IMANI: The Act Being Used To Clampdown On Foreign Retail Traders "Is A Bundle Of Confusion"

Policy Think Tank, IMANI Ghana, contends that the Ghana Investment Promotion Centre Act 478, being used to clampdown on foreigners engaged in retail trading "is a bundle of confusion" thus "any policy anchored to it shall be similarly incoherent". IMANI claims Ghana’s cabinet was advised five years ago by the GIPC to update the Act but government has failed to present a policy paper in connection with the need to upgrade the investment laws. A government Inter Agency Taskforce made up of officials from the Registrar Generals Department, Ghana Investment Promotion Center, the Ghana Revenue Authority, Police, Immigration Service, Trade and Foreign Affairs Ministries embarked on an operation on Tuesday morning to clampdown on foreigners it says are illegally participating in the retail trade after having earlier met to strategize on how to carry out the exercise. The Ghana Investment promotion law bars foreign traders from retailing unless they invest an initial capital of 300 thousand dollars. But in a statement issued today, IMANI Ghana waded into the controversy over the eviction of foreign retail traders from the market centres in the country saying “the proposed enforcement exercise is therefore based on a superficial appraisal of the current challenges within our investment climate. We will explain.” According to the group, various requirements in the legislation seem to contradict themselves and there is the need streamline the regulations in order to correct the fuzzy nature of the law. Read below the full statement from IMANI Ghana. Last month, the Government of Ghana was expected to begin a rigorous enforcement of the Ghana Investment Promotion Centre Act of 1994 through an “inter-Agency Taskforce”. What this really meant was that members of the taskforce, backed by security officers, will move through various markets to ensure that foreigners (who are the main subjects of that law) not meeting the statutory requirements are prevented from continued trading. We come to this conclusion because all comments by Ministers and taskforce spokespersons to date have focussed on the trading provisions in that Act and little else besides. Why as a country we have waited for more than 15 years to “enforce” our laws on “trading” is a question for another day. In the circumstances, the enforcement exercise was postponed from last month to the current month, but the concerns remain. Concerns have been rightly raised about the consequences of this new focus on enforcement for our obligations to ECOWAS treaties and covenants. Some observers worry that ECOWAS nationals are not provided with special safeguards in the GIPC Act, and that to advance the objectives of the custom union and to promote the ideals of the common market, not even to talk of pan-Africanist solidarity, such safeguards ought now to be provided. This matter deserves additional attention, and in due course the debate will be joined. IMANI’s immediate concerns about the impending exercise are however focused on the quality of the GIPC Act itself, whether it advances our nation’s economic interests, whether it contributes to sound policymaking, and whether in fact it makes coherent sense. We note that it has been 5 years since the Ghanaian cabinet was advised by the GIPC of the need to update the Act. We have not seen any policy paper from the government in connection with the need to upgrade the investment laws of this country to align with the country’s current and evolving needs. The proposed enforcement exercise is therefore based on a superficial appraisal of the current challenges within our investment climate. We will explain. Except for the special regimes in the Act for sectors such as fishing, forestry, mining and banking, and the wholly separate sector of petroleum, where foreign participation is governed by its own exclusive set of laws, the Act is fairly consistent in what it requires of non-Ghanaians seeking to do business in Ghana. Indeed the overall state of affairs is summed up in this popular, rather liberal, provision: “An entrepreneur, irrespective of nationality, can set up a business enterprise in Ghana in accordance with the provisions of the Companies Code, 1963 (Act 179), the Partnership Act, 1962 (Act 152), or the Business Name Act, 1962 (Act 151).” The liberality of the provision is however qualified by the minimal capital requirements set out in the Act. The Act permits foreigners to engage in all non-exempted business provided they invest a minimum of $10,000 and engage a Ghanaian partner. Though the law does require the Ghanaian partner to also invest a minimum of $10,000, there is no stipulation as to the extent of Ghanaian equity. Theoretically, the partners can enter into a shareholder agreement granting the foreigner considerably higher equity and the arrangement will still be deemed as complying with Ghanaian law. In fact, should the foreigner so wish, they can invest $50,000 or more and do away with the need to secure a Ghanaian co-investing partner. In the case of what is obliquely referred to as: “trading enterprises”, there is a requirement that the investor puts up a minimum of $300,000 in capital and employs 10 Ghanaians. There is also a schedule to the Act, titled section 18, that stipulates that foreign traders cannot do businesses from “kiosks”, or engage in what is referred to as “hawking” or “petty trading” without any definitions whatsoever in the “interpretation” section of the Act. The perverse implications of these arbitrarily thrown together provisions mean that there is virtually no proper elucidation of real-world supply chains. There are no guiding principles for wholesale, distribution, retail, logistics, or cartage. There is absolutely nothing in the law that stops 200 foreigners from forming a cooperative with 10 Ghanaians, pooling up the minimum capital, and registering the cooperative as a business with the members identified as employees, and then operating from the backs of minivans as is the practice in many countries. Even worse, since the law precisely defines a “trading enterprise” to mean a business “involving ONLY the purchasing and selling of goods”, any value-added services render the meaning of the act unclear. For example, a meat trading enterprise that also offers dressing, cold storage, and cartage may or may not fall within this category. It is similarly unclear if a distributor that receives consignments of products from a wholesaler and distributes same for commissions (i.e. does not “buy” but only sell) shall be operating within the letter of the law.