Entering an African marketplace requires rigorous strategic planning that incorporates the business’ goals and the market’s suitability to those goals. Naturally, access to accurate information is critical to the success of the business.
In African jurisdictions, practice often differs greatly from expectations created by statutes, regulations, case law (where it exists), and government-originating communications. In addition, clients usually have concerns about political and economic stability in their regions of interest. These concerns have merit.
However, there are several examples of successful returns on foreign investment in African regimes even during periods of political or economic volatility.
Consequently, it is essential that clients protect their interests in Africa with thorough guidance from well-vetted local counsel in the relevant jurisdictions.
Ghana: A Top Choice for Clients
Ghana is one of West Africa’s best countries for starting a business. Densely populated, Ghana boasts a relatively stable economy and political atmosphere—although recent general elections resulted in the incumbent president’s defeat, the elections were credible and peaceful.
Due to Ghana’s stability, it is a top choice for validating a business model. Businesses have the opportunity to experiment with their product or service, determine whether the business model works, and then pivot as needed. Minimum viable product is released to the market and then perfected.
Furthermore, Ghana’s close proximity to Nigeria—the most populous country in Africa—makes it ideal once a business is poised to scale.
Important Points to Consider
Once a client has determined that Ghana is the right marketplace, it is important to consider what form of market entry the client will use in order to validate the business model.
In Ghana, there are several business entities that are at the client’s disposal. The Ghana Investment Promotion Center, a government agency concerned with foreign investment in Ghana, permits the registration of external companies. An external company acts as a liaison office of a foreign company, is permitted to coordinate in-country activities, and must operate with funds derived from the foreign company. An external company must register with the local government but is not required to incorporate locally.
If a client desires to incorporate locally, there are several options available. A private company that does not intend to trade in Ghana and is wholly-owned by a foreign entity is required, among other things, to demonstrate that it has invested $500,000 (US) in the company before commencing business. On the other hand, if the private company is jointly-owned by a Ghanaian entity and a foreign entity it is required to demonstrate a $200,000 (US) investment before commencing business.
A private company with foreign participants that intends to trade (trade can be defined as the purchasing and selling of imported goods and services) is required to demonstrate an investment of $1 million (US) in cash or goods and services before commencing operations. The $1 million (US) threshold would place a significant burden on the majority of businesses seeking to enter the Ghanaian marketplace to trade; however, there are several exceptions to this investment requirement that apply to certain businesses.