In a bid to attract Foreign Direct Investment (FDI), governments across the globe have adopted several strategies aimed at not only bringing foreign exchange to government treasury but also to create employment for its citizenry.
One such strategy adopted by the government of Ghana was the creation of the Free Zone concept 19 years ago. Ghana’s decision to adopt the Free Zones concept was to encourage competitive enterprises established within zoned boundaries to produce goods and services, mainly to produce for export.
Birth of GFZB
To enable Ghana provide the necessary environment to attract investors, the Free Zones Act, 1995 (Act 504) was enacted by Parliament to, among other things, facilitate the establishment of free zones in Ghana for the promotion of economic development and also to provide for the regulation of activities in free zones and its related purposes.
In pursuant of this objective the Ghana Free Zones Board (GFZB) became operational in August 1995, paving way for the implementation of the program in the country.
The main idea of establishing Free Zones is to develop Ghana into a hub for manufacturing and processing through value addition for export.
It also seeks to transform Ghana into the Gate way to Africa by creating an attractive and conducive business environment for the provision and enhancement of domestic and foreign investment.
The GFZB is the primary agent for industrial development in Ghana. It focuses on development through exports to encourage investors, both local and foreign, to produce goods and services for export-oriented development.
According managers of GFZB, through the program, Ghana can gradually move away from exporting raw materials to an exporter of value added goods and services to enable it rub shoulders with other emerging economies.
The free zones program has been designed to provide incentive packages to free zones companies. These include 100% exemption from payment of direct and indirect duties and levies on all imports for production, 100% exemption from payment of income tax on profits for 10 years and shall not exceed 8% thereafter and relief from double taxation for foreign investors and employers.
The rest are 100% ownership of shares by any investor, foreign or local in a free zone enterprise is allowed, minimum customs formalities, repatriation of profits, duty-free imports of equipments for manufacturing and exemptions from withholding taxes on dividends from investments in the free zones.
However, in return for these generous benefits, companies are required to export at least 70% of their total production, and not more than 30% can be sold in Ghana. The scheme also allows for 100% ownership of shares by any investor, foreign investors inclusive and companies with free zones status have unlimited expatriate quota. There is no minimum capital investment requirement.
Free zone companies contribute substantially to the national economy. The board has chalked significant successes since the inception of the program in Ghana.
According to The head of Investor Support Services, Hajia Hanatu Abubakar, from 1995 to the second quarter of 2014 GFZB has invested whopping US$35 billion into the Ghanaian economy and created 31, 005 employments.
She said “one-third of registered free zones companies are owned by foreign entities, one-third is locally owned while one-third are joint ventures between foreign and local ventures. Free zone companies are also providing indirect employment to many
A large number of skilled and unskilled labors such as masons, plumbers and welders have been employed for construction of the factories. Local companies are also getting sub-contracts for the supply of packaging materials, raw materials and spare parts for machines as well as cleaning services.”
Hajia Hanatu Abubakar noted that, the inflow of foreign firms into the free zones has also enhanced the managerial and technical expertise of Ghanaians, created opportunities for the Ghanaian labour force to foster skills development.
“The GFZB regulations require that free zone enterprises spend up to 1% of their total wage bill on training of local staff for continuous improvement in business processes and to ensure Total Quality Management,” she noted.
Area of Operation
Manufacturing and agricultural processing companies, Hajia Hanatu said, accounted for the majority of activities within the Free Zones.
Majority of the companies are into agro-processing-cocoa, fruits and other agricultural products including salt, cashew and shea nuts.
Other manufacturing firms produce or process plastics, furniture, DVDs, food processing equipments, textiles, carbonized briquettes, vacuum bags, pharmaceuticals, mineral (including gold), cotton, marble files and electrical cables among other items.
She added that much as the government is striving to revamp local industries to boost manufacturing for both local and export markets, the Free Zones Board is working assiduously to attract investment to produce more goods and services for export.
She stated that “by exporting, Ghana would generate a lot of foreign exchange to help offset her trade deficits, create jobs for the unemployed, enhance standards of living and improve the entrepreneurial skills of the Ghanaian workforce. One sure way to continue strengthening the economy is to minimize importation of products which can be produced locally and strive to add value to our raw materials for export.”
Exports Processing Zones
The GFZB technically operates four free zone enclaves. These include Tema Export Processing Zone, Shama (Yabiw) Land Bank, Sekondi Export Processing Zone and Ashanti Technology Park.
The Tema enclave, with a total area of 1,200 acres (480 hectares), offers investors a favorable and conducive environment for manufacturing, service and commercial export activities.
The GFZB has 2200 acres of industrial enclave in the Western Region of Ghana, which is designated as the Sekondi Export Processing Zone EPZ). The proximity of the Sekondi EPZ to the country’s second seaport with a direct road link is ideal for heavy industrial activities.
The Ashanti Technology Park (ATP) located in the Ashanti Region which is in the very centre of Ghana. The Ashanti Region has abundant resources, including most of Ghana’s rich cocoa plantations, gold reserves, timber plantations, leather producers, and tourist sites. The ATP occupies an area of 1099 acres.
The Yabiw (Shama) Export Processing Zone (EPZ) is one of the Ghana Free Zones Board’s (GFZB) land banks. It is located in the Shama Ahanta East Metropolitan area in the Western Region of Ghana, where the country’s oil find is. The Western Region is therefore the hub of the oil and gas activities in Ghana. The Yabiw (Shama) EPZ is therefore designated as a petrochemical hub.
MESSAGE FROM KWADWO TWUM BOAFO
(Chief Executive Offficer, GFZB)
Ghana’s Free Zones Programme is touted as one of the most successful in the West African sub-region. This remarkable achievement couldn’t have been possible without the consideration of both Ghanaian and Foreign Investors to locate their Businesses in Ghana and to use Ghana as a hub for manufacturing and processing for export.
The fruits of your tireless efforts have yielded the underlisted results:
•Total capital invested US$35bn
•Total export US$37bn
•Tax and duties on local sales $140m
•1% of total annual salary/wage $20m
bill of Free Zone Companies
spent on training Ghanaian
nationals employed in the companies
•Social Security $123.6m
•Income Tax $125.6m
•Ghanaian owned Free Zone Companies 47%
After all the hard work, after all your immense contribution to Ghana’s developmental agenda, I would like to congratulate all Licensed Free Zone Companies sited on the Tema Enclave, and those operating as Single-Factory Enterprises in all the 10 Regions of Ghana.
I must add that to the extent that the nation through the free zones programme is striving to attract foreign investments into the country, I would like to encourage Ghanaian entrepreneurs and local manufacturing companies to take up the mantle of production and value addition to create additional employment for Ghanaians and maximise the value of Ghana’s export to enable us compete keenly with global brands on the world market and to accelerate the nation’s developmental agenda.
I wish you the best of the season
I wish you a more fruitful and successful year 2015
Source: The Al-Hajj
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