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The Risks Involved in Doing Business In Ghana

Ghana is an economic viable country making her the ideal place to invest or start a business. However, we must acknowledge that this viability comes with some level of risk concerns. These risks can make or unmake your business no matter how good the business is. A lot of risk can be highlighted when one enters the business sphere in a country considered to be the gateway to Africa. Here are a few ;

Infrastructure

Ghana, while being one of the most powerful nations in Africa in economic terms, has not quite been able to adjust their infrastructure to accommodate the needs of its booming economies. Shortages of electricity and water are possibly the most pressing issue in Ghana, with blackouts being experienced on a fairly regular basis sometimes for prolonged stretches of time and all across the nation. Addressing these issues is among the main responsibilities of the Ghanaian government so as to keep the growth rate positive and the nation prosperous.

Quite often the barriers to starting and maintaining a business come down to simple, yet often insurmountable factors, such as lack of roads, facilities, and electricity.
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Unpredictability of the Market

The capital market in Ghana is small in terms of instruments traded and the number of participants relative to that of the UK. Fluctuations in interest rates, high rate of inflation and instability of the cedi, have made it difficult for traders to predict the long- term effects of the capital market and as a result find it difficult to either invest or borrow from the market. An evaluation on the real return on the stock exchange by the Bank of Ghana revealed “the total annual returns on stocks listed on the Ghana stock exchange have followed an undulating pattern since 1991 falling every two years and rising every two years”. (Bank of Ghana report)

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Price Forecast

Unstable prices have been the bane of the market over the period of its existence. Prices of goods and services are so volatile. The same can be said of interest rates, inflation and foreign exchange rates. These conditions make its very difficult for any meaningful forecast or prediction for share prices thus reducing investor confidence in the market. Interests on government securities on the money markets are higher than securities on the capital markets such as bonds. Many investors would want to be sure of where they put their hard earn money

Contracts

Contracts

For a derivative market to thrive, it requires strong legal systems for enforcement of contracts. The legal system in Ghana could not be said to have the capability to enforce such contracts. Aside of this there is also the lack of enough financial regulation to ensure the disclosure of adequate information by participants in the capital markets. There is also not enough information available to investors to make investment decisions about the markets. These unfavorable conditions create lack of investor confidence.

Culled from Doing Business In Ghana 2015 – Goodman AMC

Authors : Isma-il Sulaiman and Bernard Boachie-Danquah are the Founding Partners of Goodman AMC, and are both renowned strategy consultants with extensive experience on the African market.

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