—Closed down & leaving
The economic landscape of Ghana, faces a significant blow as multinational companies, including the French bank Société Générale, announce their departure due to unprofitability. This exodus sparks concerns about rising joblessness and the country’s ability to attract and retain foreign investment.
Many multinational corporations, have cited Ghana’s economic challenges as the primary reason for their decision to leave.
High taxes, mass unemployment, inadequate electricity supply, and low per capita income are among the factors contributing to the unfavourable business environment.
Société Générale’s withdrawal from the Ghanaian market, merely two decades after its entry, marks a notable exit.
Alongside the bank, other prominent brands such as, Glovo, Nivea, Jumia Foods, Unilever Ghana’s Lipton Tea, Dark and Lovely, BET 365, Game, and BIC, have either departed or are on the verge of doing so.
The impact extends beyond multinational corporations, with local companies struggling to stay afloat, amidst rising production costs and stagnant revenues.
Media outlets like the Daily Graphic and Ghanaian Times, face financial distress, with unpaid salaries becoming a pressing issue.
Ghana’s ports are experiencing a decline in freight activity, leading to empty docks and reduced revenue.
Cold stores in key areas like Tema are shuttering operations due to the inability to afford exorbitant electricity bills imposed by the Ghana Electricity Company (ECG).
Société Générale’s decision to exit Ghana is part of a broader strategy that, includes withdrawing from two other African countries, Tunisia and Cameroon. This move underscores the challenges faced by multinational corporations operating in certain African markets.
The departure of Société Générale and other multinational corporations from Ghana, means an urgent need for economic reforms to attract investment and stimulate growth. Addressing issues such as high taxes, unemployment, and inadequate infrastructure will be crucial in restoring confidence in Ghana’s economy and preventing further departures.
The Accra Times news portal cited sources close to the bank as revealing that Société Générale has enlisted the services of investment bank Lazard to seek potential buyers for its operations in Ghana, Cameroon, and Tunisia. It’s been hinted that Absa Bank is seriously considering the acquisition of these subsidiaries.
Weeks ago, Société Générale finalized agreements with Saham Group to sell its Moroccan operations. Last year, it divested its interests in several African countries, including Congo, Equatorial Guinea, Mauritania, Burkina Faso, and Chad.
Despite the country’s potential as a destination for foreign direct investment, Ghana has faced economic hurdles impacting both local and international businesses hence the unstable economic conditions witnessed in Ghana have prompted many international corporations to relocate their operations.
The fluctuating value of the Ghanaian cedi, high inflation rates, and the high cost of imports are major factors contributing to this trend.
Additionally, energy challenges, including frequent power outages known as “Dumsor” and rising utility costs, have further complicated the business environment.
As a result, several well-known multinational companies have ceased operations in Ghana, citing strategic realignment and unfavourable operating conditions. These departures have not only affected job creation and Ghana’s Gross Domestic Product (GDP) but also broader economic growth and tax revenue.
The news portal, GhanaWeb Business mentioned some of the multinational companies that have left or are planning to leave Ghana.
1. Glovo:
The delivery service provider announced its exit from the Ghanaian market, effective May 10, 2024, due to profitability challenges and a difficult business climate.
The company stated, “Whilst we recognise the potential of the Ghana market, building a stronger position and achieving profitability would require substantial investment over an extended period. This is why we have decided to redirect our resources towards the other 23 countries where Glovo operates to better serve the millions of customers who use the Glovo app every day.”
2. Nivea:
The skincare brand discontinued its operations in Ghana in December 2023, citing high operating costs and taxation as reasons for its departure. The company’s action was a result of the need to streamline operations and focus on markets where sustainable growth and profitability can be achieved.
3. Jumia Foods:
Popular e-commerce platform Jumia shut down its food delivery division in December 2023 due to unsustainable market conditions and economic factors. This closure also reflects Jumia’s financial difficulties, including a significant 41% loss amounting to $49.8 million in the last quarter of 2022.
4. Lipton Tea (Unilever):
In March 2024, Unilever Ghana relocated its tea production operations from Ghana to Nigeria, citing ongoing economic challenges in Ghana.
5. Dark and Lovely:
The haircare brand exited the Ghanaian market, citing the challenging economic environment and rapid changes in the beauty industry as reasons for its departure.
6. BET 365:
The online betting company withdrew its operations from the Ghanaian market, citing an unsustainable tax burden and regulatory hurdles as reasons for its departure.
7. Game:
The popular South African retailer closed its branches in the Accra and West Hills malls in 2022 due to financial challenges. This closure was part of a strategic decision by its parent company, Massmart, to shut down eight underperforming stores across Africa.
8. BIC:
The popular pen production company moved its operations from Ghana to Ivory Coast in March 2024, citing economic challenges as the reason for the relocation.
9. Societe Generale:
The French bank has announced its plans to exit the Ghanaian market after two decades of presence.
This decision is part of a broader withdrawal from several African countries, including Cameroon and Tunisia. Societe Generale’s move follows recent divestments from other African markets and a strategy to focus on markets where it can be a leading bank.
The departure of European banks like Societe Generale from Africa is linked to factors such as stiff competition, high operational costs, lower investment returns, and stringent regulatory demands.
Société Générale initially entered the Ghanaian market in 2003 by acquiring a 51% stake in the then Social Security Bank. Despite the challenges faced by the financial sector, the bank asserted its resilience during its 20th-anniversary celebration last year.
The Société Générale group, with its longstanding presence in Africa, intends to concentrate its resources on markets where it can establish itself as a leading bank, in alignment with the group’s overall strategy, as stated on its website on April 12, 2024.
Société Générale’s planned exit from Ghana and other African countries mirrors similar actions taken by other European banks. Notable names include Barclays and Standard Chartered, with the latter withdrawing from some countries while maintaining operations in Ghana and a few other African countries.
Additionally, newer entrants like Atlas Mara have also left the continent while Credit Suisse is retaining only its South African operation. French bank Groupe BPCE exited its non-core businesses in several African countries as far back as 2018.
The departure of European banks from Africa, including Société Générale, is primarily attributed to the high cost-to-income ratio. These banks are facing reduced returns on their investments in Africa compared to decades ago. The banking landscape has evolved, requiring significant investments in IT infrastructure and compliance to meet regulatory requirements set by central banks. Many African central banks have also increased minimum capital requirements over time.
Furthermore, increased competition in the sector combined with stagnant economic growth in many African countries has further squeezed profit margins. The exit of European and other non-African banks suggests that African banks, particularly from South Africa and Nigeria, may emerge as dominant players in the continent’s banking sector.
