Energy Bulletin:

A proposed guideline for foreign investors to tap into the solar resource in Ghana: the case of the government and legislation

Bismark Ameyaw & Amos Oppong

Energy plays significant roles in achieving a sustained economic growth and development and there have been considerable and consistent energy shortages in developing countries. West Africa is endowed with basic raw materials for renewable sources of energy but most of these resources are not yet fully exploited to meet the energy crises in the region. Member states of the Economic Community of West African States (ECOWAS) have drafted an avalanche of policies to improve access to renewable and sustainable sources of energy in their quest to finding a lasting solution to energy hunger and curtailing energy-related greenhouse emission. Ghana, a core member of ECOWAS, has equally suffered from the problems of energy shortages and untapped natural resources. Solar energy holds boundless promise for the provision of energy in Ghana but the solar subsector is underdeveloped. The underdevelopment of the solar subsector is ascribed to lack of business and market model to gauge potential investors into efficiently entering the market and reaping economic profits. Here we propose a prospect-oriented and deterministic path model, starting with the government, to guide investors in engaging in solar business in Ghana. The central government of a country is arguably ‘the owner’ and ‘overseer’ of the country. As such, any organization or firm that is willing to start and venture into a solar trading in Ghana – with the intention of being successful – must be on good terms with the central government. Checking her willingness to participate, going through the right channels for a license, fulfilling all rules and regulations are among the factors indispensable in doing a lucrative solar business in Ghana. In order to create a welcoming environment, potential investors must consider the following:

Government willingness to participate

Accessing ‘the owner’s’ willingness to participate is prerequisite to starting a business and gives a clearer outlook on the probability of success. One can discern the government’s willingness through a careful perusal of her policies, those implemented or drafted, and acts passed by the legislative body. The government of Ghana has implemented a handful of policies on generation and consumption to address the solar PV industry’s growth and development which gives a good indication of her readiness to participate. Production policies including operation subsidies, transfer of technology, publicly funded research and developments, strategic research deployment, and industry research consortia; and consumption policies comprising consumption subsidies, tax credits, renewable portfolio standards, and concessionary financing [1]have been implemented or drafted for implementation. The core objectives of such production and/or consumption policies are to create sustainable and enabling business environment for investment in renewable solar energy and offering investors an attractive and stable business climate as codified in the investment, legal and regulatory framework [2]. The Ghanaian government recently implemented policies focusing primarily on boosting the percentage of renewable sources of energy to the national grid and achieve 10 percent share of renewables in the energy generation mix by the year 2020 with a particular focus on solar power [3]. Provisions in the Renewable Energy Act, 2011, Act 832; aims to provide access to renewable solar energy technologies to effectively utilize the abundant solar energy in the country and also facilitate access to renewable energy power plants to supplement the national energy grid.

Other policy tools implemented to highlight business issues relating to renewable solar energy includes the National Energy Policy-oriented towards providing new plants, prioritizing selected sectors, and directing the basis for investment opportunities; the Ghana Sustainability Energy for all Action Plan (2015) aimed at giving a clearer insight on bottlenecks in the sector and providing data on renewable resources; the Scaling-Up Renewable Energy Programme (SREP); and the Investment plan (2015)[4,5]. These policies and acts as well as related ones, if well scrutinized, will reveal clearly the government’s willingness to participate in the solar energy industry.  

Legal Issues

The next step after utilizing credible sources to identify the government’s willingness to participate is dealing with legal issues. Ghana is a member of many international and regional organizations, such as the United Nations,  Economic Community of West African States (ECOWAS), and Interpol [6]. Thus to venture into a business in the solar energy subsector one must pay heed to both rules and regulations relating to the political and legal environment of Ghana and other procedures in the international arena [7]. In general, all investmentopportunities in Ghana are regulated by the Ghana Investment Promotion Center (GIPC). However, GIPC’s horizon of business activities excludes investments in the area of petroleum exploration and extraction, mineral and mining exploration and extraction, portfolio investments, free zones activities, and export promotion[8–10]. The energy sector of Ghana is sub-categorized into two; the petroleum sub-sector and power sub-sector, and rules and regulations governing each sector are completely different. The petroleum sector involves upstream and downstream activities and the power sub-sector focuses on the generation, transmission and distribution of electrical energy to commercial, industrial and residential sectors [11]. Solar energy as a peripheral sub-sector falls under the umbrella of Ministry of Energy and mandated by the GIPC. The legislative body of the central government has approved a renewable bill that captures among other things feed-in-tariff, obligatory purchase, and renewable fund [12]. Though the central government has drafted a number of rules and regulations and approved a few, there are no clear-cut laws stating explicitly the dos and don’ts concerning operating renewable energy that a potential foreign investor could easily access [13]. Nevertheless, one can employ the services of key regulatory actors – Ministry of Power; Ministry of Environment, Science, Technology and Innovation; the Energy Commission; Public Utility Regulation; Environmental Protection Agency; Independent Power Producers; and Ghana Grid Company [14] – for a deeper understanding of the legal issues and designated entities. Legal issues on incentives for investment in solar energy such as tax exemptions on the import of renewable energy equipment, grid code for renewable development and standard for solar energy system [15] must also be understood explicitly.

Acquiring Licenses

Once accustomed to the legal issues regarding solar energy dealings, acquiring formal and official licenses from the appropriate awarding bodies is next suitable step. As enshrined in the Renewable Energy Act, Act 832, 2011 of Ghana; all organizations that wish to engage in commercial activity in the renewable industry must obtain a license from the Energy Commission before producing and supplying power ( Nunoo et al., 2010; Evans, Strezov, & Evans, 2012). The licenses granted must be verified as registered in accordance with the Company Code 1963 (Act 179) under the Incorporated Private Partnership Act, 1962(Act 152). Though the provisions for RER and SER activities are to a certain degree different from other related ones, factors including the type of business, stated workforce, proposed stated capital and investment portfolio cuts across the board as these are prerequisites in registering any legitimate business entity in Ghana. The provisions in the Company Code 1963 states an initial employment of one to fifty full-time employees with a minimum stated capital requirement of 10 times the Gross National Income per capita [17,18] According to facts from World Bank’s World Development Indicators (WDIs), the GNI per capita of Ghana is 1,250  (2010 estimate) United States dollars (USD), meaning the minimum capital requirement of 12,500USD.  

There are generally seven steps to acquiring a credible license in Ghana for small and medium scale businesses. Such steps are briefly explained below as posited in KPMG & Wang, 2012.

Step 1: Registration of the name of the business. Here the investor proposes a name for the firm and the Registrar General Department (RGD) checks for availability of the proposed company name. Once the RGD confirms availability of the name, it asks for company regulations, statement of shareholding structure, stated capital, and tax identification number and uses such information to register the name of the firm.

Step 2: The documents regarding company registration and must be authenticated by the Commissioner of Oaths under the auspices of the Registrar General Department.

Step 3: The certificate to commence business is issued in step 2 (usually on the same day). It is worth noting that the investor or the owner of the business must complete some specified forms within a specified time (28 days).

Step 4: A paid-in-capital must be deposited in an account in any reputable financial institution such as Ghana Commercial Bank, National Investment Bank, Barclays Bank, Social Security Bank, ECOBANK. The documents required for opening a company bank account are the company regulations, certificate of incorporation, a certificate to commence business (which will all be issued in earlier steps), and signatures of the authorized company representatives – the Chief Executive Officer(s), Director(s) and other major stakeholders.

Step 5: Application for a business license at the metropolitan authority where the business would be located. The license would depend on the type of business and the category in which it falls under the business classification in Ghana.

Step 6: Inspection of the work premises by the Metropolitan Authority (MA). This involves qualified personnel, from the MA inspecting the workplace of the firm, writing a report about the inspection, and giving further advice necessary.

Step 7: The last stage is the application for social security. The documents needed for this process are the list of employees with their social security numbers, their salaries, company’s certificate of incorporation and certificate to commence business

Acquiring a license for large-scale business operations involves three major phases. At the initial stages, the investor is issued a provisional license. Before being granted the provisional license, the applicant(s) must certify a sound feasibility analysis and financially viable business plan. Next, the biographical information as well other necessary details of enlisted and core stakeholders are then checked and issued a clearance certificate after successfully passing all checks. The last stage is where the new firm is granted a license to operate. The essential certifications need are an environmental assessment permit given by EPA, an approved tariff from PURC, and an appended power purchase agreement with distribution utilities or prospective valued customers[20–22].

Summary

The solar industry in Ghana is underdeveloped and foreign direct investments could help boost the sector but most foreigners with intentions of investing in the sub-sector have blurred insights on how to effectively penetrate the Ghanaian market. Here, we propose that identifying Ghana government’s willingness to participate and using appropriate means to secure credible legal statuses could help foreign investors to smoothly explore the Ghanaian solar market.

References:

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BISMARK AMEYAW is a researcher at University of Electronic Science and Technology of China and a referee to a number of prestigious peer-review journals. He specializes in modelling and forecasting the dynamic links in energy policies and the economy. He writes, teaches and consults on management and econometric issues. He serves as an editorial board member and a reviewer for a number of prestigious international journals. You may contact him through: E-mail: kofiameyaw9@hotmail.com and 3101153683@qq.com

AMOS OPPONG is a researcher at University of Electronic Science and Technology of China and a referee to a number of prestigious peer-review journals. He specializes in modelling and forecasting the dynamic links in environmental, energy and the economy and policy analysis. He has rich research experience in diverse fields assisting research projects on mining, agriculture, sectoral energy demand, economy-wide energy demand and supply, trade, environmental cooperation, air pollution and climate change. You may contact him through: Email: 201714110129@std.uestc.edu.cn; oamos@rglobal.org

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