Development and the Debt Trap by Krassowski Andrzej;

Author:Krassowski, Andrzej; [Andrzej Krassowski]
Language: eng
Format: epub
ISBN: 614892
Publisher: Taylor & Francis Group

ii) Private foreign investment

It was one of the features of Ghana's attitude after 1961, restated at the time of the launching of the Seven-Year Plan, that the pursuit of socialism and the emphasis on state enterprise should not preclude the private sector, domestic and foreign, making an important contribution. Indeed, the Plan objectives had been based on an investment contribution from the private sector of almost one-half of the total. Ghana not only continued to operate its incentive schemes for private foreign investment, but substantially increased them through the 1963 Capital Investments Act. However, many of the restrictive measures (introduced in 1961-2 and again in 1965), within which the private sector as a whole had to operate, and the hostile propaganda directed by Nkrumah and senior CPP colleagues against capitalism, Western interests, and 'bourgeois exploitation' were not conducive to new investment in the country.

Actual private foreign investment in 1962-5, contrary to what might have been expected, averaged £7m. net a year, far better than the rate achieved over any other four-year period since at least 1950. Moreover, the annual rate over the period itself accelerated, and by 1964-5 exceeded the rate needed to achieve the planned contribution over the life of the Seven-Year Plan. However, about half of this investment, and a much higher proportion in 1965, were financed out of retained profits. This feature was encouraged, or made necessary, by the restrictions imposed on profit remittance and repatriation of capital, which were progressively tightened until by 1965 it was impossible legally to transfer any funds out of Ghana. The profits which were earned by private foreign concerns were also artificially swollen by heavy protection, import controls and inflation, at least until 1965, by which time the acute shortage of foreign exchange itself seriously hampered their operations. Because of this, the higher rate of investment may well have proved temporary, with a return to more normal levels of protection and more freely available foreign exchange reducing both profits and the attaction of reinvestment of profits in Ghana over their remittance. Also, some of the investments made in the period reflected commitments entered into before 1962, particularly those in joint private state ventures (most notably a brewery, and bottling and aluminium works); after 1962 only three more joint venture agreements were concluded, for a television and two motor vehicle assembly plants.

Although the profitability of some private or private/state ventures started in 1962-5 depended initially on either generous government concessions or protection, the majority appeared to be capable of sustaining (and indeed did sustain) themselves in less artificial conditions. Moreover, the period of restrictions on profit remittance, as well as the control over overseas transfer of commercial bank deposits, did force some of the established foreign concerns, which normally looked elsewhere for a profitable investment of surplus funds (e.g. through their parent companies), to consider local alternatives; this set a precedent which some of the concerns found it profitable to follow later. Foreign private investment in 1962-5 did, therefore, make both a short-term and a long-term contribution to Ghana's economy.

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