Scrapping Minimum Capital Rule Will Be a Double Slap to Local Businesses – AGI Cries

Local businesses must brace themselves for what can be described as a double slap if the government follows through with plans to amend the Ghana Investment Promotion Centre (GIPC) Act by scrapping the minimum capital requirement for foreign investors.

This is the stance of the Association of Ghana Industries (AGI) amid the debate of whether to scrap the minimum capital rule for investors or not.

Chairman of the Economic Affairs Committee of the AGI, Eric Defor, is warning that the move will expose the already struggling Ghanaian businesses to even greater risks of being crowded out of the market.

Eric Defor in justifying his stance said indigenous businesses are already disadvantaged by the country’s high cost of borrowing, with interest rates hovering between 20-25% in addition to other business unfriendly situations.

However, in contrast, foreign investors can access capital at far lower rates, sometimes as little as 3-6%.

For Eric Defor, it will be double jeopardy for a provision that protects local indigenous businesses to be completely scrapped and hence exposing them to the highly competitive foreign counterparts.

“The GIPC Act specifically tries to protect certain aspects of our industries. Now, if you lift that veil and allow everybody to come in, it will crowd out our indigenous businesses, who are struggling to grow,” the chairman of the Economic Affairs Committee of AGI lamented.

He added, “We sit and struggle with all the challenges. Now, we are removing the limitations completely. So, if I’m a Ghanaian trader, and I want to raise capital of $10,000, which is about, let me say, about 110,000 Ghana Cedis, and I borrow that money from the bank, and I’m paying 20-25% interest on that money, a foreign investor brings the same amount of money, coming to do the same business that I’m doing, and he’s brought the money at 3%, or 4%, or let’s say even 6%. How am I going to compete with him? I’ll be crowded out.”

Such a situation, according to Defor, will tilt the playing field entirely in favor of foreigners, leaving local businesses gasping for survival.

For him, what the country really needs is to support local industries with the capital we have in Ghana. Otherwise, our indigenous businesses, which are already struggling to grow, will be completely crowded out.

“What we need to do is to find a way of supporting these industries with the capital that we have in Ghana,” he emphasized.

Many analysts argue that while foreign investment is important for growth, reckless liberalization without cushioning domestic players risks hollowing out local enterprise and stunting long-term industrial development. This is the situation AGI wants to avert, hence the call for a relook at the proposal and also advocating for support for local businesses.

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