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New Government in Ghana: Planned Policies and their Impact on Businesses

This article highlights the policies outlined in the National Democratic Congress (NDC) manifesto of 2024 and reflects the proposals and intentions of the current government. On implementation, the actual policies may, for practical exigencies, vary either materially or insignificantly.

On the 7th of January 2025, His Excellency John Dramani Mahama was sworn into office as the President of Ghana for a four-year term ending on the 6th of January 2029. This follows his election in the 2024 presidential election. He campaigned around economic recovery, a 24-hour economy, job creation, energy, and generally to reset Ghana. These promises raise optimism in the economy.

One of the most exciting aspects of the president's campaign is his commitment to abolish several burdensome taxes including the COVID levy, emissions tax, e-levy, and betting taxes. These taxes are a burden to businesses and seen as roadblocks to growth. The planned tax cuts offer potential relief to businesses. The NDC's manifesto explicitly states, "We will scrap these draconian taxes within the first 100 days to ease the high cost of doing business and alleviate hardships." This bold vision has captured the imagination of many, promising a brighter and more prosperous future for Ghana.

It is important to note that the President has consistently talked about the energy sector, particularly the upstream oil and gas industry, and the transition to green energy. The President clearly intends to avoid the resource trap of unexploited hydrocarbon resources while positioning the country on a sustainable long-term green energy path.

This piece will look at the economic indices inherited by the new NDC Government, the Government's planned immediate tax reliefs, and planned or intended policies and actions around upstream oil & gas production and energy transition, fiscal policies and their impact on businesses. It will also cover single-digit inflation, monetary policy, exchange rate policy, and financial sector development, the 24-hour economy, trade and industry, lean government, and debt management.

Writers:

Alfred K.T. Oware

Accounting & Assurance

Joshua K. Adotey

Advisory Services

Economic Indicators Inherited by the Government

On the back of the planned (i.e., intentions in the manifesto) policies of the Government are some key indicators that have been inherited. To achieve the reset agenda of the Government, the standing of these indicators are key considerations. First, the Government needs to improve on these indicators to enhance confidence in the business community. Second, the improved indicators must be sustained to underpin the reset agenda. The indicators are many, but the significant ones are highlighted below:

Consumer Price Index (Inflation): As of November 2024, Ghana's consumer inflation stood at 23.0%, up from 22.1% in October.

Producer Price Index: Inflation for December 2024 is 26.1%.

Commercial Banks' Lending Rates: Interest rates for commercial bank loans in Ghana are influenced by the central bank's monetary policy stance. The prime rate as of October 2024 stood at 27%. As of January 2025, the Bank of Ghana's 91-day Treasury bill rate was 28.1902%. The Bank of Ghana's reference rate (i.e., the benchmark for commercial banks' lending rates) in January stood at 29.72%. Most commercial banks' lending rates are above this benchmark rate. In some instances, credit could go in excess of 40%.

Business Ready Report: On the following pillars, Ghana scored 66.99% on Regulatory Framework, 54.42% on Operational Efficiency, and 47.67% on Public Services in the 2024 World Bank assessment. Particularly, on public services, more needs to be done to improve efficiency. This is vital because businesses depend on public services too.

Corruption Perception Index: Ghana is ranked 80th out of 180 countries. The country scored 42% out of 100%. A lot needs to be done to improve the nation's standing on the Index.

Debt to GDP: The country's debt to GDP ratio stands at 83% in December 2024.

Immediate Tax Reliefs in the First 120 Days

The Government intends to provide some reliefs in the economy within its first 120 days in office. These reliefs include abolishing COVID-19 levy, Emissions tax, E-levy, and Betting tax. The Government plans to relieve taxpayers of a 1.15% tax burden by abolishing the Covid-19 levy, which is currently 1% on goods and services. VAT is charged on the total cost of goods, services, and levies. Including the Covid-19 levy in the cost before applying VAT increases the final VAT charge by 0.15%. This makes the effective VAT rate in Ghana 15.9%, with the Covid-19 levy contributing 0.15% to this rate. Removing the Covid-19 levy will reduce production input costs by 1.15%.

Eliminating the Covid-19 Levy will reduce the cost of doing business, improve business performance, lower the cost of goods and services for consumers, and increase purchasing power, thereby stimulating economic consumption. In monetary terms, the impact of removing the Covid-19 levy becomes evident when applied to the billions of cedis worth of transactions occurring annually.

The E-Levy, a 1% tax on electronic money transfers exceeding GHS100 per day per individual (excluding those exempted by law), will be removed. This change will impact the mainstream telecommunication industry and e-businesses in Ghana and provide relief to individuals. The withdrawal of this tax is expected to boost electronic transfers and online purchases, leading to increased revenue for businesses in the electronic transfer sector.

The 10% withholding tax on gross earnings from betting will be eliminated. This change will impact businesses in the betting industry and provide relief to individuals who engage in betting activities. While this tax removal may not directly affect the broader business community, it will enhance the purchasing power of bet winners.

The Emission Levy is imposed on the construction, manufacturing, mining, oil and gas, and electricity and heating sectors of the Ghanaian economy, as well as on vehicle users. By eliminating the emissions levy, the government aims to lower production costs, however small. The removal of this tax is expected to provide some immediate relief to industries that have been burdened by the environmental compliance levy.

Energy – Upstream Oil & Gas Production and Energy Transition

Energy is the key input required for production. Energy deficiency will certainly not deliver the planned agenda of the Government. The most reliable source of energy is one produced locally as opposed to imported. The impact of cheap free gas from the oil fields in Ghana for energy generation cannot be ignored.

It, therefore, makes sense for the President to have reemphasized his intention to personally travel around the world to engage investors and invite them to invest in Ghana's upstream O&G industry. It is now a great moment for investors to join hands with the Government to explore the green fields of the basin in Ghana. It follows that access to the highest decision-making offices in government will become easier and deals could be made faster. Clearly, the President is unwilling to allow the oil and gas reserves to remain trapped in the era of energy transition.

In our considered view, the Paris Agreement of 2015, which championed green energy, is currently facing a significant challenge. The energy crisis in Europe, coupled with the United States' previous decision to withdraw from the agreement, seems to have dampened the momentum for green energy initiatives. Moreover, it appears that US banks are now more inclined to fund fossil fuel drilling and production, which could further slow the transition to renewable energy sources.

The President's drive to attract investment into the O&G industry in Ghana clearly coincides with these global developments. At least there appears to be one more chance for Ghana to exploit its hydrocarbons before green energy takes over in the next few decades.

It is quite imperative to note that the government, notwithstanding, is also clearly taking steps to position the country on a green path. His realignment of the energy ministry to include energy transition and the establishment of the Climate Change Ministry is evidence of his long-term thinking for Ghana. There seems to be a balancing act in the President's vision for the long term. Green energy investors now have an opportunity to work with the Government within the context of long-term and sustainable energy drive.

The Government has doors opened for both fossil and green energy. These are good for businesses as investment and profit opportunities abound under the new government. Again, the Government's intended policies show seriousness in prioritizing energy for production. To be specific, the Government intends to:

Increase targeted exploration activities to establish new reserves by rebuilding investor confidence. This will be achieved through policy and regulatory clarity, consistency, predictability, transparency, and governance, thereby attracting world-class investors.
Innovate multi-field development systems that optimize development infrastructure and allow profitable production of otherwise marginal fields; and
Fully domesticate the non-revenue benefits of the industry for Ghanaians (e.g., transfer of technologies, development of fleets of Ghanaian oil and gas businesses, and increased "local content" in sector procurement) by reinstating the role of the National Oil Company as a national center of excellence and by reviewing relevant laws and policies to align with our objectives.

Planned Fiscal Policies and their Impact on Business

The planned fiscal policy is intended to be anchored on the government's 24-hour economy strategy to enhance productivity, maximize production, create sustainable jobs, and transform Ghana into an import substitution and export-led economy. The Government's reset agenda is designed to achieve five (5) core fiscal objectives. These are:

Enhance revenue mobilization.
Reduce government expenditure and cut down waste;
Reduce public debt to sustainable levels;
Reduce consumption-related expenditure and increase capital investments to spur economic growth and job creation; and
Reduce the fiscal deficit progressively in accordance with the Fiscal Responsibility Act.

The planned fiscal policies will be designed to relieve businesses of over-taxing while sanitizing the fiscal environment. Initiatives such as broadening the tax base, operationalizing the Independent Tax Appeals Board, harmonizing and standardizing the tax regime to ensure equity in tax administration for effective revenue mobilization, and implementing the Public-Private Partnership Act, 2020 (Act 1039) for infrastructure financing will undoubtedly bring immense benefits to businesses if effectively implemented.

Single-digit Inflation, Monetary Policy, Exchange Rate Policy, and Financial Sector Development

The previous Government's over-borrowing, uncontrolled monetary policy actions, and the large injection of liquidity by the Bank of Ghana (BOG) impaired the effectiveness of monetary policy and fueled high inflation and exchange rate depreciation to historic levels. To address the problem, the Government intends a monetary policy that will aim at restoring single-digit inflation, stable exchange rates, and low interest rates.

The Government's ability to achieve its planned single-digit inflation will create a conducive business environment. Cost of borrowing will significantly reduce; following previous trends, funds will be directed from investment in government bonds to the private sector, demand for goods will expectedly rise as the purchasing power of consumers will improve significantly, and consequently, production and expansion will grow. It is expected that as inflation declines to single-digit, interest on government bonds will decline, and holders of excess funds will direct or loan funds to businesses, making access to capital improve.

The 24-Hour Economy

The 24-Hour Economy is a deliberate policy intervention by the Government to stimulate economic growth by creating an enabling environment for businesses and public institutions to operate 24/7. This innovative policy represents an integrated framework designed to support businesses to operate round-the-clock. It promises increased employment opportunities, productivity, and enhanced access to public services and revenue. The implementation of the 24-Hour Economy Policy will be supported by strategic investments in infrastructure, security, energy, among others.

The support package for businesses will come through the 'Made in Ghana Agenda', by Government using its spending power to stimulate demand by patronizing made-in-Ghana goods. The Government will create an enabling environment for businesses to be able to operate 24/7 by providing:

An atmosphere of safety and security through public/private security architecture.
Cheaper and reliable electricity for participating businesses based on a Time-of-Use (ToU) tariff system.
Tax incentives for participating businesses to reduce their cost of operations and enhance their competitiveness. 3. Tax incentives for participating businesses to reduce their cost of operations and enhance their competitiveness.
Financing support through the Ghana Exim Bank for strategic agro-processing factories and manufacturing companies, to boost production for import substitution and exports.
Support for viable SMEs operating below capacity in priority value chains with catalytic investments to grow, generate jobs, and propel the economy's growth.

For businesses that can afford the additional costs of running 24-hour operations, the potential rewards are significant.

Trade and Industry

Ghana faces significant challenges, including declining exports and avoidable imports of over $1 billion worth of essential commodities like rice, sugar, poultry, and even tomatoes. The manufacturing sector - a vital economic driver, is in decline, creating obstacles to growth and employment. Additionally, bureaucratic inefficiencies, regulatory complexities, and inadequate infrastructure hinder trade growth. To address these issues, the Government intends to implement comprehensive and far-reaching reforms designed to:

Accelerate manufacturing growth for economic development;
Empower domestic trade to drive national prosperity;
Promote exports to expand global market reach;
Structure and formalize the informal economy for sustainable economic development; and
Enhance the business environment for seamless operations.

Lean Government: Streamlining for Efficiency

A key promise in 2024 NDC's manifesto is for their government to run the "leanest government in the history of the Fourth Republic". This effort to cut down public expenditure and promote efficiency is part of his broader vision of reducing corruption and improving governance. The government also pledged to streamline the public sector, reducing the number of ministries and appointing just 60 ministers, inclusive of deputies. This move is intended to cut government expenditure, improve efficiency, and reduce bureaucratic hurdles for businesses. The manifesto also highlights anti-corruption measures, with a promise of a new code of conduct for public officials.

The idea of reducing bureaucracy itself is great for businesses. Regulations are expected to be consolidated for efficiency within the context of reduced bureaucracy in Government. Processes and procedures are equally expected to be streamlined to achieve the benefit of lean government. Businesses cannot help but look up to the Government to bring these fruits to bear. In the end, much time will be saved by businesses in obtaining licensing and permits for their businesses and in dealing with Government offices generally.

Debt Management

Perhaps the most pressing economic challenge facing President Mahama's government is the country's debt-to-GDP ratio. High debt levels limit the government's ability to invest in critical infrastructure, social services, and economic development initiatives. Moreover, with rising interest rates, the cost of servicing this debt is increasing, putting additional strain on the national budget. Ghana's ability to meet its debt obligations while simultaneously pursuing economic recovery will be a defining challenge for the Mahama administration. To address this, the government's reset agenda includes several key fiscal objectives:

Enhance revenue mobilization.
Reduce government expenditure and eliminate waste.
Lower public debt to sustainable levels.
Increase capital investments in sectors that spur economic growth and job creation.
Gradually reduce the fiscal deficit in line with the Fiscal Responsibility Act.

Achieving these objectives will require a delicate balancing act. On the one hand, the government must find ways to stimulate economic growth and generate revenue. On the other, it must ensure that debt levels are brought under control to avoid further financial instability.

Conclusion

Manifesto promises are a framework within which a candidate or party intends to deliver its priorities. Achieving the stated plans or intentions may be obstructed by unanticipated global and local events. Accordingly, expectations from the new Government of Ghana should be measured. The business community should work with the Government hand in hand to help achieve the intended policies in the 2024 NDC manifesto. Clearly, the initial decisions and actions of the Government have shown that the Government is well-intended and serious with its intended policies as contained in its manifesto. This can be seen in the first act of discipline in the appointment of ministers of state. The Government so far has restrained itself and appointed ministers of state within the promised number of sixty (60) and has reduced the number of ministries from 30 to 23. A good show. The quality of the persons appointed to some major offices including the Ghana Revenue Authority cannot be ignored.

Interesting times ahead!