Red Carpet for Foreigners, Tax Ambush For Locals — IMANI Analyst Takes On Ghana’s Business Policies

Policy analyst associated with IMANI Africa, Sitsofe Mensah, has criticised Ghana’s business environment, arguing that the country makes it easier for foreign investors to operate while placing excessive regulatory and tax burdens on locally owned small businesses. He believes the situation discourages local entrepreneurs from formalising and expanding their businesses, despite the numerous state institutions established to support them.

In a post shared on his official Facebook page on October 31, 2026, Mensah relied on figures from the Ghana in Numbers 2025 report released by Government Statistician Dr Alhassan Iddrisu to highlight what he described as a major weakness in the country’s economic structure.

According to the figures he cited, Ghana has approximately 2.64 million business establishments, but only 7.7 per cent, representing about 203,280 businesses, operate in the formal sector. The remaining 92.3 per cent, equivalent to approximately 2.44 million establishments, are informal, with nine out of every ten businesses classified as micro-enterprises.

Mensah also drew attention to the growth in the number of businesses between 2014 and 2024, noting that establishments nearly tripled during the period while the number of people employed by them only doubled. He argued that the figures raised questions about why many Ghanaian entrepreneurs prefer operating several small, unregistered businesses rather than expanding into larger formal enterprises.

Using examples of fabricators at Kokompe, spare-parts dealers at Abossey Okai and agro-processors in communities such as Hohoe, Kadjebi, Bimbila and Daboya, he questioned why local entrepreneurs were not expanding their operations into larger businesses. He attributed the situation partly to what he described as an unfavourable environment for domestic businesses compared with the incentives offered to foreign investors.

Mensah pointed to the new investment legislation passed by Parliament in July 2026, arguing that the government had relaxed several requirements for foreign investors. He cited the removal of the US$200,000 minimum capital requirement for joint ventures and the US$500,000 requirement for wholly foreign-owned service and manufacturing companies, alongside a five-day registration guarantee and a statutory grievance mechanism intended to ensure state agencies address complaints within 90 days.

He contrasted these provisions with the challenges a Ghanaian entrepreneur allegedly faces when attempting to formalise a small business through the Office of the Registrar of Companies (ORC). According to him, registration can expose local businesses to tax demands, business operating permit fees, signage enforcement exercises and Social Security and National Insurance Trust (SSNIT) compliance checks before they receive meaningful support from government institutions.

He mentioned seven institutions expected to support local enterprises: the Ghana Enterprises Agency (GEA), Microfinance and Small Loans Centre (MASLOC), National Entrepreneurship and Innovation Programme (NEIP), Development Bank Ghana (DBG), Ghana Incentive-Based Risk-Sharing System for Agricultural Lending (GIRSAL), Ghana EXIM Bank and Venture Capital Trust Fund (VCTF).

Although the Ghana Revenue Authority (GRA) provides a three per cent turnover tax arrangement for eligible small businesses under the Income Tax Act, 2015 (Act 896), Mensah argued that the system could place a considerable burden on enterprises operating with low profit margins. He illustrated this by explaining that a business making a net profit margin of 10 per cent would effectively surrender 30 per cent of its profit through a three per cent tax on gross turnover, even before other operating and regulatory costs are considered.

The policy analyst also questioned the ability of small businesses to access financing through commercial banks under Development Bank Ghana’s wholesale funding arrangements. He claimed that entrepreneurs seeking such financing are often required to provide three years of audited accounts and landed property in prime locations, conditions he believes many micro-business owners cannot satisfy.

Mensah further cited figures from the Ghana in Numbers 2025 report concerning informal trade with neighbouring countries. He said informal traders move goods worth approximately GH¢38.4 billion across Ghana’s borders with Togo, Burkina Faso and Côte d’Ivoire, representing 1.4 times the country’s officially recorded trade with those three countries.

He questioned why such a substantial volume of cross-border trade was taking place outside the formal system without benefiting from trade financing support from Ghana EXIM Bank. For him, the figures demonstrate the economic importance of informal businesses and the need to create conditions that encourage them to formalise and grow.

As Finance Minister prepares to present the 2027 Budget to Parliament in November, Mensah called attention to the need for changes that would make the business environment more supportive of Ghanaian entrepreneurs. He indicated that he had three proposals for addressing the challenges but the portion of his post available did not include the specific recommendations.

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