Investors must be made to partner local businesses – PEF

The Chief Executive Officer of the Private Enterprise Federation (PEF), Nana Osei Bonsu, has said that foreign investors seeking to invest in the country must be made to partner local businesses in order to benefit from the existing tax exemption regime.

“What we are proposing is that any foreign direct investor coming in should be linked to partner some local businesses in case they are looking for tax exemptions. If they are coming at the advantage of getting tax exemptions then they should be required to partner some Ghanaian counterparts.

You cannot do transfer of technology when you are a solo industry; you have to partner somebody before you transfer, so those are the areas that we have to insist that Ghanaian partnerships have to go,” Nana Osei Bonsu said in an interview with the B&FT at a programme held in Accra to initiate regulatory reforms to make the country’s business environment more friendly.

He further argued that foreign investors have easy and cheap access to capital whereas their local counterparts do not, hence, granting them tax exemptions in addition to that gives them an unfair advantage.

“It is a matter of how we do business that puts us at a disadvantaged position by the kind of support that is provided to others but not to us. For example, a foreign hotel chain coming to establish in Ghana gets funding at three percent from its home country. And its Ghanaian counterpart hotel gets funding at 30 percent. So you see the disadvantage?

Then when the foreign companies apply, they get tax exemptions of 25 percent that the Ghanaian counterpart doesn’t have because they don’t meet the threshold of the strategic investor which requires $50 million capitalisation,” he said.

So now this foreign company has 27 percent [the difference between interest rates in Ghana and that of the home country of the foreign investor] low cost, and the Ghanaian counterpart has 27 percent higher cost. So this foreign business gets a 52 percent cost advantage over the Ghanaian counterpart. How do they compete then?” he asked.

It is against this background that Nana Osei Bonsu is calling on government to formulate polices that will require partnerships between local and foreign businesses if tax exemptions are to be granted to foreign investors.

Last week, the CEO of the Ghana Investment Promotion Centre (GIPC), Yofi Grant, revealed that government is considering revising its laws to help boost the capacity of local businesses, rather than protecting the market from foreign competition.

“We are thinking of doing a lot of things…changing our laws and the way we do business here, so that we are competitive and allow business to grow and one of things being thought of by the government is the removal of capital limits,” he said.

“If you’re in a joint venture with a foreign company you have to show that you brought in $200,000, if you’re in a foreign company and you want to register, you have to show that u brought in $500, 000. And if you want to enter retail business $1,000,000. A lot of our people think it’s a good thing because it protects Ghanaians. But I ask how it protects us?

Incidentally, since those laws were implemented, we've seen FDI drop, but the bigger question is, here’s a country with all the resources yet we do not have capital to develop them and yet were saying that we want to protect what we have,” Mr. Grant said.