The requirement by the Ghana Investment Promotion Centre (GIPC) for the foreign partner in a joint venture to have a minimum capital of US$200,000 in cash or kind is too much and puts off investors, investment advisors have said.
Nana Ama Botchway-Dowuona of law firm N. Dowuona and Company, which advises on Joint Ventures (JVs), said the stated amount is on the high side and “a deterrent” to the growth of JVs in the country.
“We have seen that it is leading companies who are still interested in doing business in Ghana to look at structuring issues and develop the relationship in a manner different from what they might otherwise have,” she said as a panelist at Crystal Ball 2016, an event put together by AB& David Africa to discuss business opportunities and threats across Africa.
Sharon Ganney, Head of UKTI-Ghana — another advisory firm that promotes the entry of UK firms into other markets, said the amount “is quite a big challenge” to foreign partners, especially small and medium-size firms that are looking for Ghanaian firms of similar size to partner.
“I don’t think that higher monetary value necessarily means you are going to get a better end result,” she said, adding that the situation “is putting off” potential foreign partners.
The two were responding to a concern raised by a participant at the forum, who wondered what the rationale is for what he considers to be too high a requirement.
“First, a foreigner may not be willing to bring in that amount because the project for which they are forming a joint venture company may actually not require that much initial capital outlay,” he said.
“Secondly, it also operates in the negative for the Ghanaian partner; because if you want a stake in a JV so that that you have some control, it means you want to take a higher percentage of shares in the company. So if you even say you are splitting fifty/fifty with the foreign partner who brings in US$200,000 as the value for his shares, it connotes you also must bring in the same amount of money,” he added.
The GIPC Act (865) 2013, requires that “for a joint venture, the minimum capital requirement is US$200,000 in cash or equivalent in capital goods relevant to the investment or a combination of both”.
The Ghanaian partner in such a venture, according to the law, should have not less than 10% equity participation; which presupposes that a Ghanaian JV partner requires not less than US$20,000 in cash or in kind.