The government’s decision to completely scrap the minimum capital requirement for foreign investors has sparked concerns, with an economist and the West African Regional Director of CUTS International, Appiah Kusi Adomako, cautioning against a blanket removal.
While the concept of making investment in the country affordable, Appiah Kusi Adomako argues that the move, as announced by the President, will have serious consequences on the economy.
The wholesale scrapping of the minimum capital requirement by amending the GIPC Act, the economist and lawyer says, will put some sectors of the economy in jeopardy by putting them under unfair competition with foreign investors.
In an opinion copied to The High Street Journal, Appiah Kusi Adomako recommended to the government to take a different approach to safeguard local businesses.
FDI Must Not Displace Local Businesses
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According to Appiah Adomako, while attracting more foreign direct investment (FDI) is a laudable ambition, removing all restrictions without a carefully designed framework could have unintended consequences.
Ghana, he noted, has become a beacon for investors in West Africa, but that attractiveness should not come at the expense of indigenous enterprises.
He warned that a wholesale removal could “dislodge local businesses from sectors where they have traditionally been active, particularly retail trade and services.”
In his view, the capital requirement has served as a shield for Ghanaian-owned businesses, ensuring they are not easily crowded out by well-capitalized foreign entrants.
“Ghana has become something of a city on a hill in West Africa, attracting the attention of global investors. Without a carefully designed framework, we risk dislodging indigenous businesses from sectors where they have traditionally been active, particularly retail trade and services,” he noted.
The Case for a Sector-Based Approach
Kusi Adomako called for a more nuanced strategy. He believes a sector-by-sector approach rather than a blanket rule will be the best strategy to balance attracting foreign investment and protecting local businesses.
He insists on the need for maintaining some form of capital requirement in selected sectors.
Under the sector-by-sector approach, the economist says sectors where Ghanaian investors already have sufficient capital and technical capacity, such as retail trade, would retain protective requirements.
However, in industries where domestic capital and know-how are lacking, such as advanced manufacturing or technology-driven services, the restrictions could be relaxed or abolished to encourage foreign entry.
“Instead of applying a blanket rule across the economy, we should identify the sectors where domestic investors have sufficient capital and capacity, and where protection is warranted. In these areas, minimum capital requirements can continue to serve as a shield for indigenous businesses,” he noted.
He added, “Conversely, in sectors where Ghana lacks adequate domestic capital or technical know-how, requirements should be relaxed or abolished to encourage foreign entry.”
Finding the Right Balance
For the economist, the debate should not be framed as “FDI versus local business,” but rather as how to harmonize both for national development. In his analysis, foreign investment should complement, not replace, local enterprise.
This recommendation comes at a time when policymakers are weighing bold reforms to make Ghana more attractive to international investors. But the economist maintains that the long-term success of such policies will depend on striking the right balance between opening doors to the world and safeguarding homegrown businesses.
