Government COVID-19 incentives cushion foreign investors

The rollout of distinct interventions by the government has alleviated the harsh impact of the pandemic on foreign businesses, the Ghana Investment Promotion Centre (GIPC) has said.

GIPC said the extension of due dates for filing taxes, a reduction in tariffs on imported inputs, low-interest loans and the reduction in utility bills, according to most businesses, played a significant role in dealing with the adverse impact of the pandemic on their activities.

Foreign investors operating in the country are estimated to have experienced an average revenue loss of $75,000 in the second quarter of the year because of COVID-19, according to GIPC’s recent “Survey on the Impact of COVID-19 on Foreign Investors in Ghana”, conducted between 1 April and 12 June 2020.

According to the survey, a majority of businesses (51.43% of the survey respondents) had been affected severely by the pandemic.

In terms of revenue, 51.4% of the respondents sampled by GIPC had experienced losses worth over US$100,000 while the rest pegged their losses at between $100,000 and less than $1,000.

The survey said the impact of the pandemic was felt progressively as strict lockdown measures were imposed worldwide – causing severe disruption to demand-and-supply value chains.

This led to most companies experiencing payment and repayment delays, financial constraints and a reduction in demand for products and services, translating into revenue losses.

Knock-on for employment

With regard to employment, 40% of foreign investors foresee a permanent reduction in their workforce in the ensuing months.

Most workers have had to stay at home temporarily because the pandemic. Despite the downturn in activity experienced by various industries and businesses, sectors such as manufacturing, food processing, e-commerce, agriculture and health care have remained resilient and present opportunities for growth and investment.

GIPC says that, moving forward, more interventions such as a reduction in the cost of data, further reductions in taxes for manufacturers, tax exemptions on capital expenditure as well as the reopening of borders will be required to cushion business as the detrimental effects of the pandemic unfold.

FDI flows in the time of COVID

The COVID-19 pandemic came at a time when global FDI had been on a downward trend. The pandemic has exacerbated the decline in the flow of FDI.

The United Nations Conference on Trade and Development (UNCTAD) has projected FDI to drop by 40% following disruptions to global value chains (GVCs) influenced by lockdowns.

In the case of Ghana, the survey revealed a downward trend in FDI flows between April and 12 June 2020, when the survey was completed. Over the period, GIPC registered 13 projects with an FDI value of US$9.29 million.

Regardless of the initial slowdown in FDI values, 21 projects in total had been registered by the end of the quarter – 30 June 2020. This led to the value of FDI shooting up to US$207.98 million.

The development offers a positive outlook for the flow of FDI into Ghana and is a sign of a healthy trend towards economic recovery post-COVID-19.

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