Track FDI inflows to identify the subsectors that will lead demand growth
MNCs should track foreign investment into Ghana’s manufacturing sector to determine which regions and subsectors will offer demand opportunities. Also, companies should monitor the government’s priorities and the establishment of factories and special economic zones related to its industrialization agenda. MNCs can assess the potential benefits of localizing production in the country, including limiting inflation and FX risk and strengthening your brand’s credibility with local consumers.
In Q1–Q3 2021, manufacturing contributed 0.9 percentage points to GDP growth, second only to crop production, out of the subsectors in Ghana’s GDP data. Most notably, Ghana’s burgeoning automotive sector will continue grow and draw investment, after Hyundai-KIA announced plans in 2021 to establish assembly plants in the country during 2022—joining Nissan, Toyota, Sinotruk, and local producer, Kantanka. The government has sought to boost its manufacturing sector via industrial policies, including the Ghana Investment Promotion Centre Act (2013), Industrial Transformation Agenda (2017), and a ban on imported cars that are old or salvaged (2020).
We expect that Ghana’s FDI—in particular, manufacturing FDI—inflows rebounded in 2021, helped by lighter COVID-related commercial restrictions, and will continue to do so in 2022. Furthermore, the manufacturing sector will remain a key growth driver for the economy through the 2020s. The country’s business-friendly climate, uninterrupted democracy (reaching 30 years in 2022), general rule of law, robust economic growth, and industrial policies will continue to drive these gains. The key manufacturing subsectors that will benefit are vehicle assembly, pharmaceutical production, agro-processing (especially cocoa), textiles, and aluminum. Moreover, vehicle production will provide a local demand outlet for Ghana’s reviving aluminum industry, complementing the government’s ongoing investment in more mines and local processing capacity. While higher borrowing costs (following the Bank of Ghana’s sharp interest rate hike on March 21, 2022) will moderate the outlook for gross domestic investment, it will remain relatively upbeat amid a still-robust demand outlook.
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