Prioritize Domestic Investment
– Alongside foreign direct investment – Ofosu-Dorte
By Isaac AIDOO, Accra
Founder and Senior Partner of AB & David Africa, David Ofosu-Dorte, has called for a significant change in Ghana’s approach to foreign direct investment (FDI).
Speaking at the 13th Ghana Economic Forum in Accra, Mr. Ofosu-Dorte emphasized the need for a more balanced strategy that equally prioritizes domestic investment alongside FDI to achieve sustainable economic growth.
The theme for this year’s forum was ‘Unlocking Opportunities: Re-engineering Ghana’s Economic Model for Sustainable Development.’
The importance of domestic investment
According to Ofosu-Dorte, domestic investment plays a critical role in creating a conducive environment for FDI. “Every country grows with FDIs, but what Ghana has done with FDIs is different,” Ofosu-Dorte remarked.
He pointed out that while attracting foreign investment is crucial, no country can truly develop if it neglects its domestic investors. “It is the two going together,” he said, advocating for a symbiotic relationship between domestic and foreign investments.
Challenges in sustaining FDIs
Ofosu-Dorte highlighted the importance of nurturing domestic investment to attract foreign investors. “Domestic investment is a way to attract foreign investors,” he asserted.
By strengthening local businesses and ensuring they thrive, Ghana can present a more stable and promising market for international investors.
He criticized the current approach, stating, “What we seem to do is to go around bringing foreign direct investors and kill them after they have domesticated.”
He challenged the Ghana Investment Promotion Centre (GIPC) to provide data on the growth of foreign direct investors after they have been in the country for five years or more.
The need for a publication on FDI growth
He further requested, “I want to see a publication from GIPC that over the last 20 years, this is how FDIs have grown.
These are the number of people they have employed.” Ofosu-Dorte stressed that if Ghana’s FDIs cannot sustain themselves after domestication, they will move away.
“The local ones will stay. But again, we have the habit of trying to cure our macro challenges by killing the micro,” he argued.
Impact on local and foreign investors
Ofosu-Dorte explained that this mindset leads to the destruction of both FDIs and local investors.
“We kill both the FDIs which came and the local investors who stayed or who originated from here. And this is a mindset we need to tackle,” he stated.
His comments come at a time when Ghana is actively seeking ways to boost its economic growth and diversify its investment portfolio.
Enhancing the confidence of foreign investors
Ofosu-Dorte highlighted that a robust domestic investment framework would not only enhance the confidence of foreign investors but also ensure that the benefits of investment are more widely distributed across the economy.
“We need to create an environment where local businesses can flourish,” he said.
“This, in turn, will make Ghana a more attractive destination for foreign investors looking for a stable and dynamic market.”
The role of capital markets in national development
Building on this, Managing Director of the Ghana Stock Exchange (GSE), Ms. Abena Amoah, highlighted the crucial role of capital markets in driving national development.
She argued that the failure of various development plans in Ghana could be attributed to the absence of capital markets at the center of those strategies.
“When I talk about capital markets, I’m talking about two important things David said. Where is the domestic involvement, and how do we build that strong base domestically to attract foreign investors to come in and support?” Ms. Amoah questioned.
The need for domestic savings and investment
Ms. Amoah explained that a strong domestic investment base is essential for attracting foreign investors and sustaining economic growth.
“We need an agency that’s advocating for domestic savings, facilitating the deployment of these savings into investments in infrastructure, companies, and businesses,” she said.
According to Ms. Amoah, these savings should be invested in well-run businesses, some of which would be listed on stock markets where enhanced corporate governance practices ensure the sustainability and profitability of these enterprises.
Capital markets as tools for economic transformation
Ms. Amoah underscored the importance of capital markets as a tool for wealth creation and economic transformation.
“The private sector, domestic, regional, and global investments come from the sector. If we don’t put our plans, if we don’t take advantage of thinking through how we use the capital markets for that, I think we will not go far,” she warned.
Structural challenges in the financial services sector
Advisory Board Chair of Financial Literacy Africa, Mr. Richard Kwame Frimpong, highlighted significant structural challenges within the African financial services sector, emphasizing the need for a more integrated and coordinated approach to regulation and financial literacy.
Mr. Frimpong pointed out that the current structure of the financial services sector across the continent is fragmented, with regulatory bodies operating in silos.
“If you pick the universe of financial services, there is banking, there are pensions, there is insurance, and there are investments. The structure is such that regulation is literally sitting in silos,” he explained.
The need for a coordinated financial services sector
This disjointed regulatory framework, according to Frimpong, hampers the effective mobilization of domestic savings, which is crucial for powering the funding side of industrialization efforts. He echoed earlier sentiments by Abena Amoah about the importance of domestic involvement in economic development. “We need to be deliberate about the synchronization of the structures that overlook the entire financial services sector,” Frimpong urged. He called for the establishment of a “super structure”—a national financial services authority—that could coordinate where domestic savings sit within the financial ecosystem and ensure these funds are efficiently utilized to support economic growth.
