positioning ghana as a financial services hub
TRANSCRIPT
JULY 2018
This publication was produced for review by the United States Agency for International
Development/Ghana mission by The Palladium Group.
POSITIONING GHANA AS A FINANCIAL
SERVICES HUB
JULY 2018
FINANCING GHANAIAN AGRICULTURE PROJECT
(USAID FinGAP)
FINANCING GHANAIAN AGRICULTURE PROJECT (USAID FinGAP)
POSITIONING GHANA AS A FINANCIAL SERVICES HUB REPORT, JULY 2018
POSITIONING GHANA AS A FINANCIAL
SERVICES HUB
JULY 2018
FINANCING GHANAIAN AGRICULTURE PROJECT (USAID FinGAP)
POSITIONING GHANA AS A FINANCIAL SERVICES HUB REPORT, JULY 2018
i | P a g e
CONTENTS ACRONYMS & ABBREVIATIONS ii
EXECUTIVE SUMMARY 1
1 REPORT ON PROJECT MANAGEMENT 2
1.1 Project Duration 2
1.2 Project Team 2
1.3 Objective and Deliverables 3
2 REPORT ON RESEARCH 4
2.1 Key Benchmarks Used 4
2.2 International Benchmarks in the Development of an International Financial
Services Sector 4
2.3 Business Environment 4
2.4 Human Capital 10
2.5 Infrastructure 11
2.6 The Regional Environment 13
3 DRAFTING A FRAMEWORK FOR AN ACCRA INTERNATIONAL FINANCIAL
SERVICES CENTER: RECOMMENDATIONS 14
3.1 The Case for an “Enclave” Approach 14
3.2 Critical Enabling Factors in an Enclave 14
3.3 Strategic Partnerships with Other IFCS Crucial 15
3.4 Key Activities to Consider 15
4 CONCLUSIONS 16
FINANCING GHANAIAN AGRICULTURE PROJECT (USAID FinGAP)
POSITIONING GHANA AS A FINANCIAL SERVICES HUB REPORT, JULY 2018
ii | P a g e
ACRONYMS & ABBREVIATIONS
AIFMD Alternative Investment Fund Managers Directive
AU African Union
BoG Bank of Ghana
BOP Balance of Payments
CFC Casablanca Finance City
EU European Union
ECOWAS Economic Community of West African States
FDI Foreign Direct Investment
GDP Gross Domestic Product
ICT Information and communication technology
IFSC International Finance Services Center
IHQ International Headquarters
MOF Ministry of Finance
RHQ Regional Headquarters
SFZ Special Financial Zone
UCITS Undertakings for Collective Investment in Transferable Securities
USAID United States Agency for International Development
USAID FinGAP USAID Financing Ghanaian Agriculture Project
XDFDPC Xicheng District Financial Development Promotion Center
FINANCING GHANAIAN AGRICULTURE PROJECT (USAID FinGAP)
POSITIONING GHANA AS A FINANCIAL SERVICES HUB REPORT, JULY 2018
1 | P a g e
EXECUTIVE SUMMARY The USAID Financing Ghanaian Agriculture Project (USAID FinGAP) addresses a key constraint restricting
the development of commercial agriculture and food security in Ghana – access to finance necessary to
enable investment in agricultural value chains. USAID FinGAP has in the past four years used a
comprehensive approach to facilitate agriculture financing, including but not limited to engaging a broad
range of Ghanaian financial institutions (FIs) (e.g., banks, private equity firms, and investment funds) as well
as Business Advisory Service (BAS) providers, in partnership with strategic investors and buyers of maize,
rice, and soy in the north of Ghana. USAID FinGAP facilitates investment in the agriculture sector in
Ghana that complements Government of Ghana (GOG) and other donor programs aimed at expanding
commercial agriculture.
The President and Vice President of the Republic of Ghana have both expressed their vision of Ghana as
an African hub for financial services. The Ministry of Finance (MOF) has been tasked with coordinating
efforts to realize this vision and has established a taskforce to lead the endeavor.
In 2005, Ghana commenced an agenda to develop an International Finance Services Center (IFSC). This
was inspired by the government’s agenda to strengthen its financial sector, explore the growing
opportunities of cheaper private sector based investments, and strategically entrench Ghana’s role as the
gateway to Africa, especially the West African Sub region.
Initial implementation was focused on banking, which led to a passage of an Act of Parliament and licensing
of Barclays Bank of Ghana Limited to commence the maiden offshore banking service.
However, progress on the IFSC agenda stalled over time. In 2017, the government renewed its
commitment to establish a full fledge IFSC built on a “whole of Government” approach, as practiced in
Singapore, by 2019.
The Ministry has assembled a formidable taskforce of subject matter experts in various sectors of the
financial industry to provide input, insight and advisory on how best to achieve this goal per their points
of expertise. These industry leaders have generously offered their time to lead the running of a situation
analysis of the Financial Services sector in Ghana. This analysis will begin in context of other international
financial centers around the world such as Singapore, Hong Kong, Mauritius, London, New York and
Dubai. Their work will continue in a deep dive into the situation in Ghana and deliver operational and
policy framework recommendations to deliver real results.
To support, chaperone, and curate the findings of this body, the Ministry additionally engaged the services
of two USAID FinGAP consultants (a lead and a junior) to guide and coordinate the research conducted
by the subject matter experts, as well as conduct specific research to support these experts in the task
force, and finally guide the specific market and communication themes under which the research is collated
and presented. The consultants’ curation of the findings will be used as input for the preparation of a
strategic document with the goal of establishing a regional financial hub in Ghana. This hub will be a
preferred regional destination for operations within the banking, asset management, capital markets,
insurance, and financial technology spaces.
FINANCING GHANAIAN AGRICULTURE PROJECT (USAID FinGAP)
POSITIONING GHANA AS A FINANCIAL SERVICES HUB REPORT, JULY 2018
2 | P a g e
1 REPORT ON PROJECT MANAGEMENT 1.1 PROJECT DURATION
The duration of the research and consultation activities was 7 weeks (approximately 30 working days),
commencing in April 2018 and ending in July 2018.
1.2 PROJECT TEAM
The project team consisted of 2 consultants, assisted by an integrated task force from the Ministry of
Finance and related industry experts.
1.2.1 USAID FINGAP TEAM
Lead Consultant
Junior/Research Consultant
1.2.2 TASK FORCE MEMBERS
1. Joyce Awuku Darko Osei - Technical Advisor - Ministry of Finance
2. Dr. Sam Mensah - Advisor
3. Patience Akyianu - Lead expert on Banking
4. Keli Gadzepko - Lead expert on Insurance
5. Rev. Daniel Ogbarmey Tetteh - Lead expert on capital markets
6. Mr. Albert Essien - Advisor
7. Solomon - Ministry of Finance
1.2.3 TASK FORCE AND PROJECT RESEARCH STRUCTURE
FINANCING GHANAIAN AGRICULTURE PROJECT (USAID FinGAP)
POSITIONING GHANA AS A FINANCIAL SERVICES HUB REPORT, JULY 2018
3 | P a g e
1.3 OBJECTIVE AND DELIVERABLES
The consultants were expected to coordinate with the task force and subject matter experts in the
performance of the following deliverables, outlined in the Task Force’s work plan.
*The Ministry of Finance Task Force is continuing with this activity after the end of USAID FinGAP.
TIMELINE DELIVERABLES ACTIVITIES COMMENT
End of Week 2 Inception Report Done prior to MoU with
FINGAP. Hence activity
was not repeated.
1.Lay of the land/desk research – Create a detailed description of
major components of the financial system in Ghana. The description
should include:
Review of the Ministry’s Taskforce timeline-summary from their
meeting in February 2018 to ensure timeframes and listed
components are included in this situation analysis.
Done
Comparison of the situation in Ghana to both international and
regional benchmark financial centers (New York, London, Hong Kong,
Zurich, Singapore, Dubai, Mauritius, Johannesburg) Especially for the
regional and more recent hubs (Dubai etc.), how did they emerge as
financial centers?
Done
For all: What policy frameworks, institutions and infrastructures
promote and support the financial sectors in these places?Done
What has worked well in these places? What has not worked well? Done
Common elements emanating from the above and relative
importance of each.Done
GAP analysis / comparison to Ghana Done
2. Analyze any previous government attempts to establish a
regional financial services hub in Ghana Not done
3.Precursory analysis and next steps for strategic document, with
the goal of establishing a regional financial hub Not done
4.For each of the following sub-sectors, identify key elements
driving success as well as appropriate measures of performance,
and evaluate performance of each by the measures.
On going
5.Suggest directions for further reforms on the basis of the gaps
identified in the preceding analysis, and the goal of establishing a
regional / global financial hub in Ghana.
On going - not
completed for all sub
sections
End of Week 6
Presentation of
Draft Report at a
Stakeholders
Forum
Not done
End of Week 7
Final Report
reflecting feedback
from stakeholders’
forum, USAID, and
USAID FinGAP, as
needed
Not done
End of Week 5
Draft report
containing
sections on each of
the 5 activities
listed above
*
*
*
*
*
*
FINANCING GHANAIAN AGRICULTURE PROJECT (USAID FinGAP)
POSITIONING GHANA AS A FINANCIAL SERVICES HUB REPORT, JULY 2018
4 | P a g e
2 REPORT ON RESEARCH 2.1 KEY BENCHMARKS USED
The consultants examined other IFSCs during their analysis of Ghana’s potential, which include:
Luxembourg
Singapore
Casablanca
Dubai
Qatar
Busan
Kuala Lumpur
Hong Kong
Mauritius
2.2 INTERNATIONAL BENCHMARKS IN THE DEVELOPMENT OF AN
INTERNATIONAL FINANCIAL SERVICES SECTOR
Literature on international benchmarks for the development of a successful IFSC points out 5 key thematic
factors. These factors provide the enabling environment for an IFSC to thrive as well as become
competitive in the IFSC industry. These factors are summarized as follows:
Source: The Global Financial Centers Index 23
2.3 BUSINESS ENVIRONMENT
2.3.1 POLITICAL STABILITY AND RULE OF LAW
Political stability, rule of law, and good governance tend to be foundational bedrock across most, if not
all, IFSC. It is worth noting that these factors are not synonymous to or to be perceived as the presence
of western democracy. The critical factors here are the existence of a stable form of political governance
FINANCING GHANAIAN AGRICULTURE PROJECT (USAID FinGAP)
POSITIONING GHANA AS A FINANCIAL SERVICES HUB REPORT, JULY 2018
5 | P a g e
which safeguards the existence and continuity of other factors needed for the development of an IFSC.
Hence a cursory overview of successful IFSC will indicate different political systems - including democratic
governments, authoritarian, and monarchies.
The common denominator is political stability, which does not interfere with or disrupt the functioning
of the IFSC. Successive governments in Mauritius have committed to safeguarding pro-business policies
and projects which supports international business. Hence they have been rated number one on the Mo
Ibrahim African Index of good governance for several years.
Secondly, political stability is not limited to domestic stability but stability in relations between the host
country and other key markets in the host region and the global political landscape. A cornerstone factor
for Luxemburg’s success as an IFSC has been its success at building its strategic geographical location, with
active engagement in and collaboration through European Union (EU) politics. On the other hand, the
recent Brexit vote presents a major challenge to the London IFSC. Also, the recent interest of Morocco
to join the Economic Community of West African States (ECOWAS) and rejoin the African Union (AU)
underpins the importance of political stability between the host country and relevant markets.
Rule of law refers to the assurance of justice and security in the domestic financial service markets that
are transparent and effective to both local and international investors. In particular, financial laws that
safeguard the financial interests of investors in relations to their invested financial assets are important. A
common practice across a number of IFSCs is to create a separate judiciary system, independent of the
domestic system. One example is the Dubai International Financial Services Center. Nonetheless, the
presence of an appreciable perception of the rule of law in the domestic environment cannot be
underestimated.
CURRENT STATUS
Ghana’s political environment is the most stable in West Africa and among the leading stable environments
in the African region with demonstrated commitment to pro-business initiatives by successive
governments. Also the country has enjoyed stability in geo political relations within the West African sub
region and Africa in general. Key highlights include:
Approximately 26 years of uninterrupted democratic rule, one of the longest in sub-Saharan
Africa;
5 democratically elected presidents since 1992;
3 successful presidential transitions between political parties in the 4th republic;
Ranked number 1 on rule of law in Africa1 in the Global Rule of Law Ranking;
Ranked number 2 in West Africa on Global peace index, which measures level of safety, the
extent of conflicts and the degree of militarization;
An independent and well-structured Judiciary system with Commercial and Human Rights
Courts;
Legal system based on the English law, which is highly regarded globally.
1 World Justice Report 2017; Global Rule of Law Ranking
FINANCING GHANAIAN AGRICULTURE PROJECT (USAID FinGAP)
POSITIONING GHANA AS A FINANCIAL SERVICES HUB REPORT, JULY 2018
6 | P a g e
However, a major gap in Ghana’s political stability in relation to an IFSC is the partisan approach on
national development. This has led to inconsistencies in the continuation of policies and programs with
changes in government. This challenge was reflected in the discontinuity of the previous project with the
change in government in 2008. Hence a renewed commitment to the IFSC should safeguard the continuity
of the agenda either through a bipartisan approach or an Act of Parliament.
2.3.2 INSTITUTIONAL, LEGAL AND REGULATORY ENVIRONMENT
There are two main models for the institutional, legal, and regulatory frameworks of IFSC:
The first model includes first generation legacy hubs which were developed as a by-product of a
city’s preeminence and inherent advantage in the global economy. They are anchored by significant
international home-based financial firms and have a natural gravitational pull in global finance and
commerce. Examples include the New York and London financial hubs. This type of system usually
does not have a deliberate IFSC policy, nor separate legal or regulatory frameworks.
The second model includes second generation IFSCs which make a deliberate effort to replicate
the first generation hubs. They may not have comparable inherent advantages, per se, including
the endowment of a critical mass of large home-based global players; hence, they create deliberate
policy incentives through institutional, legal, and regulatory frameworks to attract foreign firms
and investors. As a result, they make very conscious efforts in regulation or incentives to attract
foreign investors. Examples include Dubai, Luxembourg, and Mauritius, which have all influenced
their institutional, legal, and regulatory frameworks.
The hubs described by the first model are usually characterized by a single domestic legal and regulatory
environment, with regulation usually undertaken by multi-tiered and highly complex Self-Regulatory
Organizations. The latter model, on the other hand, are characterized by distinct institutional, legal, and
regulatory frameworks which are designed to increase the hub’s competitiveness on the global market.
Since these usually tend to be replicated centers, devoid of a default creation as a by-product of a city’s
inherent advantage, they are usually created through an Act of law, defining its legal entity, operating
structures and regulatory framework. The execution of the Act is undertaken by a legal entity, either a
private company limited by guarantee or a Public Private Partnership model. This entity is usually an
Authority with the objective to oversee the day-to-day administrative management of the IFSC, developing
its competitiveness and marketing it globally. This is followed by a regulatory structure that manages the
regulatory requirements of the IFSC.
Some advanced second generation IFSCs such as Dubai and Astana have added a layer of a distinct conflict
resolution framework made up of separate court and arbitration systems. This independent framework is
based on the English Common Law, which is a preferred global standard. There are also some second
generation IFSCs such as Casablanca whose IFSC is regulated by the domestic regulatory framework.
Nonetheless, it is worth noting that the recent global financial crises, coupled with increased competition
from emerging IFSCs, is driving reforms within the first generation hubs. An emerging trend, especially
with markets aligned with the British jurisdiction is adopting and adapting the “twin peaks” model in
financial sector regulation. Examples include London and cities in Australia, Canada, and South Africa. This
presents a shift from self-regulatory organizations to a coherent single regulator which will minimize if not
remove duplications, gaps, and inconsistencies characteristic of the old system. Regulation is shared among
FINANCING GHANAIAN AGRICULTURE PROJECT (USAID FinGAP)
POSITIONING GHANA AS A FINANCIAL SERVICES HUB REPORT, JULY 2018
7 | P a g e
two regulatory authorities focused on ensuring consumer protection and market stability, to combat
money laundering and promote open and transparent markets.
The twin peaks consist of a Prudential Regulation Authority, which falls under the Central Bank and
a Financial Conduct Authority. The former focuses on promoting transparency and viability of the
firms to ensure market stability, whilst the latter regulates the conduct of the firms with a focus on
consumer protection. These reforms made to the domestic sector also cover the operations of their
embedded IFSC.
Beside these is a recent industry-driven regulatory set of standards developed either from best practices
or preemptive strategies. Notable among these are the Basel III protocol in banking, Alternative
Investment Fund Managers Directive (AIFMD), and UCITS (Undertakings for Collective Investment in
Transferable Securities). AIFMD regulates the alternative investment funds market to safeguard investor
protections, increase transparency for investors and regulators, and provide enhanced management of
systemic risks. UCITS has become a global standard for distributed investment fund products. AIFM and
UCITS are Luxembourg-inspired best practices.
CURRENT STATUS
The institutional, legal, and regulatory framework for an IFSC is presently underdeveloped. The regulatory
framework of the financial sector is largely via self-regulatory organizations such as Bank of Ghana,
Securities and Exchange Commission (SEC), National Insurance Commission (NIC), and the National
Pension Regulatory Authority (NPRA). Recent instability in the domestic banking sector casts a shadow
on regulatory efficiency in the financial sector.
The IFSC relevant regulation covers the offshore banking regulation developed as part of the initial attempt
at the development of the Accra International Finance Center in 2007, as well as the ongoing efforts of
the Central Bank transition towards Basel II and III. The recent directive by the Central Bank on new
Capital Requirements promises to consolidate and strengthen the domestic banking system in line with
the capital accord requirements of Basel II. Likewise, the recent regulation on deposit-taking presents a
framework to strengthen regulation.
2.3.3 MACRO-ECONOMIC ENVIRONMENT
A strong domestic macroeconomic environment is important for the growth of an IFSC. Essential variables
include low and stable inflation, stable and predictable foreign exchange regime, low interest rate, fiscal
discipline, stable economic growth, and a sustainable financial stability.
A robust and extensive domestic financial sector has also been pivotal in the development of first
generation and some emerging market hubs. The depth and capacity to serve as an anchor for the hub
and facilitate interactions with the rest of the global financial system is critical. This also leads to the
development of ancillary financial services which is an organic growth pattern for the IFSC.
On the other hand, developing countries which do not have well-developed financial sectors typically
create Special Financial Zones/Financial Free Zones that replicate the institutional infrastructure and
regulatory incentives of a strong advanced financial system.
Free capital mobility and full control over foreign currency assets by investors is critical to the
attractiveness of an IFSC. Capital controls are very limited and rare within advanced industrial economies
FINANCING GHANAIAN AGRICULTURE PROJECT (USAID FinGAP)
POSITIONING GHANA AS A FINANCIAL SERVICES HUB REPORT, JULY 2018
8 | P a g e
which normally host first generation hubs. However, developing economies which usually host second
generation hubs tend to have capital controls which are a challenge to the competitiveness of IFSCs. Hence
they incorporate free capital mobility and foreign currency assets within their Special Financial Zones
(SFZ). A major challenge is the need to manage interactions between the SFZ and the domestic economy.
CURRENT STATUS
Ghana’s lower middle income economy remains promising, albeit with some challenges. Its key
macroeconomic variables such as fiscal management, inflation, GDP, interest rates, foreign exchange rates
and balance of payments (BOP) have witnessed frequent fluctuations over the past decade, thus posing a
challenge on the stability of macroeconomic fundamentals, both in the short- and long-run. This makes it
difficult to forecast on the direction of the economy and or the likely actions the policy makers would
take.
Nonetheless, significant improvements in macro-economic management in recent years have positioned
Ghana among the fastest growing economies in the world in 2017. The World Bank credits the significant
improvement made in the macroeconomic environment in 2017 in comparison to preceding fiscal year.
Ghana’s fiscal deficit reduced to 6% of gross domestic product (GDP) in 2017 from 9.3% in 2016.2 The
economy expanded by 8.5% in 2017 compared to 3.6% the previous year, driven by the mining and oil
sectors.3 Adding to the list, the government has introduced interventions such as the digital address
system, paperless system at the port, compulsory tax identification number registration, and National
Identification system—all aimed at improving domestic revenue collection.
Ghana has experienced growth in foreign direct investment (FDI) inflows on the back of confidence in
the macroeconomic prospects. Key highlights include:
The strong 141% year-on-year growth in FDI in the first 9 months of 2017 relative to the same
9-month period in 2016, reflective of growing investor confidence in Ghana’s macroeconomic
outlook
FDI inflows from Europe and Asia contributed 98% to total FDI inflows in the first 9 months of
2017
2 http://www.worldbank.org/en/country/ghana/overview
3 Ghana Statistical Service
FINANCING GHANAIAN AGRICULTURE PROJECT (USAID FinGAP)
POSITIONING GHANA AS A FINANCIAL SERVICES HUB REPORT, JULY 2018
9 | P a g e
The growth in Ghana’s middle-class, as well as a rising consumer confidence and increase in spending,
is contributing to its economic prospects. Key highlights include:
Ghana is a thriving middle-income class country with the second largest economy in West Africa
Consumer spending is expected to hit ~USD 21 billion by 2020
In-spite of these gains, further efforts are needed to manage lower inflation rates below the current 10%
threshold, control exchange rate volatilities, strengthen the financial sector, and to control interest rates.4
The capacity of the banking sector is weak with a scarcity of long-term finance, limited access to financial
services, high intermediation costs, undercapitalized banks, and high Non Performing Loans, which are in
most cases a function of an unstable economic environment.
2.3.4 TAXES AND COST COMPETITIVENESS
A favorable tax environment is a critical pillar in the success of an IFSC, especially for emerging / second
generation IFSCs who need favorable incentives to attract foreign investors and firms. Hence, a majority
of these IFSC have designed tax laws which incentivize the financial sector by being conducive and
rewarding. The success of the Luxembourg, Dublin, and Mauritius IFSCs mirror the catalytic role of tax
regimes to cost effectiveness.
LOW TAX REGIME
Low-tax regimes are inherent to the success of an IFSC. These include corporate taxes and tailored taxes
for sub-sectors in the general financial sector. Example, Luxembourg has low corporate taxes by
counterbalancing corporate income tax liability with significant tax credits for investments. Mauritius pegs
tax rates up to a maximum 18% to different revenue benchmarks—18% for a company whose taxable
income exceeds €30,000 and 15% if annual taxable income does not exceed €25,000. Nonetheless, overly
low tax rates can cause an IFSC to suffer reputational challenges of promoting tax havens for tax avoidance.
Dublin and Mauritius have suffered reputational backlash from low-tax regimes in the development of
their offshore investment incentives.
4 https://www.worldbank.org/en/news/press-release/2018/03/05/ghanas-2018-economic-outlook-positive-but-
challenges-remain
FINANCING GHANAIAN AGRICULTURE PROJECT (USAID FinGAP)
POSITIONING GHANA AS A FINANCIAL SERVICES HUB REPORT, JULY 2018
10 | P a g e
DOUBLE TAXATION AVOIDANCE TREATIES
A double taxation treaty is a catalytic factor in driving foreign investments into emerging and second
generation hubs. The investor attraction strategy lies in the extensive double taxation avoidance treaties
it has with countries in different regions of the world. The number of agreements informs the growth and
direction of spread of the IFSC’s footprint across the globe. Luxembourg has over 60 double taxation
agreements, Singapore has 76, and Mauritius has over 30 agreements, hence attracting clients from all
these markets.
TAX CREDITS
Some IFSCs innovate with tax credits to drive foreign investments and new businesses. Luxembourg offers
tax credit as high as 13% of the increase in investment in depreciable assets gained in a year of assessment.
Also new businesses can enjoy tax exemptions of over 25% on corporate tax, and municipal business taxes
for profits made for a period of 8 to 10 years.
2.3.5 SPECIAL INCENTIVES FOR SPECIFIC FINANCIAL SERVICES
Some hubs also develop special incentives, relative to their product objectives to attract specific kinds of
clients. Singapore has special incentives to attract Regional Headquarters (RHQ) and International
Headquarters (IHQ). Companies with an RHQ in Singapore enjoy a 15% concessionary tax rate, while
companies with IHQ status enjoy lower rates between 0 to 10%.
Luxembourg has specific incentives for investment funds, financial participation companies, private wealth
management companies, securitization companies, venture capital vehicles, and financial services
companies. Investment funds are free from corporate income tax, municipal business tax, and withholding
tax on dividends. Private wealth management firms are exempt from taxation on income and net worth
tax reserve but pay a yearly subscription of 0.25% based on paid-up capital, share premium and excessive
debts. They also enjoy zero withholding tax on distributed dividends paid by non-resident private wealth
management companies on capital gains on shares. There are also specific regulations for banks, securities
depositories, insurance and reinsurance companies, and other financial service providers in establishing
taxable basis for corporate income tax. This includes neutralization of unrealized exchange gains, general
banking risk provision, provision for guarantee of deposits, mathematical reserves, and/or catastrophe
reserves.
CURRENT STATUS
Ghana’s tax regime does have some incentives aimed at attracting FDI, such as those imbedded in the
Free Zone Act. Also it has double taxation agreements with at least 11 countries. Lessons and best
practices here could serve as a guide in designing specific tax incentives for the Accra International
Financial Center.
2.4 HUMAN CAPITAL
Top-level skilled talent in economics, finance, banking, insurance (or actuarial), law, financial engineering,
information and communication technology (ICT), and relevant international languages is essential to the
success of an IFSC. This skilled workforce is normally generated by an ecosystem of top universities and
a vibrant domestic and regional financial sector providing both classroom and on-the-job training. In
FINANCING GHANAIAN AGRICULTURE PROJECT (USAID FinGAP)
POSITIONING GHANA AS A FINANCIAL SERVICES HUB REPORT, JULY 2018
11 | P a g e
countries with less vibrant ecosystems to generate such talent, flexible immigration policies targeted at
the IFSC have been a channel to attracting such talent.
This is a characteristic of emerging hubs which have to compete with the matured ecosystem of first
generation hubs for such talent. Example, the Casablanca Finance City has an immigration and residency
policy which allows visas within 73hrs, work permits in 3 days, and residency permits within 2 weeks.
Hubs within regional economic zones with free movement of people protocols enjoy high-skilled talent
from more advanced markets within the region. An example is Luxembourg which is benefiting from high-
level talent from advanced financial markets within the Eurozone without direct investment in training a
talent pool. There is also conscious effort by some centers to develop and attract such talent through
partnerships with universities to run IFSC relevant courses. This attracts students who move on to work
at the IFSC.
Closely related to this, is the quality of life of the city. This relates to cost of living and access to
international quality social amenities, including health services.
CURRENT STATUS
Ghana has the benefit of a very young and economically active population. More than half of employable
population is young and literate. Sixty percent of the adult population has at least some secondary
education, which is more favorable than key peers such as Kenya (32%) and Cote D’Ivoire (25%). Below
is a breakdown of the composition.
Sources: BMI; UNESCO; UNDP; GES
There is also a fast-growing college industry popular for programs in business, finance, and law, though
quality standards remain a challenge. It is anticipated that, plans by government to reduce taxes on private
universities will help improve standards.
In spite of all this, Ghana does not yet have a critical mass of top-level skilled labor for most IFSC
operations, but a fast-growing financial industry coupled with the growing numbers of college programs
and graduates presents a base talent pool for re-training and upgrading for IFSC specializations.
2.5 INFRASTRUCTURE
Both physical and technological infrastructure are important in the development of an IFSC. This covers
offices, accommodation (hotels/apartments), transportation (including external and internal connections),
good social amenities (restaurants, entertainment centers, retail outlets, and medical facility), electricity,
and ICT (internet connectivity, data centers, payment systems, etc.). Proximity and affordability are also
critical factors. This covers proximity of other key facilities to the business center/district, ease and cost
FINANCING GHANAIAN AGRICULTURE PROJECT (USAID FinGAP)
POSITIONING GHANA AS A FINANCIAL SERVICES HUB REPORT, JULY 2018
12 | P a g e
of connectivity to other regional/global hubs, efficient public transport, and the competitiveness of pricing
to other markets.
Emerging IFSC’s which may not have existing adequate level of infrastructure, opt for a dedicated enclave
facility with the entire needed infrastructure at international standards. This is usually a one-stop shop
financial city or space with facilities such as business centers, offices, data centers, restaurants,
hotels/apartments, entertainment centers, parks retail outlets/shopping centers, schools and medical
facilities. This can range from a few buildings to large tracts of land.
CURRENT STATUS
Currently Accra has one of the fastest growing business infrastructure developments in West Africa,
second to Lagos. There is substantial growth in private sector investments, in real estate and the hospitality
industry, leading to high-end housing and the presence of international hotel brands such as Kempinski,
Movenpick, Holiday Inn, Golden Tulip, Marriot, IBIS, and Best Western. But both hotels and prime housing
costs are too high by international standards. This presents a cost competitiveness challenge.
Ghana’s open skies policy has made Accra one of the most connected cities in the region with daily
flights/connecting flights to Europe, North America, Middle East, Asia, North Africa, Nigeria, Kenya, South
Africa, Cote D'Ivoire among others. The international airport is one of 5 US Federal Aviation Authority
Category One airports in Africa. The recently expanded airport terminals promise to enhance connectivity
in the near future.
The city has witnessed progressive improvements in internal transportation, which includes upgrading of
roads and modern taxi services, including Uber and Taxify. Traffic within the city remains a challenge to
ease of movement.
2.5.1 INVESTMENT IN ICT
Global financial transactions are predominately digital; hence, ICT and financial technology have become
critical enablers for IFSC. Thus in enhancing their competitiveness, IFSCs are investing in cutting-edge ICT
infrastructure and technology, including the development of robust Fintech industries.
Singapore is investing in the development of a ‘smart financial center’ initiative with an objective to improve
financial regulations, e-commerce, e-payment, cloud computing and digital content through digital
technologies. This will see developments in state-of-the-art data center infrastructure, high-speed internet
connectivity and the creation of ICT research centers in universities.
Likewise, Luxembourg launched digital ‘Letzebuerg’ in 2014—an agenda to develop telecom infrastructure
and support innovation and access to financing for Fintech start-ups. In 2017, it launched a house of
financial technology, to connect domestic and international Fintechs to consolidate it as a global leader in
financial technology.
CURRENT STATUS
Ghana’s ICT terrain is promising. Currently, there are three sub-marine cables providing relatively good
internet connectivity. The Accra Digital Center is being developed to host and incubate business
processing and outsourcing centers and Fintechs. The Fintech industry is developing, although it remains
quite under developed compared to peers, such as Nigeria and Kenya.
FINANCING GHANAIAN AGRICULTURE PROJECT (USAID FinGAP)
POSITIONING GHANA AS A FINANCIAL SERVICES HUB REPORT, JULY 2018
13 | P a g e
2.6 THE REGIONAL ENVIRONMENT
2018 GLOBAL FINANCIAL CENTERS INDEX RANKINGS
• Africa Leaders
– Casablanca – 32nd (international specialist)
– Johannesburg – 52nd (international diversified)
– Mauritius – 56th (local specialist)
• Associate IFSC
– Cape Town
– Nairobi
FINANCING GHANAIAN AGRICULTURE PROJECT (USAID FinGAP)
POSITIONING GHANA AS A FINANCIAL SERVICES HUB REPORT, JULY 2018
14 | P a g e
3 DRAFTING A FRAMEWORK FOR AN
ACCRA INTERNATIONAL FINANCIAL
SERVICES CENTER:
RECOMMENDATIONS 3.1 THE CASE FOR AN “ENCLAVE” APPROACH
All things being equal, Ghana should attain high marks in all 5 key indicators to be a competitive IFSC.
Currently, Ghana has a low competitiveness rating in most of these indicators. It will take substantial time
and resources for the country as a whole to improve its competitiveness across the board.
However, an enclave strategy allows Ghana a fast-track solution, by creating a special financial zone where
operating standards are at par with international competition, and that by-passes systemic problems in the
rest of the economy.
3.2 CRITICAL ENABLING FACTORS IN AN ENCLAVE
The emphasis is to focus on things that can be directly controlled. The following are the key factors for
Ghana:
BROADER COUNTRY-LEVEL:
– Political stability and rule of law
– Macroeconomic environment
ENCLAVE-SPECIFIC:
– Institutional and regulatory framework
– Infrastructure
– Human capital
SPECIALIZATION IS KEY
“IT SEEMS TO ME THAT MORE OF THE SMALLER CENTERS WOULD DO
BETTER BY SPECIALIZING IN ONE SECTOR. NOT EVERYONE CAN BE A
LONDON OR A NEW YORK.”
—ASSET MANAGER BASED IN MONTREAL, 2018 GFC INDEX
Emerging trends in the sector tend to avoid replicating or competing with established global IFSCs to
carve a niche with competitive advantage. Examples include Busan’s focus on marine finance and Kuala
Lumpur’s specialization in Islamic Finance.
FINANCING GHANAIAN AGRICULTURE PROJECT (USAID FinGAP)
POSITIONING GHANA AS A FINANCIAL SERVICES HUB REPORT, JULY 2018
15 | P a g e
It will be important for Ghana to identify a niche with competitive advantage that it can exploit for an
IFSC.
3.3 STRATEGIC PARTNERSHIPS WITH OTHER IFCS CRUCIAL
The market entry strategy should consider a marketing strategy where Ghana collaborates with other
global and regional IFSCs, feeding into and off their value chains. An example is the Casablanca Finance
City (CFC) which has entered into strategic partnerships with Luxembourg, Busan International Financial
City, Xicheng District Financial Development Promotion Center, among others.
It will be apt for Ghana to identify strategic relationships with Casablanca and Mauritius. Casablanca has
an objective to become a Regional Hub for North and West Africa. Its competitive positioning between
Europe and North America, coupled with other key factors, gives it a higher advantage in the sub region.
A strategic partnership with CFC could be considered for a less aggressive market entry.
3.4 KEY ACTIVITIES TO CONSIDER
1. Set up an institutional and regulatory action group with multi-ministerial representation,
supported with international experts, to develop a concise institutional and regulatory framework.
2. Secure an Act of Parliament to safeguard the project and designate an authority to oversee
implementation.
3. There is no need to fully develop the physical enclave before launching the IFSC. While a facility
is being developed, IFSC status firms can locate in any number of designated locations in
country/Accra.
4. Enact an interim law allowing firms to operate anywhere in country in the first few years while
the center is under construction (Dubai case, United Arab Emirates Financial Free Zones Law,
2004/Dubai International Finance Center Law 9).
5. Set up an estate management entity to facilitate the identification, negotiation and signing on of a
pool of business centers, hotels, apartments, offices and other related real estate and
infrastructure needs on behalf of clients. This could include tax breaks/incentives to real estate
providers for competitive pricing. This will ensure that, in the absence of a designated physical
enclave, clients would still have a single platform to access international standard facilities at
negotiated competitive rates. This could be done as a PPP vehicle, possibly with reputable global
IFSC estate developers or local real estate management company.
6. Leverage top rank position of “Doing Business Index” in West Africa for sub regional hub.
7. Though an improvement in Ghana’s rating will be good for broader country reputation, an enclave
model provides opportunity to directly provide these as part of offerings of the enclave,
independent from the domestic situation.
8. In the short-term, it will be necessary to import talent. This could begin with Ghanaian and African
Diaspora. Leverage Ghana's large expatriate community to attract international standard talent.
Develop an IFSC talent program in partnership with local universities/resident firms and other
partner IFSCs to train locals. Initiate a talent program in advance of launching the IFSC.
9. Build on the ongoing recapitalization of banks to support selected local banks to consolidate, build
capacity and spread across border within the sub region. This will help build a home grown
financial sector with regional spread.
FINANCING GHANAIAN AGRICULTURE PROJECT (USAID FinGAP)
POSITIONING GHANA AS A FINANCIAL SERVICES HUB REPORT, JULY 2018
16 | P a g e
4 CONCLUSIONS
The Ministry of Finance has taken steps towards achieving the vision of Ghana as an African hub for
financial services, or an International Finance Services Center (IFSC), through a taskforce comprised of
subject matter experts in various sectors of the financial industry to provide input, insight and advisory on
how best to achieve this goal per their points of expertise. The taskforce was supported by two USAID
FinGAP consultants.
To commence the assignment, the taskforce conducted a literature review on international benchmarks
for the development of a successful IFSC points out 5 key thematic factors. These factors provide the
enabling environment for an IFSC to thrive as well as become competitive in the IFSC industry. While
comparing Ghana with international financial centers around the world such as Singapore, Hong Kong,
Mauritius, London, New York and Dubai, the taskforce analysis concluded that currently, Ghana has a low
competitiveness rating in most of these indicators. It will take substantial time and resources for the
country as a whole to improve its competitiveness across the board.
However, they recommend an enclave strategy which would allow Ghana a fast-track solution by creating
a special financial zone where operating standards are at par with international competition, and that by-
passes systemic problems in the rest of the economy. The specific recommendations include establishing
strategic partnerships with other IFSCs and identifying a niche with competitive advantage that Ghana can
exploit for an IFSC.
These activities will strengthen Ghana’s financial sector, explore the growing opportunities of cheaper
private sector based investments, and strategically entrench Ghana’s role as the gateway to Africa,
especially the West African sub region.