The recent exit rumours of Société Général, a French bank from the Ghanaian market, may have turned out to be a facade that only highlights the growing concern about doing business in Ghana lately, given the country’s precarious economic situation.
This explainer discusses the impact of the country’s economy on businesses, focusing on some multinational companies that have exited the country recently.
The country’s economic environment has worsened since 2022, forcing several multinational companies to quit operations and relocate to other countries.
These companies include Glovo, the latest to announce its exit from the Ghanaian market. Glovo is a Spanish food delivery firm that operates across Africa. It entered the Ghanaian market in March 2021 and currently operates in other African markets, including Morocco, Uganda, Kenya, Côte d’Ivoire, and Nigeria.
Upon entering the Ghanaian market, Glovo announced that it would invest about €3.5 million ($3.7 million) in expanding its operations. However, the company stopped operations here on May 10, 2024, attributing its exit to profitability constraints and a further assessment of investment priorities, according to an earlier statement issued by the company.
Unilever Ghana
Before Glovo’s departure, Unilever Ghana also announced the relocation of its tea production operations from the country to neighbouring Nigeria in March this year. The British-owned company had produced the famous Lipton in Ghana for several years. The company, which is regarded as one of the biggest manufacturers in Ghana, also cited the country’s economic crisis as a reason for the relocation.
Jumia
In December 2023, Jumia announced closing down its food delivery service, Jumia Food.
Formerly known as HelloFood, Jumia Food was the first largest food ordering and delivery company in Ghana. It offered a variety of food products through an efficient delivery system.
The decision to stop operations followed a comprehensive assessment of prevailing market and economic conditions in its operational territories. The company stated that the decision was necessary given the threats posed to its operations by the current economic climate.
It is worth noting that Jumia Food faced a couple of financial setbacks before its closure, including a 41% year-over-year loss of $49.8 million in the last quarter of 2022.
Nivea
Nivea is a globally recognised skincare brand that closed its marketing operations in Ghana in December 2023. The company attributed this to a strategic need to streamline its operations and focus on markets where it can gain sustainable growth and profit.
Regardless of the company’s reasons, many others attributed the exit to the high cost of doing business in Ghana recently.
These exits and the reasons linked to them are similar to what caused Game, a South African retail company, and Dark and Lovely, another skincare company, to close operations in Ghana between 2022 and 2023.
The exit of both companies was attributed to a myriad of hostile economic factors.
Game, for instance, has operated in the Ghanaian market for more than six years. The company provides various household appliances and other electronic products in the Ghanaian market.
The most common factors that underline these exits include a decline in sales and revenue, increasing competition from local and international competitors, regulatory and local market challenges, and global strategic decisions to make more profits.
Effects on the economy
The exit of these companies from Ghana will have severe consequences for the country’s already struggling economy, most importantly, job losses, consumer choices, revenue and economic growth, and a shift in market dynamics.
Although there is no accurate data on the number of employees who have lost their jobs due to these exits, the numbers are believed to run into thousands.
Glovo, for instance, had about 150 couriers in Kumasi whose livelihoods have now been negatively affected by the company’s exit, according to Ali Dabuo Mohammed, one of the many couriers who worked with Glovo.
Ali, a Life Insurance agent, joined the company in 2023 as a courier to supplement his income.
On the firm’s exit, he commented, “I have lost a supplementary income. I could use what I earned working with Glovo to support myself and my family.”
He asserted that more than 100 people in Kumasi alone depended on Glovo’s operations in Ghana for their livelihoods.
In terms of the economy, the country is believed to have lost millions of Ghana cedis in tax, which amounts to revenue loss.
Dr Daniel Delali Kornu, a Senior Lecturer at the Department of Accounting, Finance, and Economics at the Evangelical Presbyterian University College, noted that,
“The departure of these multinational companies may result in a reduction in corporate tax revenue and a reduction in individual tax such as PAYE since workers have lost their jobs.”
According to him, the effects are overreaching, and potential investors may be scared of investing in the Ghanaian economy.
“Businesses, including multinational companies, operate in a global village, and with the emergence of globalisation, information flow is always available; thus, this could result in the diversion of investment from potential multinational companies that may want to expand their business operations into the country. The indication will be that businesses operating in Ghana are not making enough profit to remain in business,” Dr Kornu added.
With another election approaching, it remains to be seen how the government and the other political parties intend to address the country’s economic crisis as many experts project a further decline.
This explainer is produced under the DUBAWA 2024 Kwame KariKari Fellowship, supported by the National Endowment for Democracy (NED), to facilitate the ethos of “truth” in journalism and enhance media literacy in the country.
