The World Bank’s recently published Business Ready Report 2024 sheds some light on selected African economies, including Ghana. However, several other African countries do not appear in this version of the report, like Kenya, for example.
Given that Intra-African investment serves as one of the corner stones of the continent’s economic growth, AfricanLaw takes take a closer look at the business ready concept by comparing the regimes of Ghana (West Africa) and Kenya (East Africa). This article is not intended to present a narrative of rivalry between those states, but rather to assess whether the geographical position of these jurisdictions shed some light on their approaches.
The African Continental Free Trade Area (AfCFTA) aims at accelerating intra-African trade and boosting Africa’s trading position in the global market by strengthening Africa’s common voice and policy space in global trade negotiations. The AfCFTA is expected to harmonise trade and investment regulations across member states of the African Union (AU) and work continues to be underway since January 2021. Ghana and Kenya were among the first African states to commence trading under the AfCFTA and participated in the AfCFTA Guided Trade Initiative, which launched in October 2022.
However, are these efforts matched by business-ready national frameworks? Kenya and Ghana, two of Africa’s most dynamic economies, present distinct strengths and challenges for investors.
Below we explore their legal frameworks in terms of business-readiness.
Ghana: A Gateway to West Africa
The country’s legal framework, coupled with its stable political environment and commitment to good governance, creates an enabling environment for investment, at least to a certain extent. Ghana’s Investment Promotion Centre Act, 2013 (Act 865), offers various incentives to investors, such as tax holidays and profit repatriation, and protect investors against expropriation and nationalisation.
Ghana is also characterised by transparency in taxation, which is facilitated by automated tax systems and adherence to international standards. In addition to this, the country has designated special economic zones, aimed at promoting export-led economic growth. This streamlines land acquisition, addressing bottlenecks, thereby attracting foreign direct investment.
However, Ghana also faces various challenges to investment, including common land tenure disputes, attributable to the country's unique land management practices, governance, and tenure, as well as high government debt and high energy costs.
Kenya: A Rising Star with Streamlined Processes
Kenya on the other hand is regarded as somewhat of a regional leader in East Africa. It has an advanced financial sector and has undergone significant pro-business reforms to date. Kenya’s Investment Promotion Act, 2004, provided a guarantee against expropriation and provides access to international arbitration under Section 19. A common standard in incentivising investment within this jurisdiction. Furthermore, the Public-Private Partnerships Act 2013 which facilitates joint ventures, particularly in infrastructure, provides a regulated and favourable environment for investor-state relationships. The business environment is further strengthened by simplified business registration, a crucial aspect of investment facilitation efforts. Kenya’s e-Citizen platform in particular centralises company registration and licensing under the Companies Act, 2015, thereby reducing significant bureaucratic hurdles faced prior. However, Kenya’s frequent tax policy changes do seem to create some uncertainty, especially for SMEs.
Comparative Strengths and Weaknesses
The two economies offer varying benefits and challenges to investment. In terms of ease of doing business, Kenya’s digital platforms offer a smoother process than Ghana’s manual steps. Kenya also offers a superior transportation and telecommunications infrastructure to that of Ghana.
On the other hand, Ghana’s investment incentives, such as comprehensive tax policies, surpass those of Kenya. In addition, Ghana offers more legal certainty through its predictable tax laws and international arbitration adherence. This is in contrast to Kenya’s frequent policy shifts.
The AfCFTA Connection
Both Kenya and Ghana play critical roles in AfCFTA. Ghana hosts the AfCFTA Secretariat, highlighting its commitment to regional integration commitment. On the other hand, Kenya facilitates trade routes through its status as the East African hub of international trade.
Key Takeaways
For investors, the choice between Kenya and Ghana depends on industry focus and risk tolerance. Kenya’s dynamic economy suits industries such as logistics, information technology and other related technologies, while Ghana’s stability and incentives favour manufacturing and agriculture. Understanding each country’s legal landscape is key to leveraging intra-African investment opportunities under AfCFTA, which is why direct access to African lawyers and knowledge transfer are AfricanLaw’s priority objectives, offering the world access to information and services within the continent under a single platform.
