Ghana’s business environment stagnant – World Bank report

Despite positive reforms implemented in the past 10 years, Ghana’s business environment is still stagnant, a World Bank report has revealed.

Titled “Ghana Economic Diversification Through Productivity Enhancement”, the report emphasised the need for the country to substantially improve the quality of its business environment.

Ghana implemented several positive business reforms during the past 10 years, including the implementation of a paperless customs clearance system, the publication of construction regulations, a strengthened construction quality control, and several simplification measures for trading across borders.

However, the report said the gold-, oil- and cocoa-producing country still needs to further reform its business environment as it ranks 114th out of 190 countries in the 2019 Doing Business report.

“While Ghana has a relatively favourable regional positioning in Africa, firms’ executives identified financial system, infrastructure, and macroeconomic volatility as key competitiveness issues.”

Even though Ghana ranks 106th out of 140 countries in the 2018 World Economic Forum Competitiveness Report, it outperforms the sub-Saharan Africa region on the majority of all 12 pillars of competitiveness, but lags countries in the East Asia and Pacific region.

In addition, global competitiveness scores are particularly low for the financial system (112th), infrastructure (116th), and macroeconomic stability (132nd).

The report focuses on key constraints on the supply side and proposes potential product-based diversification pathways that are based on demand side analyses.

Firm productivity

The report noted that firm productivity is higher in Ghana than in most regional peers, but there is significant potential to raise it further to global levels.

Half of Ghanaian manufacturing firms have labour productivity below US$3,969, which is above the level observed in a peer regional country such as Cameroon and an aspirational country such as Indonesia. However, an income per capita based analysis suggests that this median productivity level could be further increased to the level recorded in Vietnam, one of Ghana’s aspirational peers.

Female-owned firms show particularly low productivity levels in Ghana. This can be explained by the type and size of their activities, and the existence of gender-based inequalities.

About 56.1 per cent of female-owned enterprises are in food, hotel, restaurant, and retail activities, and 84.2 per cent of female-owned firms are small.

However, the recent productivity of the service sector has been sluggish, and small firms have low productivity.