An unpopular fact might have been commonly overlooked would be that population size is sometimes only just a number, as it isn’t necessarily a determining factor as to how a country performs.
Ghana, known to be the 13th largest in Africa by population size has emerged as the country that attracted the largest amount of Foreign Direct Investment (FDI) in West Africa, surpassing the continent’s most populous country, Nigeria.
Ghana has recorded its FDI for the first half of 2020 to be USD 785.62 Mn. This represents 90 percent of the total investment in the country which is at USD 869.47 Mn for the same period.
A thrilling fact is that the FDI figure recorded for the first half of 2020 has shown a 400 percent increment from that of the same January-June period in 2019, with FDI at USD 123.26 Mn. The FDI data was produced by both the Ghana Investment Promotion Center (GIPC) and the country’s petroleum commission.
Ghana’s positive FDI figure shows a shift from the global projection by the United Nations Conference on Trade and Development (UNCTAD), which had earlier warned that the COVID-19 pandemic could send global FDI plummeting by about 40 percent – driving the total value of FDI below USD 1 Tn for the first time since 2005.
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“Despite the sluggish start in the first quarter of 2020 and a worrying slump at the beginning of the second quarter due to severe lockdown measures to contain the spread of COVID-19, FDIs to Ghana have begun to rebound, resulting in a notable increase recorded over the first half of the year,” reads a portion of a statement by Yoofi Grant, the Chief Executive Officer of GIPC.
The influx of foreign investment is known to have birthed 69 projects, with the services sector capturing the highest by registering 25 projects. This is followed by the manufacturing and export trade sector with 21 and 11 projects recorded, respectively.
In terms of the source of those foreign investments, the data reflects that China accounted for the highest number of investments with a total of 12 FDI projects, followed by the United Kingdom with 9 projects.
How did Ghana get there?
It is quite interesting to find out how Ghana, as a country with a population of 30 million outpaced Nigeria which is 7-times its size. Ghana overtook Nigeria’s much larger economy as the most preferred destination in West Africa for FDI in 2018.
One of the most telling factors tied to the FDI boom in Ghana appears to be the country’s stable economy. For a country that is registering fairly stable economic growth, pulling in foreign investment would be less of a struggle.
According to the International Monetary Fund (IMF), Ghana was a USD 67.1 Bn economy as of 2019. This represented a growth surge by an estimated figure of 7.4 percent, and it was in keeping with the growth trajectory it had maintained in the years prior; 6.2 percent in 2018 and 8.1 percent in 2017. The IMF further projects that the economy would grow by 5.6 percent in 2020, even when many economies are shrinking.
The Ghanian economy is known to be one of the most attractive in Sub-saharan Africa, as economic growth has averaged 6.8 percent between 2017-2019.
What the FDI boom means for Ghana
The projects brought about by the new investment would certainly be a driver of job creation. It’s been projected that a total of 14,000 new jobs will be directly or indirectly created by the increased interest from foreign investors.
Apart from its obvious impact on job creation, FDIs also have a positive impact on economic growth by increasing the output and GDP in recipient countries. Such investments also have a knock-on effect of encouraging further investments.
As such, it is expected that Ghana would continue to experience increased FDI inflows in the coming years given the healthy macroeconomic environment that the country appears to be steadily working itself into.