Ghana seems to be on track to becoming Africa’s next hotspot for retailers, according to new research by Euromonitor International.

Ghana has been identified as a country with a positive business environment in which foreign retailers can invest. Furthermore, the country is developing a reputation for political stability, cultural tolerance, and has made huge strides in diminishing its poverty problems.

Current retail environment

According to Euromonitor, Ghana is considered by many as the gateway to West Africa and its 250 million consumers. It acts as an exit point for landlocked nations (such Niger) and, as an English-speaking nation, has close ties with US and British businesses.

The majority of modern retail space has been developed in Accra (Ghana’s capital), due to better infrastructure and access to a large population. The Euromonitor research notes that Ghana’s retail industry achieved 14% value growth between 2006 and 2011, which reflects the strength of fast-moving consumer goods (FMCG) companies in the country.

For example Fan Milk Group, a Danish-based dairy company that has been present in Ghana and Nigeria for over 50 years, reportedly has almost 10 times the turnover per capita in Ghana than in Nigeria. “In 2010, Ghana was the largest market for the company and, with a turnover of US$67 million, accounted for 48% of the group’s revenue and 64% of its operating profit,” notes the report.

Other companies that have set up manufacturing facilities in Ghana include Unilever and PZ Cussons. “The presence of such manufacturers provides a good opportunity for retailers as they can source these manufacturers’ products cheaper locally rather than importing them,” says Euromonitor.

Melcom Group is one of the biggest Ghanaian retailers and has 23 Melcom supermarkets and three department stores – specialising in household goods, electronics and appliances. According to the report, “the company’s nationwide coverage of eight out of 10 regions is a clear advantage over most international competitors.”

Retail space

When looking at retail space, the Accra Mall, which opened in 2007, is the leading modern shopping centre. RMB Westport, a South African property firm, is also working on two mixed-used developments in Accra. The first is West Ridge Head Office where the ground floor will offer retail space while offices will occupy the rest of the building. The second location is Icon House, close to the airport and Accra Mall, which will also offer retail space.

In Takoradi, the heart of the emerging Ghanaian oil operations, rental prices have surged since 2010. “The aim is to convert the city centre into a high-rise business and commercial district,” notes the report. “Depending on how well the oil money is spent locally, Takoradi could become a thriving mid-tier city for retailers.”

Operating environment

Ghana moved up the World Bank’s Ease of Doing Business rankings from 102^nd in 2005 to 60^th in 2011, but cross-border trade has not seen much improvement in recent years and still remains time consuming and costly.

As a member of the Economic Community of West African States (ECOWAS), a regional bloc of 15 countries, Ghana benefits from common external tariffs ranging from 0-20%, with some exemptions. “More importantly, internal tariffs are being abolished, allowing for a greater level of intra-regional trade.”

Infrastructure developments

In 2007, off-shore oil reserves were discovered – catalysing foreign interest – and production started in 2010. Foreign direct investment into Africa in 2010 fell by 9% but rose significantly in Ghana. The promise of an oil boom has attracted the interest of global construction and infrastructure companies.

“One example of this was the signing in 2010 in Beijing of a $2 billion letter of intent by Hasan International Holding, a Chinese conglomerate, to develop a state-of-the-art industrial facility near the port of Takoradi, which handles 60% of the country’s crops and mineral exports,” says the report. “The initiative aims to leverage the country’s existing infrastructure to service the oil industry. This will create jobs in the region and attract both local and foreign workers, which could provide a sizeable consumer base for retailers looking to expand outside of Accra.”

Ghana has a mature mobile infrastructure with more than 60% of the population being mobile phone subscribers. In a trend seen around Africa, mobiles are increasingly used as a means for cashless payments/transfers, and target the large unbanked population. An example is MTN’s Mobile Money, a service that allows users to send cash and purchase goods from participating retailers.

The development of Ghana’s infrastructure (catalysed in part by the discovery of off-shore oil reserves) and the country’s movement to political stability, has paved the way to sustainable economic growth. With this comes retailing potential and opportunities that may turn Ghana into the next retail hub in the region.