The framework for investment in Ghana

The country of Ghana is currently governed by the 1992 Republican Constitution of Ghana, which was approved by referendum and established the country’s multi-party democratic system. As this is Ghana’s fourth republican constitution since it gained independence in 1957, the period since it was passed is described as the country’s “Fourth Republic”.

The Legal System

Ghana operates a legal system premised on English common law, with the laws of Ghana comprising:

• The constitution;

• Statutes enacted by Parliament;

• Orders, rules and regulations made by any person or authority under a power conferred by the constitution;

• Existing law; and

• The common law (composed of the rules of law generally known the doctrines of equity and the rules of customary law – rules of law which, by custom, are applicable to particular communities in Ghana – including those determined by the Superior Court of Judicature).

General Framework For Investment In Ghana

The Directive Principles of State Policy, prescribed under the 1992 Republican Constitution of Ghana, emphasise the encouragement of foreign investment in Ghana, subject to any law for the time being in force regulating investment in Ghana.

The Ghana Investment Promotion Centre (GIPC) Act, 2013 (Act 865) and the Free Zones Act, 2003 (Act 504) set up the GIPC and the Ghana Free Zones Board (GFZB), respectively, to promote economic development and regulate the activities of investors in the country. The GIPC law regulates businesses in all sectors of the economy.

The GFZB has the mandate to regulate businesses (except banking and insurance companies) classified as free zone that export at least 70% of their products/services. Investment guarantees include:

• Payments in respect of foreign loan servicing;

• Safeguards against expropriation;

• Guaranteed unconditional transferability of capital, profits, proceeds of sale and/or liquidation, interest and dividends, and personal remittances attributable to the investments (net of all taxes and other obligations);

• Non-discriminatory application of rights and obligations under investment laws; and

• Fees and charges in respect of technology transfer agreements registered with the GIPC. Additionally, free zone companies enjoy exemptions in respect of:

• Direct and indirect taxes;

• Payment of withholding tax by shareholders on dividends; and

• Income tax on profits for the first 10 years from the date of commencement of the operation with a subsequent income tax rate of 8%.

Choosing the Corporate Vehicle: In Ghana, a local entity may be established by:

• The incorporation of a private or public company, limited or unlimited by shares (for profit) or by guarantee (not for profit); or

• Registration of an external company (i.e., a branch of a company, for profit or not for profit) incorporated outside Ghana. The minimum capitalisation (either cash or capital goods) of a local entity is determined by the nationality of the shareholders and nature of business. The minimum foreign capital required is as follows:

• A joint venture company made up of Ghanaian and foreign shareholders requires a minimum foreign capital of $200,000, with the Ghanaian partner having not less than 30% equity participation.

• Where the company is wholly foreign-owned, the minimum foreign capital required to be invested is $500,000.

• For trading, a minimum foreign capital of $1m should be invested. Additionally, the company is required to employ at least 10 skilled Ghanaians.

• There are no minimum capitalisation requirements for external companies.

Acquisitions: A company seeking to do business in Ghana may acquire an equity stake in an existing company (the “investee company”). Such an acquisition does not obviate the obligation to comply with minimum capitalisation requirements. Where the industry or sector in which an investee company operates is regulated, the approval of the regulator may also be required.

Additionally, the approval of the Securities and Exchange Commission (SEC) is required where an investee company is listed on the Ghana Stock Exchange. Acquisitions of 30% or more of the shares of either a listed company or its holding company trigger a mandatory takeover offer and also need to be regulated by the SEC.

Key Regulated Sectors 

Banking & Financial Services: The Bank of Ghana (BoG) must approve any agreement or arrangement that would result in a change in the control of all banks and non-banking financial institutions or their holding companies. Consequently, the sale, disposal or transfer of 10% or more of the capital or voting rights of a company (“significant interest”); an amalgamation or merger requires BoG approval.

Insurance Industry: In the insurance sector, the acquisition or sale of a significant interest in an insurance company also requires the prior written approval of the National Insurance Commission.

Mining, Oil & Gas: The acquisition of a stake in a mining company, which vests in a person either alone or with an associate or associates, control of more than 20% of the voting power at any general meeting of a mining company or of its holding company requires the approval of the minister responsible for mines.

In the upstream petroleum sector, there is a local content requirement for a non-transferable minimum of 5% shareholding by Ghanaian companies operating in the upstream sector. This requirement can only be waived on the authority of the minister for lands and natural resources.

The downstream petroleum sector in Ghana covers the import, export, re-export, shipment, processing, refining, storage, distribution, marketing and sale of petroleum products. A maximum 50% equity stake may be acquired by a non-Ghanaian.

Telecoms: In the communications sector, the National Communications Authority must approve the transfer of shares in a licensee company if the transfer would result in a change of control of that company and cause that company to breach licence terms relating to its ownership structure.

Protection Of Intellectual Property Rights

Ghana is a member of the World Intellectual Property Organisation (WIPO) and a signatory to the under-listed WIPO-administered treaties:

• The Protocol Relating to the Madrid Agreement concerning the International Registration of Marks;

• The Singapore Treaty on the Law of Trademark;

• The Washington Treaty on Intellectual Property and Respect of Integrated Circuits;

• The Patent Law Treaty;

• The Hague Agreement concerning the International Deposit of Industrial Designs;

• The Paris Convention for the Protection of Industrial Property;

• The WIPO Copyright Treaty; and

• The WIPO Performance and Phonograms Treaty. Ghana has in place intellectual property legislation governing geographical indications, trademarks, unfair competition, copyright, industrial designs, patents and the layout designs (topographies) of integrated circuits. There are civil and criminal sanctions for the infringement of intellectual property legislation in Ghana.

Ghana’s Protection against Unfair Competition Act, 2000 (Act 589) codifies the common law tort of passing off, sets out the various practices deemed as unfair competition, defines these practices and outlines the extent of protection provided under Ghanaian law and other related matters. Major practices that are considered as unfair under the law include:

• Causing confusion with respect to another person's enterprise or its activities;

• Damaging another person's goodwill or reputation;

• Misleading the public;

• Discrediting another person's enterprise or its activities;

• Unfair competition in respect of secret information; and

• Unfair competition in respect of national and international obligations. The Plant Breeders Bill, which is currently before Parliament, has yet to be passed, as there is an on-going debate on the impact that it will have on the agriculture sector in Ghana.

Technology Transfer

Technology transfers entered into under the GIPC Act must be registered with the GIPC. The GIPC Act provides the mandatory terms and conditions that must be contained in a technology transfer agreement and the provisions, which shall be deemed unenforceable. Mandatory clauses include:

• The description of the technology in English;

• Payment of royalties;

• The provision of requisite training of the transferee’s personnel with an attached detailed training schedule;

• The obligations of the holder of the technology to ensure the efficient performance of the technology; the continuous availability of spare parts; access by the transferee of improvements and innovations; and process performance guarantees covering large projects involving technical complexity.

• Confidentiality restriction on sub-licensing;

• Duration: 10 years (renewable every five years);

• Applicable law: Ghana law; and

• Amicable settlement or where there is no settlement, the following options: within UN Commission on International Trade Law rules; rules of any bilateral agreement; or other international dispute settlement agencies. The inclusion of provisions governing the under-listed issues in a technology transfer agreement are unenforceable:

• Transfer of technology freely and easily available in Ghana;

• Restriction on volume of production/resale in transferee’s country;

• Procurement of equipment and inputs from transferor or specific source unless not available otherwise;

• Need for consent of transferor prior to modifications except where technology is being used under a licence or trademark;

• Prohibition on export to certain geographical areas apart from that agreed on by the transferor;

• Restriction on research and development;

• Compulsory employment of transferor personnel unless considered essential with remuneration comparable to what exists in the international market under a properly drawn up management or technical services agreement;

• Obligatory transfer of improvements to technology unless mutual or reciprocal;

• Payment for rights after their expiration, termination or invalidation;

• Restriction on use of rights after expiration of agreement;

• Restriction on judicial proceedings regarding validity of rights;

• Restriction on the production of similar products as subject of technology transfer; and

• Obligation to sell subject matter of technology transfer to transferor or persons designated by transferor at a particular price unless the production is solely for the benefit of the transferor, transferor enjoys special distribution rights or the market for the item is exclusive.

Labour & Immigration

The Labour Act, 2003 (Act 651) governs the rights and obligations of employers and employees, except employees of the security and intelligence agencies.

The National Labour Commission (the “commission”) is the administrative body responsible for the administration of the act and the settlement of disputes. The commission employs negotiation, mediation and voluntary/compulsory arbitration in the exercise of its mandate. The commission’s order is enforceable only on the order of the High Court.

The labour law regulates three categories of workers: permanent, casual and temporary. The law makes it mandatory that a person who is employed for a period exceeding six months, either at a stretch or a cumulative number of days within a year, is deemed to be permanently employed and the terms and conditions must be secured by a contract.

A person engaged on a seasonal/intermittent basis for a period of less than six months is categorised as a seasonal worker. A temporary worker, on the other hand, is a person who is employed continuously for a minimum of one month, but is neither a permanent nor seasonal worker. No formal contract is required in respect of temporary or casual workers and remuneration is calculated on a daily basis. A contract of employment must contain the following mandatory provisions:

• Name of employer/employee;

• Date of first appointment;

• Job title or grade;

• Rate, method and intervals of pay;

• Hours of work;

• Compensated annual leave;

• Conditions relating to incapacity to work due to sickness/injury and details of related remuneration;

• Disciplinary rules;

• Details of social security or pension scheme;

• Notice period for termination for employees/employer;

• Grievances or dispute procedure; and

• Overtime payment, where applicable.

Termination of Employment: The Labour Act gives the employer the right to terminate employment of an employee; however, the act provides boundaries within which an employer can exercise his/her discretion. A termination (except for redundancy or cause prescribed by the employer) is deemed to be fair in the following circumstances:

• By mutual agreement;

• Incompetence/lack of qualification;

• Existence of legal restrictions prohibiting the worker from performing the work for which he/she is employed; or

• The inability of the employee to carry out his/her duties due to a medical condition, sickness or accident.

Unfair Termination: Termination is deemed to be unfair in the following circumstances and the onus of proof of the fairness of the termination is on the employer:

• The involvement by the employee in trade union activities (this will apply only to unionised workers) or seeks office as a workers’ representative;

• Victimisation as a result of a worker’s complaint;

• Race, gender, colour, ethnicity, religion, creed, social, economic or political status;

• Disability;

• Where the qualification required is different from what was required at the time of employment; or

• Ill treatment by the employer or failure by the employer to take action on repeated complaints of sexual harassment, which compels the employee to leave his/her employment.

Process for Termination: The employer is required to provide the employee with written notice of the termination or make payment in lieu of such notice, except for proven misconduct, which could warrant a summary dismissal.

Remedies for Unfair Termination: The employee would be entitled to the following benefits upon the termination of appointment:

• Remuneration earned prior to the termination;

• Deferred salary due to the termination, if any;

• Grants and awards;

• Compensation in respect of sickness/accident; and

• Where the employee is employed under a foreign contract (i.e., a contract where the employee is recruited outside Ghana to work in Ghana), the employer is also required to pay, in addition to remuneration earned prior to the termination and compensation in respect of sickness/accident, costs incurred by the employee and his dependants for repatriation to his/her home country.

Trade Unions: Ghana’s labour laws allows employees (except those responsible for policy decisions and management or those who perform duties that are highly confidential) to form or join trade unions of their choice for the promotion and protection of their economic and social rights. The terms and conditions of unionised workers are negotiated between the union and their employers and prescribed in collective bargaining agreements.

Employment of Foreign Nationals: The key qualification criterion for the employment of a foreign national is the unavailability of the foreigner’s expertise in Ghana. An application for immigrant status may be based on an immigrant quota granted by the GIPC in consultation with the Ghana Immigration Service (GIS) or directly by the GIS.

The number of automatic immigrants allowed under the GIPC law is dependent on the capital investment made by the company. The capital investment and quotas prescribed by the GIPC are as follows:

• $50,000-250,000: 1 person;

• $250,000-500,000: 2 persons;

• $500,000-700,000: 3 persons; and

• Above $700,000: 4 persons.

Payment of Pensions: Ghana operates a three-tier social security system. The first two tiers are mandatory, while the third is voluntary. All businesses (employers) registered in Ghana are required to contribute to the first and second tiers irrespective of the number of employees or whether the company contributes to another scheme for its employees, locally or internationally.

Employers are required to contribute 13% and the employee contributes an amount equal to 5.5% (deducted at source by the employer) of the employee’s basic salary to the Social Security & National Insurance Trust (SSNIT), and this money is invested (in trust) for the employee’s pension.

Of the 18.5%, the employer remits 13.5% to the Tier 1 Basic Social Security Scheme (publicly managed) and the remaining 5% to a Tier 2 privately managed pension scheme (employer chosen) for investment.

Social security contributions are portable, that is, they can be transferred from one social security scheme in one country to that in another country and are to be paid in respect of both local and expatriate staff. The guidelines issued by SSNIT exempt the following categories of expatriates from contributing to Tier 1 where they:

• Are engaged on a short-term assignment; or

• Contribute to a pension scheme in their home country (evidence to be provided in the form of pay slips showing deductions to the scheme).

Capital & Profit Transfer

Investments registered with the GIPC and the GFZB are guaranteed unconditional transfer of dividends or net profits; payments in servicing foreign loans; fees and charges arising from technology transfer agreements; and proceeds from the sale or liquidation of the whole or part of the investments.

Currency Regulation

Ghana’s foreign exchange regime is governed by the Foreign Exchange Act, 2006 (Act 723). The BoG regulates foreign exchange business and transfers between residents and nonresidents. Payments to or from Ghana between residents and/or non-residents must be made through a bank. However, transfers to or from Ghana must be made through a bank, a dealer or person licensed to carry out the business of money transfers.

The BoG periodically issues directives on foreign exchange transactions as well as directives on limits on foreign exchange transactions.

Foreign Currency Accounts: Residents and non-residents are allowed to maintain foreign currency accounts, which may be credited with transfers in foreign currency or other foreign currency accounts. Balances are freely transferrable and may be debited for payment of transfers to other foreign accounts and for purchase of external currency.

Foreign Exchange Accounts: Residents are permitted to maintain foreign exchange accounts into which can be credited foreign exchange earnings that are not converted into cedi balances. Generally, balances on these types of accounts are able to be transferred when accompanied with the necessary supporting documentation.

Anti-Money Laundering

Pursuant to the AntiMoney Laundering Act, 2008 (Act 749) the Financial Intelligence Centre (FIC) has been established within the BoG to provide assistance in the identification of proceeds of unlawful activities and to combat money laundering in Ghana. Banks are required under the law to apply comprehensive know your customer due diligence on existing and potential clients in respect of financial transactions.

Land Acquisition, Planning & Use

The ownership of land in Ghana is prescribed by the constitution and statute. The legal regime distinguishes between the rights of ownership and use. The 1992 Republican Constitution of Ghana provides three categories of ownership of land, namely:

• Public/Vested Lands: Public lands belong to the state, while vested lands are lands in which the state takes over the legal incidents of ownership, that is the right to sell, lease, etc. from the customary landowners, and holds the land in trust for the land-owning community. Landowners retain equitable interest in the land and these lands are managed by the Public & Vested Lands Management Division (PVLMD) of the Lands Commission.

• Stool/Skin Lands: These are community lands vested in a traditional council or community leaders on behalf of and in trust for the subjects of the Stool in accordance with customary law and usage.

Transactions in connection with these lands must receive the concurrence of the PVLMD to make the grant valid.

• Private and Family/Clan Lands: This refers to lands owned by individuals, families and clans in a community.

Acquisition of Title to Land: In Ghana land can be owned by a body corporate who may have acquired its interest either from the PVLMD, a stool, a family or an individual. The terms of the transfer of interests in land which exceeds three years must be provided in a contract. It is a constitutional requirement that there cannot be the grant of an interest in land to a foreigner in excess of 50 years at a time.

The use of land is subject to a number of restrictions, namely:

• Compulsory acquisition: Under the constitution, the state has authority to compulsorily acquire the rights in land, subject to payment of compensation, for the benefit of society. This interest is often necessary for the social and economic development of the country. Thus, such an acquisition requires finding the balance between the public need for land on the one hand, and the provision of land tenure security and the protection of private property rights of an individual on the other.

• Disposition and development of stool lands: Where one acquires stool land, its disposition and development must be governed by customary law. The constitution further provides that there shall be no disposition or development unless the Regional Lands Commission of the region in which the land is situated has certified that the disposition or development is consistent with the development plan drawn up or approved by the planning authority for the area concerned.

Mitigating the Risks of Land Acquisition: The purchaser must:

• Request for all documentation on the land in order to obtain appropriate information;

• Conduct a search at the Lands Commission and Companies Registry (if the land is owned by a company) to ascertain whether the vendor is the appropriate person to transfer interest in the land;

• Conduct a search at the Town and Country Planning Department or the local authority to ascertain the suitability of the land for the purpose for which it is being acquired;

• Visit the land to ascertain if there are any physical encumbrances on the land; and

• Ensure that the terms of payment are structured to ensure that ownership of land is confirmed before any payment is made.

Loan & Security Transactions: Under Ghana law both movable and immovable property can be used as security for a loan transaction. The use of land as security is reflected by the Mortgages Law, the Land Law and the Companies Act, where the security is created by a company.

Movables – including receivables, shares and securities – may be used as security for transactions by the creation of fixed or floating charges in respect of the identified security. To assess whether a proposed security is free of liens and can be used as security for a transaction, searches must be conducted on the property at the Companies Registry, the Collateral Registry of the BoG and the Lands Registry in respect of landed property.

Doing Business With Government

Procurement: The Public Procurement Act, 2003 (Act 663) was passed as an integral part of Ghana’s public finance management and good governance reforms to instil propriety and accountability in public sector financial management and expenditure. The law regulates the procurement of goods, works and services financed in whole or in part from public funds and the disposal of government stores. Additionally, all government agencies, institutions and establishments in which the government has a majority interest are mandated to comply with the law.

The application of the law is, however, subject to two key exceptions. The first exception is the power vested in the minister of finance to direct the use of a different procurement procedure when the minister determines that it is in the “national interest to do so”. When the minister makes such a determination, the procurement method shall be published in the Gazette.

The second exception is in respect of the procurement of goods, works and services financed by loans taken or guaranteed by the state, or aid granted under an international agreement that prescribes the procurement procedures to be employed.

Parliamentary Approval for International Business Transactions: Investment opportunities in Ghana may entail some direct government involvement. Government, therefore, remains a critical party to most foreign investment arrangements in Ghana.

The country’s 1992 constitution provides that “international business or economic transactions to which the government is a party shall, with necessary modification by Parliament, apply to an international business or economic transaction to which the government is a party as it applies to a loan” (i.e., loan agreements require the approval of the Parliament).

One of the pertinent concerns of investors is the nature of the ultimate approval required for validity and enforceability of such agreement. The concern has become more pervasive following decisions of the Supreme Court of Ghana:

• Martin Alamisi v (1) Attorney General, (2)

• Attorney General v (1) Balkan Energy Ghana Ltd, (2) Balkan Energy LLC & (3) Philip David Elders; and

• Martin Alamisi Amidu v (1) Attorney General, (2) Waterville Holding (BVI) Ltd & (3) Alfred Agbesi Woyome.

In all of the above cases, agreements executed between a private party and government were held to be invalid and unenforceable, as they were not approved by Parliament, as required by the constitution and other laws of Ghana.

From the various decisions of the Supreme Court, the following agreements may qualify as international transactions:

• Agreement for business transactions between a foreign or non-resident company and the government of Ghana;

• Agreement for business transactions between a resident company (incorporated in Ghana) and the government of Ghana, where the shareholders are non-Ghanaian. The Supreme Court, in the Balkan case, said issues to be taken into account may include: source of funding originated outside Ghana; jurisdiction of the originator of the project is not Ghana; individuals negotiating with government are foreign nationals; jurisdiction of the project sponsor is not Ghana; place of management of the project company is outside Ghana; or international arbitration clause in the agreement.

• Project agreements which fall under either of the prior two bullet points, for which the funding or loan agreement has been approved by Parliament. There are a number of exemptions applicable. For example, where the agreement is regarded as “minor”, parliamentary approval may be dispensed with. The determination of what is minor will be determined on a case-by-case basis by reference to the opinion of the attorney general.

Sector-Specific Legal Developments

Public-Private Partnerships (PPPs) & Infrastruc- ture Development: The government has set up the Infrastructure Investment Fund, under the Ghana Infrastructure Investment Fund Act, 2014. The object of the fund is to help achieve national development through proven financial resources and investment in a diversified portfolio of infrastructure projects. The fund is an independent body corporate, with the power to create funds and set up affiliates in any jurisdiction in order to achieve its objective.

The fund seeks to partner with the private sector, which will offer support in financing projects. The role of the private sector includes partnering with the public sector by financing PPPs and special purpose vehicles (SPVs), among others.

Sources of funds will include:

• A percentage of value-added tax (VAT) proceeds;

• The annual budget funding amount;

• Proceeds from the disposal of state-owned investments and various grants. Under the law, the fund is exempt from the payment of taxes for the first five years.

Local Content – Oil & Gas: The Petroleum (Local Content and Local Participation) Regulations, 2013 (L.I. 2204) has been passed. The concept of local content as it applies under the Petroleum Regulations focuses on the percentage of locally produced materials, personnel, financing, goods and services rendered in the petroleum industry value chain, which can be measured in monetary terms.

The Petroleum Regulations provide the minimum local content levels for petroleum activities ( including the exploration, development, production of petroleum, acquisition of data, drilling of wells, pipeline transportation and storage).

The law also lays out the rules to be employed in the procurement of goods and services in the industry. It is important to note that, in instances where the total value of the bid of a qualified, indigenous Ghanaian company does not exceed the lowest bid by more than 10%, the law mandates that the contract be awarded to the indigenous Ghanaian company in question.

An indigenous company is defined under the relevant regulations as a locally incorporated company that has at least 51% Ghanaian equity participation. The regulations also stipulate that the company must have 80% of its executive and senior management, as well as 100% of its non-managerial positions, held by Ghanaians.

Furthermore, a non-indigenous Ghanaian company can only participate in a procurement process for the provision of goods and services if it has incorporated a local company and will provide the goods and services in question in association with an indigenous Ghanaian company.

Hedge Funds, Commodity Exchanges & Private Equity: The Securities Industry Law is being amended in order to introduce new operators like commodity exchanges, credit rating agencies, hedge funds, nominee account operators, private equity funds and venture capital funds. Additionally, the above entities will be brought under the regulation of the SEC.