key piece of legislation to crow about – it has backed down for now, due primarily to the fierce controversy over foreign traders being disallowed from operating in Ghana’s small scale retail space.
Government is worried that whichever way it handles the issue in the proposed new investment code, the political opposition could create political capital out of it.
Generally, the draft of the revisions seek to further liberalize Ghana’s investment laws in order to attract more foreign investment.
The core of the investment code still in use today was drawn up in 1995, when there were still very few liberalized developing economies to compete against Ghana. Today, there are more than 100 ‘emerging/frontier’ markets in competition for Foreign Direct Investment.
However at the same time the revisions seek to facilitate greater local participation and content in industries so far dominated by foreign interests. But the strategy adopted in the draft revision of the investment code is focused more on facilitating increased local capacity and competitiveness rather than at trying to simply legislate compulsory greater local participation.
Indeed this is the approach recommended by GIPC in the draft revisions towards resolving the ongoing dispute between Ghana and Nigeria over the fate of the latter’s small scale retailers in Ghana.
“It is not a question of the law but a bigger issue of trade relationships between nations” asserts Yofi Grant, GIPC’s chief executive. “From my standpoint it is how well we can equip our traders to be competitive. Our traders are not competitive against others because the others may have cheaper sources of finance, they might have access to markets that we do not have. So for that is the real problem.”
GIPC’s desire to liberalize foreigners access to retail trade is shared by the top tier of government. However not only is this politically dangerous for it now – which is a primary reason why the revisions of the law are currently under lock and key – but government acknowledges the real economic dangers as well.
This is the danger of dislocation. A surge of Nigerian retail traders into Ghana could all to easily replace their indigenous counterparts who are clearly more price competitive, which is why GIPC wants to tackle the problem at its roots rather than simply address the effects.
It is instructive that the last time the Ghana Union of Traders Associations got government to close down foreign owned small scale retail shops in Accra, the local traders immediately took advantage by hiking their prices drastically, which indeed was part of the reason government quickly back pedaled.
Besides, pressure is mounting on government from both ECOWAS and AfCFTA to liberalize access to retail markets by nationals of member countries and with Ghana hosting the latter’s headquarters, Ghanaian trade officials fear that the country’s commitment to regionalist trade will be called into question.
Thus government is applying the temporary solution of postponing legislative debate on the revision of the investment code until its second term begins – assuming of course it wins the upcoming election – while seeking ways to ensure that Ghanaian traders would be price competitive by the time new legislation eases the restrictions.
The thinking is that from early next year, with elections not due for another four years, it will run into much less political traffic than is in place currently.
But this still leaves government with the knotty problem of facilitating better price competitiveness of Ghanaian traders, which will have to be achieved eventually.
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