Ghana leads business boom

Stroll through any town in Ghana and it is impossible to miss a South African presence. There are Engen garages, Stanbic branches and ATMs in all the major towns and MTN signs are as ubiquitous as Coca-Cola. The 21000m2 Accra Mall, recently sold by private equity group Actis to the Pretoria-based Atterbury Property Group for $65-million (for an 85% share), would not look out of place in Centurion or Sandton. Three of the biggest tenants in the mall are Game, Mr Price and a Shoprite that stocks a range of South African products at prices that would not seem out of place in some of the more expensive European capitals.

For South African expats, Shoprite is the go-to store for Five Roses, boerewors and Cape wines, not to mention the latest issue of Huisgenoot and other South African magazines. Nearby is a Woolworths and the head offices for Gold Fields and AngloGold Ashanti.

The Accra Mall was opened in 2008 fully let and now attracts 13 000 shoppers a week, according to Actis head of real estate David Morley. "The development of the Accra Mall came at a time when Ghanaians still sourced even basic goods from London and Johannesburg. Now they can buy products locally with pride."

Louis van der Watt, chief executive officer of Atterbury, says the mall's occupancy is running at 100%. The return on investment is higher than can be achieved in South Africa and is dollar based. "That's a double whammy. The return has to be higher for the assumed risk, although I think risk in South Africa is currently higher [than in Ghana]," he says.

Atterbury has already started building a second shopping mall in Accra, the 3 0000m2 Westhills development. It has purchased four sites in Accra, all for mall development. It already has plans to double to size of the Accra Mall to 4 0000m2.

Tiger economy
Another South African icon flying the flag in Ghana is MTN, which recently announced its Ghanaian subscriber base had passed the 11-million mark. This is roughly half the 21-million subscribers it has in South Africa and makes it far and away the largest cellphone network in Ghana. It grew its Ghana base by 4.8% in the September 2012 quarter, despite the entry of Nigerian competitor Glo, which has signed up two million customers since its launch in April this year.

The speed with which South Africans have moved into this African tiger economy is startling. Before 1990, the only South Africans in Ghana were ANC exiles and a smattering of students at Accra University. As the apartheid edifice crumbled, a few trade missions were despatched from Johannesburg to feel out the West African market. The initial response was lukewarm. Although Ghana was the first African country to achieve independence from a colonial power in 1957, it has had several military coups since then, shrouding it in an air of instability. Its first democratically elected leader, Kwame Nkrumah, was deposed in a coup in 1966. Several coups followed, the last by Flight Lieutenant Jerry Rawlings, who stepped down from the presidency in 2001 to make way for multiparty democratic elections.

Although South African companies initially took a cautious view of Ghana, mining companies wasted no time snapping up some of the choicest mineral real estate on the continent. Once the mining companies had a foothold in Ghana, the mining supply and services companies followed. Group Five, WBHO, Kruger Brent Security, Africa Mining Services, Moolmans and a host of other companies have pitched their tents alongside the big mining houses. Ghana now accounts for a substantial and growing share of non-South African revenue for both Group Five and WBHO.

Mining is the lifeblood of the Ghanaian economy, and it is in this sector that South Africans reign supreme. AngloGold Ashanti's two Ghanaian mines, Obuasi and Iduapriem, produced 512000 ounces of gold in 2011, equivalent to 11.8% of total group output. Last year, Gold Fields' Tarkwa mine in western Ghana produced 717000 ounces of gold, nearly double that of the previous year. This figure should reach nearly one million ounces in the next few years as its smaller Damang mine starts to benefit from the opening of new pits. That is equivalent to nearly a quarter of Gold Fields' total worldwide output.

Ghana's economic miracle is generally credited to surging cocoa and gold prices – the country's two biggest export commodities – and newly discovered oil 60km off the southwest coast.

But another factor is at play. Ghana is a largely cash-based economy, and that inoculated it against the financial chokehold that has Europe and North America in a death grip. Another factor undoubtedly working in its favour is its political stability and a business-friendly environment.

Being number one
Several new five-star hotels have sprouted in Accra in the past three years to accommodate the influx of business visitors seeking a foothold in Africa's fastest-growing economy. More are on the way, one of which is being built by Actis. Rand Merchant Bank is funding a large slice of the new $56-million Icon House on Accra's Liberation Avenue, which will serve as Stanbic's new head office. In August, FirstRand announced that it would acquire 75% of the 22-branch Merchant Bank Ghana for R746-million ($91-million).

"South Africans are moving into the West African country en masse," according to GhanaWeb, a Ghana-based website tracking business developments in the country. "Stanbic, which has grown into the fifth-largest bank from 18th five years ago, is clearly focused on being number one in a few years. While growing organically it has been eyeing acquisitions, coming close to buying the 50-branch state-owned Agricultural Development Bank three years ago before politics put an end to its bid. But the bank is on the lookout for other similar opportunities."

Earlier this year Stanbic put together the first syndicated loan in Ghanaian banking with a $300-million facility for MTN. Absa is also keen to get into this market and is in talks with its British parent, Barclays, to combine their African operations, which would put Barclays Ghana under the control of both banks. This is part of a long-term plan to accelerate growth across the continent. The Ghanaian government recently approved the formation of a consortium led by Absa and Barclays to finance the construction of eight hospitals across the country.

Graphic: John McCann

Although Ghana has a deserved reputation as an investment-friendly destination, its regulatory bodies have shown their teeth in recent times. Its environmental protection agency shut down a portion of Gold Fields' Tarkwa operations earlier this year and ordered it to stop discharging water from its heap leach pads, affecting roughly 20% of production. Though Gold Fields argued that its mine was in full compliance with local environmental laws and regulations, the agency demanded that it install water treatment plants to purify the effluent. Gold Fields expects to lose about 15000 ounces of gold because of the closure, and is bitter about the way the matter was handled.

No real means of employment
"We remain concerned about the lack of a level playing field in Ghana amongst mining companies on fiscal matters and other practices, and are engaging with the government on this …," said Gold Fields chief executive Nick Holland after the closure.

Still, Ghanaians look at the labour troubles on South African mines with puzzlement and see an opportunity for the country to capture investment fleeing the country. The last measure of unemployment taken in 2005 was 12.9%, which is hardly plausible, as millions of people are locked into subsistence farming with no real means of employment in the non-farm economy.

Although it can take several years to get a prospecting licence in South Africa, the process in Ghana is quicker and cheaper. There seems to be no shortage of South African mining entrepreneurs willing to forego the comforts of home for a shot at gold in Ghana, Africa's second largest gold producer after South Africa. One South African entrepreneur who arrived in Ghana two years ago to prospect for gold recently sold his concession to a Canadian mining group for several million dollars. With the gold price hovering above $1700 an ounce, Ghana has become a favoured destination for bounty hunters from all over the world.

Mines account for nearly a quarter of Ghana's tax haul and, with an election looming in December, the ruling National Democratic Congress is keen to polish its law enforcement credentials, perceived by many to be its Achilles heel. It promises to get tough on corruption, while rolling out infrastructure upgrades and pointing to its stewardship of Africa's fastest-growing economy. But the National Democratic Congress is also fighting a rearguard action against the lively New Patriotic Party, which makes sport of the ruling party's perceived corruption, and promises to institute national health insurance and free schooling. Whatever the outcome of the election, Ghana remains open for business, and South Africans will keep on coming.