GB&F December 2013

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DECEMBER 2013 / ISSUE 032 GH¢10.00

Will Ghana’s 2014 Budget inspire growth? (pg 23)

Herman Chinery-Hesse

FDI inflows into Africa set to increase in 2014 - Moody’s (pg 32) USA..................... $7.00 UK....................... £5.00 EUROPE............... €5.00 AUSTRALIA........ AS8.50

CFA ZONE..... CFA 2,500 NIGERIA............. N1000 SOUTH AFRICA....... R45 SOUTHERN AFRICA. R45

THE FIRST BUSINESS READ IN GHANA

- SOFTribe, leading Africa’s ICT revolution (pg14)

Follow us online at www.ghanabizfinance.com

May you rest in the peace you gave us.

Portrait by Yousuf Karsh

www.nelsonmandela.org

23... Economy (Reactions to the Budget)

GB&F

As usual, players in the economy have had a fieldday dilating the 2014 Budget Statement.Read on for some interesting reactions sampled by GB&F from a cross-section of economists, civil society groups and industry associations.

General Manager Andrew Padi Jnr andrewpadi@gmail.com Editor Eric Kwame Amesimeku eric_kwame@yahoo.ca Contributors A. Kapini Atafori Martin Luther King Albert Kodjoe

25... Brand Ghana

Marketing Manager Josiah Spio-Garbrah kojosegu@yahoo.co.uk

Ghana seeks to tap into the South African experience in branding

Deputy Manager, Marketing Michel Kouassigan Art-Graphics Manager Benjamin Tetteh

DECEMBER 2013 / ISSUE 032 Front Cover: Herman Chinery-Hesse Founder, The SOFTribe

Design & Production Daniel Sackey Yobo Circulation & Subscription Bright Yram Yaotse Jeffrey Dapaah Editorial Committee Prof. Paul N. Buatsi Prof. Kwame Addo Ms. Johanna Awotwi Mr. Gaddy Laryea Mr. Ray de Bono Nana Robert Mensah Mr. Frederick Alipui Ms. Dede-Esi Amanor-Wilks Nana Spio-Garbrah Office Location Ghana Business & Finance African Business Media House No. 7 Lamb Street (off Farrar Avenue) Adabraka, Accra Ghana Mailing Address P. O. Box O 772, Osu, Accra, Ghana Tel: +233 302 240 786 Fax: +233 302 240 783 ghanabusinessfinance@gmail.com Brand Advisor Dmax Studios in Malta, EU. (www.dmax.tv) Credits

GNA Daily Graphic Forbes ghanabusinessnews.com

myjoyonline Blommberg citifmonline

Ghana Business & Finance magazine is published by

Contents 7...

Editor’s Suite

8...

News in Brief

Read on for the latest news making the headlines in Ghana

14... Cover (Chinery Hesse)

Meet Africa’s ‘Bill Gates’ and his SOFTribe blazing the trail of ICT innovation

17... Africa Briefs

Get to know the business trends across the African continent

20... Economy (2014 Budget)

Several programmes and new initiatives have been introduced into Government’s 2014 Budget Statement.We publish here excerpts of the 2014 Budget Statement.

Subscribe online at www.ghanabizfinance.com All information contained within this magazine is the property of Ghana Business & Finance and is not to be used without written authorisation from the publishers. Although every effort is made to ensure the correctness of information submitted for publication, the magazine may inadvertently contain technical inaccuracies or typographical errors. Ghana Business & Finance assumes no responsibility for errors or omissions in this publication or other documents that are referenced by or linked to this publication.

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GHANA BUSINESS & FINANCE

27... Economy (Wage Bill Burden)

As Ghana inches closer to the upper limits of it borrowing threshold, there is a common ‘enemy’ we all point accusing fingers at - the Single Spine Salary Structure (SSSS).

Ayuureyisiya Kapini Atafori analyses Government’s predicament and suggests how it could tie in high wages to productivity for the worker.

32... Trade & Industry (FDI Inflows)

FDI inflows into Africa is on the increase and according to Moody’s, the trend is bound to continue in the medium to long term.What informs this projection? Read on.

34... Trade & Industry (Pre-Xmas Trading)

Oppong Baah takes a leisurely look at the history of Christmas celebrations in Ghana and how trading activities fare during this season.

37... International Politics

Paul Frimpong of CEPA takes a look at China’s growing economic influence in Africa

linkedin.com/GhanaBusiness&Finance facebook.com/Ghanabusiness&finance @ghana_business

DECEMBER 2013

Letters to the Editor

send your letters to the editor at kwame.eric@gmail.com

38... Aviation

In this piece, Martin-Luther King does a comparative analysis of the challenges in the aviation industry of Ghana and Nigeria respectively.

40... Insurance

Ghana’s Motor Insurance industry has been on the growth pattern for years now.Oppong Baah analyses this growth trend in the face of the challenges in the industry.

44... In Focus (Mantrac Ghana)

When the history of Ghana’s mining and construction sector is being chronicled, Mantrac Ghana will surely occupy a central position. In this edition’s In Focus,we look at the contribution of Mantrac to Ghana’s development, 75 years down the line.

46... Conferences

Follow upcoming conferences and events around the globe.

In Focus (Mantrac Ghana): Page 44

48... Perspectives

57... Book Review

51... Outlook

58... Auto Review

Ebo Bhavnani is the Relationship Manager, Public Sector Group, at the Guaranty Trust Bank (Ghana) Ltd.,and in this piece, he does an interesting analysis on the age-old and oft-abused maxim that ‘The customer is always right.’ Makes such a nice read.

As 2014 beckons, the world is bracing itself for the unpredictabilities of the coming year. But Africa’s continuous economic growth seems to be a certainty, at least according to the latest IMF’s Regional Economic Outlook for subSaharan Africa. Read on for more.

Dr. George Ayittey in his book Defeating Dictators, dilates the problem of leadership in Africa.

We publish here, a review of his book done by Dr. Vakunta, a professor of Modern Languages at the Department of Defense Language Institute, MontereyCalifornia, USA.

Toyota Ghana launches the new Yaris onto the Ghanaian market.

54... Management

The advent of ICT has revolutionised the way humans live, and in this piece, Jules Caesar-Tokoli writes on how Managers could effectively deploy ICT for growth in their businesses.

56... Job Openings Perspectives: Page 48

DECEMBER 2013

Get all the latest executive job openings

Managment: Deployment of ICT in Management Page 54

GHANA BUSINESS & FINANCE

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EDITOR’S SUITE

2013 in retrospect he year 2013 will go down as one of the most eventful years in the annals of Ghana’s history.If for nothing at all, 2013 goes down as the year during which the nation’s real democratic credentials were put to the test.Of course, I speak of the Elections Petition which threatened to erode all the painstaking steps taken since 1992 to have multi-party system of governance imbued into the body politics of the nation’s governance system.

Whilst most Ghanaians will always remember 2013 as a very difficult year, the year represents even a tougher one for the President of the nation, His Excellency John Dramani Mahama and his team. For the President, he has had to dig deep into his wits to hold together a nation that was tottering on the brink of destruction politically, whilst its economy was bursting at the seams under pressure from a huge deficit, suffocating wage bill and a debilitating debt burden. Then the nation has had to struggle to come to terms with how millions of its taxpayers money could be doled out to political cronies and people pretending to be working for the nation in the Subah/GRA and the GYEEDA issues. All these stoked the baptismal fire that President Mahama had to endure in his first year in office, having already gone down as the only President in the nation’s history whose election was challenged at the Supreme Court of the land.

For the ordinary worker, besides the huge increases in utility prices that he has had to deal with, his misery has been compounded by the challenges brought on by the infamous Single Spine Salary Scheme (SSSS), and he has had to resort to strikes and other such acts to press home his demands and to right the wrongs of the SSSS. And so strikes and agitations have been rampant, and 2013 could aptly be described as “The Year of Strikes for the Ghanaian Worker.”

DECEMBER 2013

So President Mahama continued to sweat from the challenge to his legitimacy, and the nation’s economy having taken serious buffeting from the numerous problems, continued to wobble along. But whilst the main Opposition party in the country, the New Patriotic Party (NPP), might have found a fodder in the economic difficulties to feed on, the party in itself was not having a jolly ride either. Coming from a painful elections defeat, the party had salt rubbed into its wounds when the Supreme Court of the land affirmed President Mahama as the legitimately-elected President of the Republic, sending Nana Akuffo Addo, the Flagbearer of the NPP to an unexpected holiday abroad to nurse his wounds.

Short of a general election, 2013 could have easily passed as another election year, because Ghanaians will just not shed their political cloaks in 2013 and forge ahead as a nation united by a common goal to succeed.

Then a final blow was dealt the African continent of the death of one of its most important sons - Nelson Mandela. But in spite of his death, his legacies of unity and forgiveness live on and we know he rests in the bosom of his maker.

Adieu 2013 with all your troubles, because 2014 beckons with a new breath of freshness reminiscent of the sweet scent of the tamarind.

Eric Kwame Amesimeku Editor Tel: 0244 985 098 Email: eric_kwame@yahoo.ca

GHANA BUSINESS & FINANCE

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NEWS IN BRIEF

ABL embarks on $100 million expansion project Accra Brewery Limited (ABL), a subsidiary of SAB Miller Plc, is embarking on a $ 100 million expansion project to help double the capacity of production. The expansion project, estimated to be executed over a period of 12 to 24 months, entails the construction of two new state of the art packaging lines, a new warehouse, material storage areas and waste treatment plant.

“The expansion project is expected to increase the company’s capacity to meet sales growth over the next five years and will include the construction of a modern office complex, installation of new packaging lines for beer and soft drinks, a waste water treatment plant, upgrades to brewing capability and warehousing space,” Mr Gregory Metcalf, ABL Managing Director said. Dubbed Project Everest, Mr Metcalf said the critical phase of the project, would be completed by October 2014.

He said the project would offer employment for both skilled and unskilled labour during the various phases until completion.

“There are a number of positive economic impacts associated with this project. It is a win-win situation for us as a business, the government and the people of Ghana,” Mr Metcalf said.

He appealed to government to take a further look at the tax regime, especially on those affecting manufacturing companies and provide some incentives for local industries. “Such a move will encourage businesses such as ours to continue to exist and provide additional employment avenues to Ghanaians and thus contribute to the socio-economic development of the country,” Mr Metcalf.

In a speech read on his behalf, Mr Haruna Iddrisu, Minister of Trade and Industry, commended ABL for the expansion project and the faith in the Ghanaian economy, adding that it would serve as an example to other investors to also come to Ghana and invest in manufacturing. The more local raw materials ABL purchases, the more money our local farmers make,” Mr Iddrisu said.

Rice production goes up in Atwima-Mponua There has been significant increase in per-hectare yield of rice farms in the Atwima-Mponua District following the introduction of improved technologies.

Farmers now produce an average of 2.9 tons perhectare of rain-fed lowland cropped, compared with the 1.2 tons they were previously getting.

The Ministry of Food and Agriculture (MOFA) and the Japanese International Cooperation Agency (JICA) under a joint technical cooperation initiative have been helping farmers in the area to use modern production technologies and simple tools to boost local rice yield. Mr. Yoshino Minoru, a representative of JICA, said the goal was to help improve food security and the livelihood of farmers. Other districts in Ashanti benefitting from the five-year project include Asante-Akim North and Central, Ahafo-Ano North and the Adansi South.

Speaking at meeting with rice producers, millers, processors, sellers, officers of the agriculture ministry and assembly members at Nyinahin, he said the project which was started with only two communities in the district - Kensakrom and Mpasatia, had now been extended to 42 other communities, bringing in about 4,000 farmers.

He noted that rice had become a major staple crop in the country due to the changing preference of taste of consumers from households to social and official functions. He appealed to farmers to continue to adopt best cropping practices and to take advantage of the technical expertise of agricultural extension agents to raise production levels.

Mr. Stephen Yeboah, the District Chief Executive (DCE), said the government would support farmers to better their lives and appealed to the youth to take to farming because the returns were attractive.

Mr. William Osei, the District Director of MOFA, called for effective working relationship between the extension agents and farmers to boost food production.

Swiss telecom giant K3 Telecom enters Ghanaian market Swiss-based global provider of patented technology, K3 Telecom has partnered Ghanaian telecoms operator Media Ghana Limited, to launch its unique Triple Play services in Ghana. The partnership will lead to the building of a customised telecommunications network with a unique patented wireless technology. This will enable the company to deliver unmatched internet speed, Voice Over Internet Protocol (VOIP) telephony and quality television content.

Speaking at the launch, Group Chief Executive Officer of K3Telecom, Uros Mlakar said: “our technology arrives to solve the African challenge of last mile fiber delivery. It allows for the continent to tap into and complete the massive fiber optic infrastructure available on its shores”.

Mike Cooke, CEO of Media Ghana Limited said: “this partnership into our ‘Converged Media Connectivity strategy’ will see the value lines of content and access become one”. K3 Telecom will embark on a 5 year plan to drive and expand internet and content access in Africa with its headquarters in Ghana. It is expected that the partnership will become one of the major players in the telecommunications sector in Africa.

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GHANA BUSINESS & FINANCE

DECEMBER 2013

The Ghana ECONOMIC OUTLOOK & BUSINESS STRATEGY Conference 2ND EDITION Theme: STRATEGIES TO ATTRACT FOREIGN DIRECT INVESTMENTS TUESDAY, 28th JANUARY, 2014

BEST WESTERN HOTEL, AIRPORT, ACCRA

After the successful “Ghana Economic Outlook & Business Strategy 2013 (EOBS)” Conference held in November 2012, it’s second edition will take place on 28th January 2014 with a focus on government’s strategies to creating an enabling environment that could see Foreign Direct Investments (FDI) into the country increasing to USD 10 billion by the year 2016. Sector Ministers and heads of Governmental agencies responsible for creating such an atmosphere to attract foreign investors to partner their local business collaborators to drive this quantum jump in FDI will lay out their strategies and plans for the year 2014. Industry and corporate CEOs will also have the chance to unveil their strategies for the next year. It is a “not-tobe-missed” event for top executives seeking those special insight that can make a difference to the bottom line.

To sponsor or partner the event, please call:

+233 302 240786, Andrew (0242355956), Josiah (0264510396) and Eric (0244985098) Organized by

Supported by

Partners

Media Partners

Hosted by

Radio

TV

Ministry of Trade and Industry

Press

www.ghanaeconomicoutlook.com

Outdoor

NEWS IN BRIEF

New AGI President assures Industry of development John Dramani Mahama, Ghana’s President

Jacob Zuma, South African President

Ghana and South Africa sign 3 agreements to enhance cooperation Ghana and South Africa have signed 3 agreements covering key sectors of their economy in a push to enhance corporation whilst leveraging on trade. The agreements which were signed after bilateral meetings were held between a high powered delegation from South Africa and Ghana include bilateral air services agreement; a Memorandum of Understanding on transport and cooperation and a Memorandum of Understanding on Electricity and Energy. Briefing the Press after their meeting, both Presidents were hopeful that the level of engagement between the two countries would yield positive results.

President Mahama called for strict implementation of the agreements so the benefits are realized by all. “I wish to urge those who will be involved in implementing this decision to create an environment in which implementation can be effective. So that we just don’t sign the agreements and not have them come into reality” President Mahama stressed. The President also called for an expansion of the South African investments in the country.

“We have significant South African investments in Ghana and we believe that we can expand those areas of investments. And so most of the areas that we have discussed and signed memorandums on are areas that we can continue to push to expand the level of cooperation between ourselves” he stated.

President Zuma on his part expressed hope that South Africans will maximize the relationship with Ghana.“We have agreed that these instruments should translate into concrete projects that will benefit our people. We have also agreed to further promote our economic relations,” President Zuma added. He disclosed that the South African government is also “consulting on trade issues with the intention of unlocking bottlenecks with regards to imports from Ghana.”

The newly elected President of the Association of Ghanaian Industry (AGI), Mr. James Asare-Adjei, has assured Ghanaians, especially industry players of dynamic leadership for growth and development.

Mr. Asare-Adjei gave this assurance when he was recently elected as the new AGI President to spearhead the affairs of the association. Providing his vision for AGI for the next two years of office, Mr. Asare-Adjei said, “I would ensure effective organization of Member companies at regional branches to present a formidable force in strengthening the advocacy drive of AGI to position industry at the heart of government policies”.

The new AGI boss added that he would champion the setting up of an SME bank through the aggregation of Japanese grant, Italian fund, EDAIF, MASLOC, etc to make credit easily accessible and cheaper to AGI members.

“I will provide dynamic leadership for industry growth and development through effective engagement of government in solving utility tariff hikes, high cost of credit, excessive business taxation, depreciation of the cedi, lack of market access and many more”, Mr. James Asare-Adjei added.

He is the Founder and CEO, of Asadtek Group Limited.

Stratcomm Africa wins AGI award

Strategic Communications Africa Ltd. (Stratcomm Africa) has been adjudged the Business Promotion and Consultancy Services Company of the Year 2013 by the Association of Ghana Industry (AGI) during the association’s annual awards held recently in Accra.

The ceremony, which was under the theme “Rewarding Excellence and Innovation”, was held at the State House Banquet Hall in Accra.

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AGI seeks to recognize companies that have achieved outstanding success in various areas of industry and innovation in the year of review. The recognition serves as a platform to motivate and encourage other companies in the industry to pursue excellence.

Ms Esther A. N. Cobbah, Chief Executive Officer of Stratcomm Africa, and the current CIMG Marketing Woman of the Year, received the award with a team of Stratcomm Africa Staff.

She said: “Stratcomm Africa is delighted to have won this award. This award and three others that have come to Stratcomm Africa this year show that it pays to pursue excellence. At

GHANA BUSINESS & FINANCE

Stratcomm Africa, we seek to work to the glory of God. He is an excellent God that working to his glory requires excellent delivery. This commitment has made us a winning team.”

Gillian Heathcote, Head of Stratcomm Africa Communication Division added that the award “is further motivation to continue raising the bar and achieve new heights of excellence in the communications industry in Ghana and abroad.”The company expressed its appreciation to the “AGI for this recognition and encouragement, and also to all our stakeholders, particularly our clients, suppliers, as well as our families and friends.”

DECEMBER 2013

The Feed the Future (FTF), a United States Agency for International Development’s (USAID) Agriculture Technology Transfer (ATT) project aimed at reaching out to some 100,000 maize, rice and soya farmers in the North Region has been launched. The five-year, USAID funded project also seeks to increase the availability of appropriate and affordable farming technologies to sustainably improve the competitiveness of the maize, rice and soya value chains in Northern Ghana through public private partnership.

Mr Andy Karas, USAID-Ghana Deputy Mission Director speaking at the launch in Tamale recently, said FTF was part of President Barack Obama’s flagship programmes to increase food security and improve nutritional status around the world. The FTF USAID, ATT project would be jointly implemented by the International Fertilizer Development Center (IFDC), the Savanna Agricultural Research Institute (SARI), the Ministry of Food and Agriculture, as well as other agencies relevant to private sector agricultural investment in Ghana.

Mr Karas explained that the ATT had been designed to address some of the key constraints of small holder farmers so as to improve agricultural productivity and growth - the development, availability and adoption of agricultural technologies. He said the five-year initiative had various components, which would address challenges including lack of access to loan schemes and develop innovative ways of farming and the development of climate resilient crop varieties.

Mr William Boakye-Acheampong, Northern Regional Director of the Ministry of Food and Agriculture said a significant improvement in the agriculture sector was needed to improve the living standards of farmers and that a boost in the sector had a direct impact on the attainment of the Millennium Development Goals (MDGs).

He said farmers in the region’s quest to increase production had been thwarted due to many challenges including low soil fertility, low use of fertilizer, low level of mechanization in production and processing.

Mr Boakye-Acheampong said the project was in line with the government’s Medium Term Agriculture Sector Investment Plan (METASIP) for 2011-2015, which solicit the support and participation of stakeholders to increase competitiveness and enhanced integration into domestic and international market, sustainable land management and environment as well as the use of science and technology to increase food production.

He urged smallholder farmers and other actors in the value chain to embrace the initiative and make good use of the new technology that the project would develop to ensure high productivity.

DECEMBER 2013

Glo rolls out revolutionary product for subscribers Glo Mobile Ghana, the African telecommunications giant, has launched another innovative product - the Glo Bounce tariff plan - which enables subscribers on the network to make free, unlimited calls even when they have no credit. Introducing the product to journalists in Accra, Glo Mobile Ghana’s Head of Business, Mr. Akeem Kazeem, said, on the amazing Glo Bounce tariff plan, Glo would reward its customers with up to 100% instant bonus airtime every time they recharge, which bonus they can use to make calls to all networks, send SMS and browse the internet.

Mr Kazeem observed that with Glo Bounce, Glo is introducing for the very first time on the Ghana market, a unique tariff plan in which subscribers would first enjoy their bonus airtime within their validity period before using credits in their main account. “This means debiting will only start either after a subscriber has finished his or her bonus credit or when the validity days for the bonus credit has expired,” he explained.

All subscribers on the Bounce plan also get to enjoy the ‘Zero Balance Bonus’ which allows customers to make free unlimited Glo-to-Glo, send SMS and browse within the validity period of any recharge they have made. The Head of Business disclosed that a recharge of GHc1, GHc2, GHc3 and GHc5 will enable Glo customers to enjoy this bonus facility within validity duration of 3 days, 5 days and 7 days respectively, while recharges of GHc10 and above will provide subscribers with 15 bonus validity days.

“With this offer, if a Glo subscriber recharges with GHc5 for instance, he or she will be entitled to a bonus airtime of additional GHc5 which can be used to call and send SMS to any network in the country and browse the internet within a 7-day validity period before the main credit account may be charged. Additionally, the subscriber will enjoy free, unlimited calls, send SMS to any Glo number and browse the internet within the validity period.

Another significant benefit is that, a customer on the Glo Bounce offer can register up to five Glo numbers as ‘Family & Friends’ to make unlimited calls at 2 pesewas per minute after their validity period. In addition, customers on the Glo Bounce offer who use GHc2 and above between Monday 12am to Friday 11:59pm enjoy a special weekend tariff of 2 pesewas per minute for Glo-to-Glo calls (Saturday 12am to Sunday 11:59pm) also after their validity period.

He said the just ended Glo Slide and Bounce concerts which brought so much excitement to the youth in Kumasi, Accra and Takoradi over the past three weeks was a precursor to the arrival of the incredible Bounce product and that it is the company’s intention to sustain the excitement by offering the public the most uniquely rewarding network experience through the Glo Bounce product.

GHANA BUSINESS & FINANCE

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NEWS IN BRIEF

Agric-value-chain actors to benefit from USAID project

GB&F signs the Mandela Book of Condolence

An Oak has fallen!

Even in the face of despair, you smiled. When the world expected vengeance, you smiled at the follies of those who oppressed you and forgave all their atrocities.

Although we grief at your passing, our grief is relieved by the fact that you lived a worthy life. You fought a good fight; you have run fully the race of life, and now you lay in the bosom of the Lord. Rest in Peace and Rise in Glory, Madiba

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GHANA BUSINESS & FINANCE

DECEMBER 2013

COVER STORY

Bringing change - through innovation (the Chinery-Hesse way)

By Angelina Lazar

With unprecedented experience in design and in implementation of computerized business application systems for Africa, Herman Chinery-Hesse with his SOFTribe team extraordinaire have been providing cost efficient and practical business solutions for both the private and public sectors in Ghana and West Africa for the past 20 years. ince 1991 SOFTribe has grown steadily to now become the number one business management systems provider in Ghana. SOFTribe provides supreme technology consultancy in IT solutions and exceptional advisory services for our highly peculiar African market, which Hesse dubs their “tropical solutions” for Africa. Some of their prestigious and more noteworthy multinational clients include Guinness Breweries, Unilever, Cargill and Cirrus Oil. Amongst the financial services sector are Beige Capital, Databank, Zenith Bank, Unique Trust Bank and PriceWaterhouse Coopers, including some hospitals, and governmental agencies, such as the Accountant General’s Department and National Controller, Ghana National

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Petroleum Corporation (GNPC), and the National Labour Commission.

As for Mr Hesse, he is poignantly aware of the short window of opportunity to machete through the proverbial African jungle with breakthrough solutions.This will inevitably cement him as the unsurpassed leader in the field before other foreign competitors come to swoop down on Accra as it takes off, entering the ozone of first world status with its state of the art, brand new world-class series of office towers in business parks.

Transnational companies, likewise, are quickly moving in to take part in this business revolution and virtual extravaganza, sweeping across Accra at lightning speed! In Hesse’s own words,

GHANA BUSINESS & FINANCE

DECEMBER 2013

BBC describes Chinery-Hesse as “Africa’s Bill Gates”, and rightly so! Mr Hesse was a visiting speaker at America’s top Wharton Business School, Harvard Business Schools, Cambridge University, including our very own University of Ghana. A visionary entrepreneur, highly dynamic , ultimately brilliant with a mind that works like a veritable computer, Hesse is highly entrepreneurial, with a generous initiative, ample foresight, sheer dedication, grueling determination! This guru could have easily been reclining in some plush executive office suite in London or Washington D.C., with a handsome compensation package that would set him up for the rest of his life to live like a king; but what is most commendable about him is that he returned home to catapult his own country forward in the savvy world of IT, serving not only the Government and Ghana’s newest budding entrepreneurs, but also the less fortunate citizens, who still strive to make ends meet.

Mr Hesse is also a Director of a number of Boards, including Assessor of the Commercial Court of Ghana. He has won a number of not just corporate, but personal awards including Outstanding Ghanaian Professional from the GPA Awards (UK), as well as the Distinguished Alumnus Award from the Texas State Alumni Association and Texas State University-San Marcos - the first and currently the only African recipient of this award.

The illustrious chairman dares to keep it real amidst an overly ostentatious and proud business world, that has lost its soul, heart and candour! Herman Hesse is a sparkling gem in Ghana’s business world, who just keeps shining on, as I’m certain he did as a young school boy, hustling and bustling his way to school, running late, but still managing to kick stones into the air along the way, enjoying the whole process of arriving every step along the way! He remains a big kid at heart; enjoying moments along the way, and each and every project, which mean something personal to him! They are his babies, his inventions, the fulfillment of his mission and purpose in life!

He embraces life, his projects and all those he meets, reveling in them, and living in the moment each code along the way.

This man has no chip on his shoulder; neither by virtue of his being from a royal family, neither due to his series of awards, accrediting him “best at this”: and “best at that”; neither due to his being in high demand for interviews from top global media giants, like CNN and BBC, big-little Herman remains humble and gleeful, full of zest, passion and enthusiasm, with an infectious spirit, ease and friendliness. Here is a bit from Herman, the interview-style: GB&F: So, Herman, allow me to utilize this time wisely and get something down... What’s on the top of my mind most is this: What makes your software so special?

HCH: I think we’re innovative. . .

DECEMBER 2013

GB&F: How so?. . . And what do you mean by “tropical” solutions?

HCH: “You’ve been reading! (He mused with a pause of satisfaction) “We build solutions that work in Africa! There are certain peculiarities in this continent. We have 5 core issues that exist in our continent: power, connectivity, security, literacy and affordability. You have to design solutions to overcome these impediments,” he explains. Firstly, one knows that power outages are the norm here in Africa, therefore, they need to have backup systems upon backup systems, he explained. Next, the internet link goes often down at the drop of a hat, which further aggravates one’s effectiveness, so, Hesse explains, they need to create a secure line. As for security, that is a whole separate issue, where they must make their systems securitytight, so that no hackers can cause havoc and sabotage their operations or compromise the discreetness or security of any transaction. Systems need to be also super user-friendly for even the illiterate citizens, which is a high percentage of the Ghanaian population; and lastly, the fact that we are not in an advanced capitalist economy, with an affluent upper middle class; solutions need to be affordable for the average Ghanaian to purchase and utilize, and this is what really sets Soft Tribe apart from the rest! “We customize our solutions to work!” (he adds) GB&F: The Soft Tribe’s indisputable flagship product, which was recently launched is something comically referred to as “Hei Julor”! Tell us about it.

HCH: “It is only about $10 a month”. It fulfills him to “be able to also service the watchman, the secretary and the driver”, as he says! “Now, they, too, can insure their homes!”, he beamed. This is what Mr. Hesse finds most rewarding of all… above all the rewards he has thus far received in all his achievements! Here, he provides real value for the real Ghanaian; filling a niche, fixing a need, making people’s lives easier, more seamless, safe and fluid. “When an armed robber comes into your home, let us say, the client just needs to call us up, without a word”, he explains, “The call will immediately cut you off, as it needs no more explanation”, he adds. “Instantly, it will alert 10 of your immediate neighbours and let them know you are being robbed! It will alert the police. Notwithstanding, it will trigger our own security personnel, with dogs to urgently come to the rescue, with sirens and military dogs”.

“Hei Julor” (“Hey Thief!” in Ga) is also in partnership with Enterprise Insurance to pay up to 15,000 GHC for any valuables that might have been stolen (just as a back up)! Thus, the client simply speed dials the number of Hey Julor, which it immediately recognizes, is triggered and activated, noting your number and already known address, which will activate a series of offence tactics to combat the perpetrators. With SOFTribe, it is not just the town crier, but also the town crier’s mother-in-law, second cousin’s third spouse, nephew’s pet dog and great grandchild’s step dad who could also very well play a role in heralding the news far and wide. This medley of players and multi-varied action-packed crime stoppers are all poised to thwart and decimate the bandits’ operation virtually in real time with show-stopping spontaneous action. So, just a message to all potential clients: ‘ don’t give it a second thought; invest today for a peace of mind and your security.

GHANA BUSINESS & FINANCE

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COVER STORY

“if Africa misses the current global IT boat there may never again be an opportunity for rapid wealth creation on the continent”, he confides. No worries there; this Software King is spearheading his visionary ideas and brilliant breakthroughs far before most people become aware of the opportunities.

AfDB supports Inga mega hydro-power project A hydroelectric project which is aiming to produce 44,000 megawatts (MW) – half of Africa’s installed electricity capacity – has received $ 68 million from the African Development Bank (AfDB) for further development. The Inga Site Development and Electricity Access Support Project (PASEL), which is located on the banks of the Congo River, will use the money to develop a power-generating capacity of 4,800 MW and build power transmission lines to supply electricity to the Democratic Republic of the Congo (DRC) and South Africa.

PASEL’s undertaking is to finalise the preparation of the first phase of Inga 3. PASEL will develop local institutions and the technical, legal and financial skills needed to attract private capital for the completion of the complex Inga 3 project. “This is the right project for the DRC and the Bank – at the right time,” said Alex Rugamba, Director of the AfDB’s Energy, Environment and Climate Change Department. “It is timely because it facilitates the implementation of Inga 3 whose investment costs would otherwise be difficult to mobilise in the current context of the DRC.” The AfDB’s support, which comes in the form of a Fragile States Facility grant of $ 7.7 million and an African Development Fund grant of $ 60.6 million, accounts for 43 per cent of the total project cost of $ 169 million. With this approval, the support of the AfDB to the Inga 3, since the inception of the mandate to lead the implementation of the NEPAD Infrastructure Action Plan, will amount to $ 90 million.

The AfDB’s financing will be used to cover the cost of technical assistance to ensure the completion of preparatory activities for Inga 3. It will also help address electricity scarcity in remote areas that are not directly covered by Inga but where the DRC intends to develop electrical systems around microor mini-hydropower plants.Improved access to electricity is also expected in the semi-urban areas of Kinshasa for more than 25,000 households.

PASEL builds on previous AfDB support to the Inga Hydropower Project, which led to the development of institutional and technical plans; a feasibility study, which defined the development pattern of the Grand Inga by successive phases; and the identification of an innovative approach to the project that will guarantee the full realisation of Inga’s hydro-electricity potential and promote integration in Africa.

Inga 3 will increase access to more reliable and cheaper energy in the DRC, contributing to an increase from the current nine per cent to over 40 per cent by 2020. It is also expected to improve the business climate and productivity of the economies of countries benefiting from the project.

Current demand for electricity in the region is huge and steady, guaranteeing a market for energy to be produced from the hydropower plant. Indeed, South Africa has already signed an agreement with the DRC to import about half of the electricity that will be produced, guaranteeing the financial viability of the project.

DECEMBER 2013

AFRICA BRIEFS

Exotix planning African office after equity hires from RenCap

Exotix Ltd., the London-based investment bank boosting its African equities team, plans to open its first office on the continent in the next six months. Equity research will focus on financial services, consumer stocks, telecommunications and industrial companies, London-based Ali Khalpey, head of African equities, said in an interview in Johannesburg.

Khalpey, 39, ruled out the South African city, Nairobi and Lagos as locations for the first office, without giving more details on the firm’s plans.

Renaissance Capital and Standard Bank Group Ltd. (SBK)’s securities unit are also expanding in Africa to tap into growth rates higher than those of developed markets. Exotix said last week it had hired Citigroup Inc.’s Kato Mukuru, Sruti Patel from Standard Bank and James Busch from RenCap to expand its Africa team. Khalpey, who joined Exotix from Moscow-based RenCap, also plans to add an oil and gas research analyst, he said.“We’re believing in the growth story so volumes is where the opportunity comes in,” he said, adding that while equities remain attractive there is some margin compression.

As infrastructure projects grow, companies will need to raise capital, he said, adding that Nigerian banks will need to to come to the market in 18 to 24 months to fund projects.

Egypt has some “amazing companies,” he said.

Countries like Tunisia, Algeria and Morocco are undiscovered and also have “world class companies that our clients can invest in.”

Exotix’s equity unit offers sales, trading and structured transactions, according to its website. The firm, which began in 1999, started as a fixed-income specialist and provides debt capital services in sub-Saharan African countries, Khalpey said. “The most exciting area of growth over the next decade will be in the emerging and frontier markets outside of the G20,” Phil Southwell, who became chief executive officer of Exotix earlier this year, said in a statement last week. “With the International Monetary Fund forecasting 5 percent real GDP growth in 2013 and 6 percent in 2014, the investment case for the region is compelling.”

GHANA BUSINESS & FINANCE

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AFRICA BRIEFS

Panelists at WCIT-13 propose change of name for telecom industry regulators anelists discussing “Economic Impact of the Internet in Africa” at the ongoing ITU World Conference on International Telecoms (WCIT-13) have proposed a change of name for telecom industry regulators from “Regulators” to “Enablers”.

Ngcaba explained the delay in licensing LTE and LTE Advance has cost Africa US$100 billion in investments over the last five years and the continent will continue to lose the same amount in investments for every five years it delays in rolling out LTE and LTE Advance.

They explained that in the 1970s when the International Telecoms Union (ITU) chose the name “regulators” for institutions like Ghana’s National Communication Authority (NCA), the intention was to create an enabling environment for the industry to thrive, but now the mode of regulation is inhibiting rather than enabling industry growth.

He said there are 200 million Africans left to be including in the digital revolution and those 200 million are rural dwellers who cannot afford the high cost of service so regulators needed to enable the industry players to extend affordable services to them.

One of the panelists, Andile Ngcaba, Executive Chairman of South African-based Dimension Data said “we need to rename the child from Regulator to Enabler because the industry regulators seem to be obsessed with the regulator mentality and their mode of regulation has become one of stop this and stop that and pay this and pay that.”

Ngcaba said on hind sight, he thinks the ITU made a mistake in choosing the tag “regulators” for institutions intended to be “enablers”, adding that it is not too late to reverse the clock and rename them to give them the right orientation towards the industry.

“The issue of right of way is impeding, the issue of not giving out spectra is impeding, the issue of interconnect is impeding, the issue of not investing in digital migration is also impeding, the delay in licensing LTE and LTE Advance is impeding,” he said. “Africa is a wireless continent so this first come first serve mode of allocating spectra is not the best – we need to encourage shared infrastructure so we can expand to cover the un-served and under-served quickly,” he added.

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“The term ‘telecoms’ will be completely lost in the next five years and ‘internet’ will be the key word.

Voice service will then either become absolutely free or be part of data packages.

“This mode of regulation that places impediments in the way of service providers and investors cannot continue if indeed we want to reach the remaining 200 million Africans who live in poor areas and cannot afford to pay for all the additional charges that the regulators place on the telcos,” he said.

“The term ‘telecoms’ will be completely lost in the next five years and ‘internet’ will be the key word. Voice service will then either become absolutely free or be part of data packages.

This requires deep pocket investment into the expansion of internet service to the rural areas now, but the current mode of regulation is a disincentive to investment,” Ngcaba said.

GHANA BUSINESS & FINANCE

DECEMBER 2013

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ECONOMY

Excerpts from Ghana’s 2014 Budget Honourable Seth Terkper, Minister of Finance and Economic Planning, last month presented the government’s budget and economic plan for the 2014 fiscal year. Notable highlights of the 2014 Budget document is the government’s plan to set up an Infrastructure Development Fund which, sources say, would be up the tune of GHC 1 billion. Mention could also be made of a GHC 50 million Small and Medium scale Enterprises (SMEs) Fund which is expected to help the SME sector in the country’s economy. Whereas some opponents of the government and watchers of the economy have described as unrealistic some projections and programmes outlined in the Budget Statement by the Government, it is instructive to look beyond the politics and take an objective look at these proposals in the Budget to see if they are goals that are realistic and whether the real beneficiaries would be the intended targets of these funds.

Here, GB&F presents some excerpts of the 2014 Budget Statement for you.

Macroeconomic policies and targets for 2014 Mr. Speaker, the medium term objective and strategic direction under the new Medium Term Development Policy Framework (MTDPF) is to expand opportunities for all, and reinforce the foundation for socio-economic transformation of the country, in partnership with the private sector. The strategy for accelerated economic growth is putting people first, building a strong and resilient economy, expanding infrastructure and ensuring transparent and accountable governance. This will be achieved through increased investments in infrastructure, agriculture modernization, manufacturing based on agroindustrialization, Science, Technology and Innovation (STI) and targeted exploitation of Ghana‘s natural resources, particularly, minerals, oil and gas.

Mr. Speaker, the specific macroeconomic targets for 2014 are as follows: • non-oil real GDP growth of 7.4 percent; • overall real GDP (including oil) growth of 8.0 percent; • an end year inflation target of 9.5 percent within the band of ±2 percent; • overall budget deficit equivalent to 8.5 percent of GDP; and • Gross international reserves of not less than 3 months of import cover of goods and services.

Fiscal Sector Mr. Speaker, our fiscal policy objective of ensuring fiscal sustainability by reducing the fiscal deficit to 6 percent over the medium term still remains.

Specifically, fiscal policy will focus on: • improving revenue mobilization; • realigning the key budget items and enhancing the efficiency of public expenditures; • reviewing capital expenditures and the strategy for financing them; • focusing on the completion of pipeline projects to reduce medium term fiscal risks; and • refinancing and extension of tenure of debt.

Mr. Speaker, over the medium-term, fiscal policy will continue to aim at ensuring fiscal prudence and debt sustainability through improved revenue mobilization and rationalizing and enhancing the efficiency of public expenditures, as well as reviewing our financing methods.

Resource Mobilisation for 2014 Mr. Speaker, total non-oil revenue and grants for the 2014 fiscal year is estimated at GH¢24,276.6 million, equivalent to 25.0 percent of non-oil GDP. The expected non-oil revenue and grants for the year represents a 26.3 percent increase over the projected outturn for 2013.

For the 2014 fiscal year, total revenue from oil that will accrue to the budget is estimated at GH¢1,709.4 million, equivalent to 1.6 percent of GDP.

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GHANA BUSINESS & FINANCE

DECEMBER 2013

Resource Allocation for 2014 Mr. Speaker, total expenditure, including provision made for the clearance of arrears and outstanding commitments in 2014 is estimated at GH¢34,956.8 million, equivalent to 33.1 percent of GDP. The estimated expenditure for the year represents 17.7 percent increase over the projected outturn for 2013. Of this amount, GH¢2,816.2 million, equivalent to 2.7 percent of GDP and 8.1 percent of total expenditure will be used for the clearance of arrears and outstanding commitments.

barest in comparison with 10 percent of GDP for compensation to employees.

Total interest payment is estimated at GH¢6,178.6 million, equivalent to 5.9 percent of GDP and 19.5 percent of total expenditure. Of this amount, GH¢975.8 million will be expended on external interest, while GH¢5,202.8 million will be for domestic interest payments.

Mr. Speaker, Grants to other Government units, comprising statutory payments into the National Health Insurance Fund, Ghana Education Trust Fund,the District Assemblies Common Fund, Road Fund, Petroleum-Related Funds, transfer to the Ghana National Petroleum Company and retention of internally-generated funds by MDAs is estimated at GH¢6,498.0 million (6.2 percent of GDP).

Mr. Speaker, as part of government efforts to narrow the infrastructure deficit in the country, a total amount of GH¢5,967.3 million is allocated for capital expenditure. This represents a 31.3 percent increase over the projected outturn for 2013 and 17.7 percent of the estimated total spending for 2014.

About 24 percent of the total amount will be financed from domestic sources and the remaining from foreign sources.

Overall Budget Balance and Financing for 2014 Mr. Speaker, based on the revenue and expenditure estimates, the 2014 budget will result in an overall budget deficit of GH¢8,970.8 million, equivalent to 8.5 percent of GDP.

Mr. Speaker, Compensation of employees which comprises wages and salaries, allowances, pensions, gratuities and social security contributions by Government on behalf of its employees is estimated at GH¢10,597.3 million, representing 10.0 percent of GDP, 70.4 percent of non-earmarked tax revenue, 54.1 percent of non-oil tax revenue, and 52.1 percent of tax revenue. Of this amount, GH¢8,967.8 million (8.5 percent of GDP) is estimated for the payment of wages, salaries and allowances, while GH¢678.9 million, GH¢224.2 million and GH¢726.4 million is estimated for pensions, gratuities and social security, respectively.

Financing of the deficit will be from both domestic and foreign sources. Net Domestic Financing is estimated at GH¢4,117.9 million, equivalent to 3.9 percent of GDP, and financing from foreign sources are estimated at GH¢4,921.9 million, equivalent to 4.7 percent of GDP.

Expenditure on goods and services is estimated at GH¢1,529.5 million, representing 1.4 percent of GDP and is the

Mr. Speaker, Section 21(5) of the PRMA states that the ABFA shall be spent in not more than four priority areas in order to maximize the impact of the use of petroleum revenue.

DECEMBER 2013

2014 Petroleum receipts and distribution Mr. Speaker, the Benchmark Revenue is estimated at US$584.39 million (GH¢1,285.66 million). It is proposed that 70 percent or US$409.07 million (GH¢899.96 million) of the Benchmark Revenue be allocated to the ABFA and 30 percent or US$175.32 million (GH¢385.70 million) be allocated to the GPFs. Out of the amount allocated to the GPFs, it is further proposed that 70 percent or US$122.72 million (GH¢269.99 million) be allocated to the Ghana Stabilization Fund (GSF) while 30 percent or US$52.60 million (GH¢115.71 million) is allocated to the Ghana Heritage Fund (GHF).

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ECONOMY

Thus, total revenue and grants including oil for the 2014 budget are estimated at GH¢25,986.0 million, equivalent to 24.6 percent of GDP.

ECONOMY

Section 21(6) also states that the four priority areas where the ABFA is spent shall be reviewed every three years, with 2014 as the first year of review. We are proposing to this august House to consider and approve the following existing four areas for the period 2014-2016: • Expenditure and amortization of loans for oil and gas infrastructure; • Road and other infrastructure; • Agriculture modernisation; and • Capacity building (including oil and gas.

Mr. Speaker, in the medium term, Government has decided to spend the ABFA on the development of six major specific projects and to clear the pipeline of infrastructure projects.

POLICY INITIATIVES FOR 2014

as well as ABFA portion for amortization and infrastructure development. Other sources include: escrowed and on-lent funds from prior investments; private or public domestic and foreign funds from multilateral institutions and development banks; the capital markets (including our stock exchange); pensions and mutual funds (including social security and insurance funds); and other funds.

• GIF Debt Service Account (DSA): The GIF with assistance of the Bank of Ghana will set up and manage a Debt Service Account (DSA) for designated domestic and foreign Sovereign Debt. The purpose of the latter is to utilize the flows of foreign exchange such as ABFA to spur confidence in the markets and minimize foreign exchange exposures. All existing escrow and debt service accounts (eg. EXIM, CDB, BNDES) will be subordinated to the GIF- DSA provided the terms of existing agreements permit.

Mr. Speaker, the broad policy initiatives in this Budget have been designed to enable us consolidate our middle income status and deal with the new challenges of financing our development. The policy initiatives are presented in five areas, namely, Infrastructural Development, Private Sector/ SME Development, Fiscal, Social Intervention Policies, and Transparency, especially the fight against corruption, reflecting key priorities of Government.

• Project financing: The Board of the GIF will advise the Minister on viable projects to be financed by GIF, including those involving special purpose vehicles (SPV) such as joint venture (JV) and publicprivate partnership (PPP) projects. It is envisaged that GIF will issue special bonds to finance specific commercial projects. The GIF will be empowered to set up on-lending, escrow and other mechanisms for the purposes of pursuing and ensuring the success of its investments.

INFRASTRUCTURE DEVELOPMENT

• Guarantees and risk management: The establishment of GIF will lead to a review of Government‘s exposure to risks from borrowing and issuing sovereign guarantees. It is our intention to minimize the use of sovereign guarantees that are currently treated,automatically, as public debt in our Debt Sustainability Analysis (DSA) band and not as contingent liabilities. We are currently in discussions with the World Bank and African Development Bank (AfDB) on the appropriate classification of SOE and other guarantees.

Where guarantees are essential, we will maximize the use of third party guarantees such as MIGA guarantees and World Bank/AfDB partial and credit risk guarantees.

Ghana Infrastructure Fund (GIF) Mr. Speaker, under the able leadership of His Excellency President John Dramani Mahama, Government proposes to set up the Ghana Infrastructure Fund (GIF) to deal with the huge infrastructure deficit and to focus on strategic infrastructure that will lead to job creation and the growth of the economy.

• Nature of the Fund: GIF will be a quasi-fiscal body that will be chaired by the Minister of Finance and, in due course, pursue its own ― ratings‖ on the domestic and international financial and capital markets. Indeed, independent rating is a strategic move that Government will encourage to enable these enterprises to borrow on their own Balance Sheets or records.

• Private Sector Role: The GIF will focus on strategic infrastructure in partnership with the private sector. Currently, Ghana‘s financial and capital markets are constrained with limited availability of long term finance, both local and international, to support both the public and private sector infrastructure projects. The GIF will partner the private sector through linkages that include financing project SPVs, PPPs, mortgage finance and finance leases.

Additionally, the GIF will create investment opportunities for institutional investors including pension funds.

Mr. Speaker, the GIF is a response to the need to manage Ghana‘s limited but potentially expanding fiscal space; suboptimal classification and management of public debt; and difficulties in mobilizing funds, in particular, for infrastructure projects of a commercial nature.The linkages to the private sector are crucial since, to leverage private sector investment in infrastructure projects, it is necessary to vigorously pursue long-term quasi-fiscal institutions as well as banking and/or capital market solutions.

• Sources of GIF funds: The potential sources of funds for GIF includes appropriations

by Parliament, including the recent 2.5 percent increase in VAT,

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GHANA BUSINESS & FINANCE

DECEMBER 2013

ECONOMY

...and stakeholders react to ‘overambitious’ targets set in the 2014 budget statement Honourable Seth Terkper, Minister of Finance and Economic Planning recently presented the Government’s 2014 Budget Statement to Parliament. The Budget Statement which encapsulates the government’s economic policies and programmes for the 2014 fiscal year, as expected, has received mixed reactions from people from across the political spectrum in the country.

Whereas those sympathetic to the government have been quick in praising the government for coming out with such an ‘outstanding’ Budget statement with bold initiatives such as the Infrastructure and the SME Funds, political opponents of the government have been quick in dismissing the Budget document as containing programmes and targets that are unachievable, and at best, overambitious. Among other things, those who have cast doubts on the Budget Statement state that the government’s plans to reduce the budget deficit to 8.5 per cent is not feasible. But what do the ‘neutral’ stakeholders in the Ghanaian economy think of the 2014 Budget Statement?

GB&F sampled views and opinions from stakeholders in the Ghanaian economy ranging from economists to heads of civil society groups, on the programmes and targets set in the 2014 Budget Statement and how feasible some of these programmes are.

Reducing the Budget Deficit Honourable Seth Terkper in delivering the Budget Statement admitted government’s failure to meet its deficit target of 9 per cent for the year 2013. Perhaps it is against this backdrop that some watchers of the economy think that government might as well miss its set deficit target of 8.5 per cent in 2014.

Fitch Ratings agency,an international credit ratings agency is

DECEMBER 2013

“government should provide subsidies to the manufacturing sector as done to local companies in Nigeria.” one of such watchers of the Ghanaian economy that thinks government’s deficit target of 8.5 per cent is far-fetched. In a release issued after the Budget presentation by the Minister, the agency believes “…the pace of fiscal consolidation over the next two years will be slower than the government projects,” adding the Budget “aims for a very limited fiscal correction” and thus “We do not think it will effectively address the deterioration in government finances over the past two years that has substantially eroded Ghana’s creditworthiness.”

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ECONOMY

Dr. Joe Abbey of the Centre for Policy Analysis (CEPA) expressing his view on the Budget with specific reference to the deficit says “It’s not a question of just setting a target for the deficit; it is whether the target is concrete enough and whether it has a solid basis.” He adds further that “Bearing in mind what the business community is complaining about, I will like to see that expenditure rationalization is being treated with seriousness. Ghanaians are not happy with the value for money they are seeing, and we must take steps to assure them.”

“Government’s efforts at supporting Small and Medium Scale Enterprises (SMEs) with a GHC 50 million facility could be a total failure if it continues to rely on private banks to push its agenda.”

Job Creation It has almost become a tradition for successive governments to outline plans and programmes for job creation in their budget statements, and to further set out plans to create an enabling environment for the private sector to grow in order to employ more of the populace.

Thus when the Honourable Set Terkper in his Budget presentation was silent on governments plans for job creation, the ‘oversight’ or deliberate ploy by the government became conspicuous by its absence. It naturally became a rallying point for civil society groups and trade unions to reject the Budget Statement as insensitive to the plight of millions of Ghanaians struggling to eke out a living for themselves. Abraham Koomson, Secretary-General of the Ghana Federation of Labour in his reaction to the Budget Statement, downplayed the usefulness of the Budget document itself saying it was a mere “academic exercise, as has been over the years.” When pushed further to speak to the content of the Budget document, he was very critical of the failure of government to outline any concrete measures to create jobs. He believes “government should provide subsidies to the manufacturing sector as done to local companies in Nigeria.” This he says “will encourage industry to be competitive and employ more people as a result.”

On its part, the Trade Unions Congress (TUC) in a statement issued by its General Secretary, Kofi Asamoah, has lamented Government’s deliberate silence on job creation. Mr Asamoah says “In a characteristic fashion, the 2014 budget was silent on employment.” “Government has once again confirmed to

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Ghanaians that when it comes to employment it is a matter for manifestos and not a serious macroeconomic issue for its consideration” he adds.

New Initiatives to engineer growth One area in the 2014 Budget Statement that has received thumbs-up from a cross-section of the Ghanaian populace is government’s plans to set up two funds namely an SME and Infrastructure Funds to aid the growth of the SME and promote the expansion of the nation’s infrastructure respectively.

According to reliable sources, the SME Fund, for instance, could have as much as GHC 50 million as the seed money.

However, according to Sydney Casely-Hayford, a local Economist and financial consultant, “Government’s efforts at supporting Small and Medium Scale Enterprises (SMEs) with a GHC 50 million facility could be a total failure if it continues to rely on private banks to push its agenda.” Citing a failed strategy to boost agricultural exports through EDIAF as an example, he said “as laudable as EDIAF’s aim was, it has not worked because government has been relying on private banks.” He advises government to use nationally-owned banks like Agricultural Development Bank, Ghana Commercial Bank and National Investment Bank as the channel for disbursing the loans.This he believes, will “force the private banks to drop the commercial rates” as the difference between borrowing from a nationally-owned bank as against private banks will become obvious to SMEs. Kofi Bentil, Vice President and Strategy Manager of IMANI Ghana, an Accra-based policy think tank commenting on the Budget Statement, commended the introduction of a programme-based budget by government. He has however requested for clear indicators or set-targets and expected outcomes to charge various government heads and appointees to perform as expected with the available resources.

Contributing further he states that “the services sector for the past years has overtook other sectors in the economy as the leading contributor to the Gross Domestic Product (GDP) to exceeded its 2012 target of 7.7 per cent by 1.1 percentage points registering a growth rate of 8.8 per cent.” Against this development, he believes “the 2014 budget should focus on growing the services sector with a series of long-term strategies to transform the sector since the sector remains the largest contributor to the nation’s economic growth with a share of 50.0% of GDP, followed by 27.3% industry and agriculture 22.7% in 2012.” “There should be a concerted effort to support and grow the services sector by revamping the country’s infrastructure, whilst implementing direct policy-strategies on tax and regulations” he adds.

GHANA BUSINESS & FINANCE

DECEMBER 2013

BRAND GHANA

Ghana to tap into the South African experience in branding Panelist at a roundtable discussion on the competitiveness of Ghana have called for collective efforts to promote the Ghanaian brand. The panelists unanimously agreed that a national brand can never be realized if citizens are not ambassadors to promote it outside world. he program was organised by Brand Ghana in collaboration with its South African counterpart, Brand South Africa and focused on strategies to project and promote the positive aspects of the two countries as well as the continent as a whole.

Honourable Hannah Serwaa Tetteh, Minister of Foreign Affairs, said Ghana must learn from South Africa to appreciate and do things differently to change the fortunes of the country.

“Ghana must take advantage and brand itself as the first nation to gain independence in Sub-Saharan Africa and the most stable, peaceful democracy in Africa to enhance economic growth from” she stated.

She admitted that South Africa’s brand image is one of the most successful stories on the African continent and stressed the need to for all to learn from them to re-brand the country.

Honourable Tetteh noted that, it is the task of all Ghanaians irrespective of the political affiliation, religious background, or ethnic belonging to build the brand Ghana. “There is lots of issues-base stories going round that we do not have to wait to be invited before we write on,” she added. She noted that the uniquely welcoming and hospitable nature of Ghanaians would drive tourism and investment if capitalised as a tool for branding. “Customer service should be taken seriously in all public sectors as an organisational responsibility to improve on services to customers and the public”. She noted

and social interest stories and issues to drive tourism and economic growth.

Mr Miller Matola, Chief Executive Officer of Brand South Africa, stated that nation branding is a conscious effort by all in that nation. He explained that the critical elements of branding involves the collective effort and inclusion of all the citizenry.

“For brand Africa to takes its place globally, all hands must be on deck by consolidating our activities, learning from each other with the support of policy makers”. He stated Mr Mathias Akotia, Chief Executive Officer of Brand Ghana, noted that in Ghana, branding really shows who we are as a country and where have reached.

“It takes collective conscious efforts to make a country distinctive through leadership and we need to rally the support of all to get there,” he added. He reiterated the point that “we must adopt best media practice through sensitisation, modelling behaviours and consciously embarking on it to rebrand the nation and the continent as a whole.”

“Branding really shows who we are as a country and where we have reached. It takes collective efforts to make a country distinctive and we need to rally the support of all to get there,” he concluded.

Her Excellency Jeanette Ndhlovu, South African High Commissioner to Ghana, who was present at the event said the dialogue was to complement the work of both President John Dramani Mahama and President Jacob Zuma in spreading the message of Africa’s preparedness to open up for Foreign Direct Investments to propel socio-economic growth . She intimated that “Its time to tell our story in our own way.” “Over the years we have allowed others to tell our stories from their viewpoint for us but the time has come that we tell our own stories and let the whole world know that Africa is ready and capable to handle its own affairs and take its own destiny into its hands,” she added. She urged the media to desist from glorifying evil but rather focus on Africa’s success story and delve into human

DECEMBER 2013

GHANA BUSINESS & FINANCE

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ECONOMY

Sustaining the public wage bill while ensuring productivity

By Ayuureyisiya Kapini Atafori

It is the albatross, or the Sword of Damocles, or both hanging around and over the neck of the present government. Yes, you have guessed correctly: Single Spine Salary Structure (SSSS). Simply called the Single Spine, it aims to rationalize and re-adjust the pay structure in the public sector equitably, but more and more workers are calling and crying for ‘Double Spine.’ Presenting the 2014 Budget and Economic Policy to Parliament on November 19, Finance Minister Seth Terkper indicated that 479,497 out of the targeted 480,000 public workers have been migrated onto the SSSS. he implementation of the SSSS has been problematic. The Fair Wages and Salaries Commission (FWSC), the body administering the SSSS, and several public sector labor unions have been, and are still, on a collision course since they were migrated onto the Single Spine. Thus its implementation has been accompanied by walk-outs, protests, demonstrations, strikes and lawsuits. The thorniest issue is how to sustain the rising cost of the public sector wage. By the end of this year, about GH¢11 billion would have been expended on paying public wage earners. The gross public pay stood at about GH¢9 billion last September. The bill swallows 70% of annual government revenue, leaving a paltry 30% for other expenditure.

salary structure that the government is saddled with. The 2014 budget prescribes the steps the government will take to sustain the galloping bill. But the budget appears not to offer any concrete way out for ensuring that productivity in the public service improves commensurate with the increased pay. Yet the link between pay and productivity is one of the bulwarks of the SSSS. The short-to-medium term measures that the government would pursue to sustain the pay policy include weaning off 12 subvented agencies from the government payroll; and streamlining compensation issues relating to wages and salaries, allowances, pensions, social security and gratuities by setting up of a Compensation of Employees Unit under the Budget Division of the Finance Ministry.

“In addition, the Ministry has constituted a Compensation Committee with membership drawn from the Ministry of Finance, Controller and Accountant-General’s Department, the Fair Wages and Salaries Commission, and the Public Services Commission to advise on compensation issues,” said Mr. Terpker.

“the budget appears not to offer any concrete way out for ensuring that productivity in the public service improves commensurate with the increased pay.”

President John Dramani Mahama, in his 2013 state of the nation address in Parliament, expressed concern about the ballooning public sector wage.

President Mahama observed: “It is important to appreciate the fact that the personnel emoluments portion of the Budget has more than tripled in the last three years, from GH¢2.5 billion to about GH¢8 billion this year. This has been mainly due to the Single Spine Salary Scheme (SSSS).

We now spend a staggering 60.9 percent of our entire national revenue to pay public sector salaries.” This percentage is almost double the globally accepted prudent level of 30 to 35 percent.

“We now face the challenge of ensuring that the effect of the public sector pay reform does not constitute an unsustainable burden on public finances and on macro-economic stability.”

Besides the problem of sustaining the huge public wage bill, matching remuneration with productivity is one aspect of the

DECEMBER 2013

Another measure is for the government to implement the White Paper on Market Premium as recommended at the multi-stakeholder forum at Ho. To this effect, the government has directed the FWSC and the Ghana Statistical Service to undertake a Labor Market Survey to determine critical skills in short supply and their market premium, starting with the Health and Education sectors. cont’d on pg 28 GHANA BUSINESS & FINANCE

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ECONOMY

From January 2014, the existing interim market premium paid to some workers will cease and be replaced by market premium determined in consonance with the White Paper.

The government defined market premium as “an absolute amount paid only to employees with critical skills in short supply.” According to the budget statement, beneficiaries will be placed on the SSSS as soon as the survey is completed. The appropriate market premium values determined shall not be part of or indexed to wages and salaries of beneficiaries. But unions such as the Ghana Medical Association have already raised red flags about the announced application of the market premium, calling for immediate negotiations.

New Patriotic Party (NPP) Government was gingerly trying to implement the SSSS when it lost the 2008 elections to the then opposition National Democratic Congress (NDC). On taking the reins of power, the Atta Mills-led NDC Government seems to have taken the bull by its horns by issuing a white paper on the SSSS in November 2009. In the paper, the government would tackle the existing pay disparities within the public service; the rising cost of the public sector wage; the numerous public sector pay negotiations; and the link between pay and productivity. To facilitate the implementation of the SSSS, public service workers have been categorised into several groups, taking job similarities into consideration. Determining factors of this categorisation are education, The government will also training and other occupational/ “The government has also skills, streamline and bring sanity into career roles. Parliament passed the Fair decided to replace the the administration of allowances Wages and Salaries Commission Act to in the public service. The FWSC, create the FWSC. The implementation payment of the book and in collaboration with the Public of the SSSS begun in June 2010 after research allowance with a the government clinched an agreement Services Joint Standing Negotiation Committee, is working on the with public sector unions to defer the Research and Innovation harmonization and standardization commencement of the policy which was Facility with starting fund of Categories 2 and 3 allowances. scheduled for 2009. Though the SSSS “To ensure that this phase of the started in June 2010, the structure was of GH¢15 million.”

SSPP is sustainable, the FWSC and effective in January 2010. the Ministry of Finance will engage Organized Labour to ensure that the implementation of the categories 2 and 3 allowances After sustaining the bill, ensuring that increased productivity is is executed within budget constraints and is properly phased,” matched with improved salaries and wages is the next headache he said. of the government. “Mr. Speaker, linking pay to productivity is one of the phases in the implementation of the SSPP,” Mr. To further sustain the heavy pay bill, the use of Internally Terpker showed the way. “Mr. Speaker, it is now Government Generated Funds (IGFs) to pay salary supplements is to be policy to link pay to work and productivity in the public service. curtailed with sanctions and ensuring the efficient, effective This enjoins employers to pay for work done and compensate and lawful administration of IGFs using the warrant system. for increases in productivity of employees. In line with Section “The Commission will also collaborate with the Controller 168 (2 & 4) of the Labour Act of 2003, Act 651, Government and Accountant General‘s Department and the Head of will henceforth pay only for work done. To implement these Civil Service to carry out a national payroll survey that will policy directives, a national framework to link pay to work rationalize nominal roll with pay roll of each public service and productivity and productivity index in the public service institution. The objective is to clean the public service payroll will be developed by the Ministry.” He said the FWSC would and possibly reduce the Public Sector wage bill over time,” collaborate with the Public Services Commission (PSC) and stated the Minister. The government has also decided to replace the Management Development and Productivity Institute to the payment of the book and research allowance with a Research “expedite action on the modalities for the introduction of the and Innovation Facility with starting fund of GHC15 million.

Public Service-Wide Performance Management System.” He explicated that in line with the government‘s determination to Another measure for keeping up the pay bill is anchored on control the rising wage bill, the PSC has been mandated to recruitment: “From 2014, the wages and salaries vote of MDAs build a human resource database of employees to enable the and MMDAs in respect of recruitment and replacement of government effectively control the entry and exit of workers in staff in public sector institutions, will be subjected to budget public sector institutions. constraint. In this regard, the Ministry of Finance will collaborate with the Public Services Commission and Office of Can the government deal with the rising huge wage bill which the Head of Civil Service to ensure that due process, including is undoubtedly suffocating the economy? The single spine seeking financial clearance before undertaking recruitment and bores holes in macro-economic stability, and experts wonder replacement, are observed. Sanctions will be imposed on heads whether, with the present momentum, the pay structure could of institutions who do not follow the due process,” the Finance be sustained. What needs to be done is for the government Minister intoned. and public sector unions to sit down and negotiate realistically, dialoguing co-operatively, not aggressively, together to reach a The introduction of the Single Spine Pay Policy (SSPP), the consensus for the way forward for the sustenance of the SSSS bearer of the SSSS, was announced in 2007. The Kufuor-led and achieving increased productivity.

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BRAND GHANA & BRAND SOUTH AFRICA ROUNDTABLE DISCUSSION MOVENPICK AMBASSADOR HOTEL, ACCRA 25th NOVEMBER, 2013

2

3

4

1. L-R Hon Hannah Tetteh, Minister of foreign affairs , Her Excellency Jeannette Ndlovu, South African Ambassador to Ghana at the event. 3. Participants at the round table Brand Ghana/ Brand South Africa event 4. H.E Jeanette Ndlovu speaking at the Event 5. Hon Hannah Tetteh speaking at the event 6. Panellists at the event 7. Participants making a point at the event 8. Mr. Miller Matola (CEO Brand S.A), having a chat with a participant 9. Hon Hannah Tetteh responding to a question posed to her by a participant 10. Another participant making a contribution 11. Mr Serame Taukobong (C.E.O MTN Ghana), Mr Mathias Akotia, (C.E.O, Brand Ghana), Mr Miller Matola (C.E.O Brand South Africa),Mr. Humphrey Ayim-Darko (Exec.Director Petra & Investment Consult), Mr Ransford Tetteh (Editor, Daily Graphic)

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DECEMBER 2013

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FDI inflows into Africa will continue to grow - Moody’s Foreign Direct Investment (FDI) inflows into Sub-Saharan Africa (SSA) is projected to grow over the medium term, according to Moody’s credit rating agency. The trend is expected to be a continuation of the positive investment inflows into Africa since the the year 2000. Africa currently attracts less than 5% of the global FDI projects in spite of the fact that the continue remains one of the regions in the world where returns on investments are still high. These projects and findings are contained in a report released by Moody’s titled “International Sovereign Issuance in Africa 201314: A Rating Agency Perspective.”

Although most of the FDI into Africa is directed towards the extractive industries, as is the case in Congo, Mozambique, etc. according to the report, “FDI could also be used to finance the infrastructure gap in Africa as in the case of other regions such as South Asia which although started at a similar level in 2001 as Africa, the region was able to attract substantial amount of FDI in energy and transport.”

In the report published in October 2013, Moody’s believes that Governments in Sub-Saharan nations can do more to attract its deserved share of FDIs by “improving the business environment, as well as being a catalyst for those flows, especially through Public Private Partnerships (PPP). For instance, infrastructural projects financed through PPP in Sub-Saharan Africa remains limited in size compared with other emerging markets: the stock of Private Participation in Infrastructure (PPI) represented about $100SOVEREIGN billion&over 2001SUPRANATIONAL 2011, or 8% of total PPI globally. PPI presents opportunities as it leverages the private sector’s experiences and skills to develop experiences and skills to develop and maintain infrastructure, and allows the risks associated with and infrastructure, andtwoallows the inrisks projectsmaintain to be shared. The slow development highlights key constraints SSA: lowassociated institutional capacity and the lack of adequate PPP regulation. Most of the FDI is directed towards the extractive with projects to be shared. industries, as is the case in Congo, Mozambique, etc. However, FDI could also be used to finance the infrastructure gap in Africa. Although they started at a similar level in 2001, other regions, such as South Asia, were able to attract substantial amount of FDI in energy and transport, as shown in the chart below.

Table 1.0 EXHIBIT 23

Private Participation in Infrastructure (2002-12, % of GDP) Energy

Telecom

Transport

Water and sewerage

25 20 15 10

Meanwhile FDI flows to Africa decreased by 5% in the first half of 2013, compared to the same period in 2012. Two of the continent’s five sub-regions North Africa and Southern Africa recorded positive growth rates. Flows to Algeria and Morocco rose, and FDI inflows to South Africa resumed their growth. In Sub-Saharan Africa, Nigeria attracted inflows of US$2.6 billion, in the first six months of the year less than half last year’s record US$7 billion. However, Nigeria’s inflows are expected to rise sharply on the back of recent efforts to attract industrial and manufacturing investments and its market growth prospects.

Traditionally, the trading partners of the continent have remained the biggest contributors of FDI flows but China is gradually emerging as a major source of FDIs for developmental projects in Africa and this is expected to grow the continent’s share of FDIs in coming years. China’s sudden interest in SubSaharan Africa has been spurred on mainly by its insatiable demand for natural resources which abound in the African continent and to catch Africa’s eye and to stay ahead of the competition, it has had to invest substantially in infrastructure projects across the length and breadth of the continent. In Ghana, China’s footprints are seen in the granting of the USD 3 billion to finance gas infrastructure projects and transportation facilities among others.

5 0 East Asia and Pacific

Source :World Bank PPI Database

MENA

Europe

LatAm

SSA

South Asia

Ghana‘s share of FDI inflows declined during the first half of 2013 and this is in comparison to the same period last year.

Traditional trading partners remain the largest contributors of FDI flows. However, it is important to note the increase in flows from emerging countries, such as Malaysia (A3 stable), South Africa or China, 14 and we expect that the trend will continue as Africa becomes more integrated within the global trade framework. This development led Mauritius (Baa1 stable) to position itself as an 32 BUSINESS FINANCE investmentGHANA gateway between Asia &and Africa further to extending its network of double tax treaties in Africa. Mauritius hopes to replicate its success vis-à-vis Asia with Africa (for instance, 40% of FDI towards India went through Mauritius).

DECEMBER 2013

(UNCTAD) which states that Ghana’s FDI inflows

by PPI Database Sourcedeclined :World Bank

Liberia 4% 11 percent in the period under review.

IT 23

LatAm

20

France

563

São Tomé and Príncipe

2%

USA 46 Traditional trading partners remain the largest contributors of FDI f UK to note increase in flows from emerging countries, such as Malaysi around 8 per cent of its Gross Domestic Product (GDP)the but it Mozambique 4% 2,077 14 that effectiveWater reforms especially the that and in sewerage Energyis pertinent Telecomto noteTransport China, and we expect Malaysia that the trend will continue as Africa becomes Congo, DRC touch directly on means of doing business in the country could 8% South Africa 2,066 global trade framework. This development led Mauritius (Baa1 stable) see Ghana increasing its share of the FDI inflows that come to Seychelles 20% China 133 investment gateway between Asia and Africa further to extending its n Sub-Saharan African region.Some policy decisions by managers Niger 1%of the nations economy tend Germany to stall progressAfrica. and makeMauritius it even786 hopes to replicate its success vis-à-vis Asia with Afric more difficult to do business in the country.

Sierra Leone 2% 371 Switzerland towards India went through Mauritius).

Currently, Ghana’s share of FDI inflows into Africa just Congo-Brazaville ate Participation in Infrastructure (2002-12, % ofis GDP) 3% 2,482

5

0

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TRADE & INDUSTRY

10 towards went Mauritius).highlights ects to be India shared.

Thethrough slow development two key constraints in SSA: low institutional city and the lack of adequate PPP regulation. Most of the FDI is directed towards the extractive 25 Congo, Mozambique,5etc. However, EXHIBIT 26 ustries, as is theEXHIBIT case in FDI could also be used to finance the The country’s Foreign Direct Investment inflows decreased to s Top 10 African FDI Receipients FDI by Countries Originsuch as astructure1.5gap in Africa.

Although theylaststarted at billion a similar level in 2001, otherof regions, billion slightly lower than year’s0 1.6 (Avgdollars, 2008-12, % GDP) % of Total FDI sent to Africa dollars.This the latest Global investment h Asia, were ableistoaccording attracttosubstantial amount oftrends FDI in energy and transport, as shown in the East and Pacific MENA Europe 0 10 40 Asia 20 30 % GDP US$ mn monitored by the UN Conference on Trade and Industry 8,000 0 5 10 15 t below.

16%

Equatorial Guinea

15%

Madagascar

Table 1.1 EXHIBIT 24

0

1,533

950 EXHIBIT 25

Source: UNCTAD Top 10 African FDI Receipients

Singapore

EXHIBIT 26

Source: UNCTAD Top 10 African FDI Receipients

(Avg 2008-12, US$ mn)

5

Italy

FDI by Coun

(Avg 2008-12, % GDP)

% of Total FDI s

0

2,000 4,000 6,000 8,000 % GDP

10

20

40 US$ mn

30

the country “made starting 0DI compared to other countries, its role should be considered in coordination with other external financial flows, such as grants and Liberia Nigeria 4% France 563 a business more difficult by e significance of Pacific China as a financier East Asia and MENA in Africa.

Europe LatAm SSA South Asia São Tomé and Príncipe South Africa 2% USA requiring entrepreneurs to 46 obtain :World Bank PPI Database Congo-Brazaville Egypt 3% UK a tax identification number2,482 prior to SPECIAL COMMENT: INTERNATIONAL SOVEREIGN ISSUANCE IN AFRICA 2013/2014 Mozambique Libya 4% Malaysia 2,077 ditional trading partners remain the largest contributors ofcompany FDI flows. incorporation.”

However, it is important 0

Congo, DRC

Ghana

8% South Africa ote the increase in flows from emerging countries, such as Malaysia (A3 stable), South Africa2,066 or Congo-Brazaville Seychelles For instance, according to the World Bank’s Doing China na, 14 and we expect that the trend will continue20% as Africa becomes more integrated within the133 toBusiness Report 2013 “Ghana added to the time required import Algeria Niger 1% al trade framework. This development led Mauritius (Baa1bystable) to position itself as an and786changing its Germany increasing its scanning of imports Morocco Leone system.” Again, the report 371 customs clearance stment gateway between Asia and Africa further2%to extending itsSierra network of double tax treatiesstates in that theSwitzerland country “made a business more difficult by requiring 16% Asia with Equatorial Guinea 1,533 Italy ca. Mauritius Mozambique hopes to replicate its success vis-à-vis Africa (forstarting instance, 40% of FDI entrepreneurs to obtain a tax identification number prior to Congo, DRC 15% Madagascar 950 Singapore ards India went through Mauritius). company incorporation.” Indeed, the country fared worse in SOVEREIGN & SUPRANATIONAL

Source:the UNCTAD Source: issuances are helping to finance Africa’s still-large developmental infrastructure 2014 “EaseInternational of Doing Business” rankings placingand 67 out of UNCTAD

Source: UNCTAD

needs

infrastructure was the key reason recent issuances, and we expect that the surveyed asprojects against 62 inbehind 2013.

Ghana’s current EXHIBIT189 26 economiesFinancing rising trend in sovereign issuances will continue for the foreseeable future because of the region’s

EXHIBIT 25

challenges brought on by a crippling wage bill and FDI byeconomic Countries of Origin

Top 10 African FDI Receipients

hugeFDI fiscal deficit makes it difficult for the country to continue 14 (Avg 2008-12, GDP) % of Total sent to Africa Despite the%low level of Chinese FDI compared to other countries, its role should be considered in coordination with other ex to borrow to carry out its developmental projects. Creating concessional lending, a financierenvironment in Africa. for an increased FDI inflows thus 0 supporting 10 20 the 30 significance 40 US$ mnof China as a conducive 0

Seychelles

2,066

South Africa1.2 Table

133

China

EXHIBIT 10

Effect of Hypothetical $500mn Eurobond Issuance

2%

Sierra Leone

371

Switzerland % of GDP

16%

Equatorial Guinea

15%

Madagascar

950

Congo, DRC

Germany

Uganda

786

Angola

Niger

Nigeria

1%

1,533

0.1

0.2

0.4

1.1

1.1

1.2

1.8

2.2

2.3

2.6

3.2

3.5

4.1

% of Gov. Revenue

0.5

0.6

1.0

4.2

7.1

5.5

7.3

8.2

9.6

10.0

14.1

8.7

11.0

14.6

18.8

Italy

0.3

1.0

1.2

2.2

4.7

2.1

3.5

3.9

10.0

7.5

6.2

6.2

6.7

7.4

8.3

376.0 283.7

125.6

46.5

46.3

Increase in Debt Level (% change)

1.6

1.8

Memorandum:

Nominal GDP (U$ bn, 2013F)

Singapore Gov. Revenue (% of GDP, 2013F) Gov. Debt (% of GDP, 2013F)

Source: UNCTAD

Institutional capacity also limits the capability of African issuers to mobilize resources through the international markets, as it requires a certain degree of transparency and sophistication required by international investors. The scarcity of African paper is likely to be magnified due to the growing demand from international investors that are seeking exposure to African debt.

Mauritius

20%

Malaysia

Senegal

Congo, DRC

2,077

Mozambique

8%

9

Zambia

Mozambique

2,482

20

Cameroon

4%

46

Côte d’Ivoire

Congo-Brazaville

Tanzania

3%

563

15

Ghana

and Príncipe 18São Tomé OCTOBER 8, 2013

Ethiopia

2%

10

Kenya

Liberia

4%

5

In SSA, lack of economic and institutional developments often limits African issuances

remains the surest to receiving theAfrican needed resources From anbet international investor’s perspective, bond issues financial are relatively small in size, which compound a structural scarcity steaming from the inability of most SSA countries to issue more on a France sustainable basis. for development.

Indeed as the table below shows, any further Only a few countries could raise a $500 million Eurobond internationally without distorting their SPECIAL COMMENT: INTERNATION USA by Ghana borrowing could bring the country precariously close economic and financial equilibrium. To illustrate this, we compare a potential $500 million Eurobond with GDP, general government revenue and the debt of African governments (see Exhibit to theUKInternational Debt Sustainability of$500 not more 10). For illustrative purposes, we present the countries for Ceiling which a hypothetical million issuance would represent below 5% of GDP, and a debt increase below 10%. Existing SSA Eurobond issuers and governments that expressed an interest in issuing internationally are among this sample. than 60 per cent of GDP.

South Africa

0 % GDP

substantial infrastructure needs. Domestic resources (limited domestic savings and size of the domestic capital markets) remain insufficient to fund long-term projects. For instance, in 2013, the proceeds of Rwanda’s bond issuance were earmarked for infrastructure projects, such as financing the development plan for the national airline and for a hydro-power project. The African Development Bank (AfDB) estimates that the cost of addressing Africa’s infrastructure needs is around $90 billion annually. AfDB research 8 has highlighted that such deficiencies constrain per capita growth by at least 1%. (For more information on the infrastructure issue in SSA, see our report entitled Closing the Infrastructure Gap: Challenges & Prospects for Sub-Saharan Africa Sovereigns)

28.3

28.1

21.4

19.4

15.8

14.4

27.8

27.4

40.4

25.9

15.2

21.2

21.4

21.5

18.5

21.6

16.6

29.6

28.7

23.8

21.9

42.7

17.9

32.8

47.9

23.0

56.6

42.7

44.9

31.9

45.4

17.7

28.7

23.1

37.6

41.3

47.0

47.2

50.0

12.1

Source: UNCTAD Source: IMF, Moody’s

8 9

11

African Development Bank, Africa’s Infrastructure: A Time for Transformation, Nov 2009 Note that it does not correspond to any normative view or threshold. It is for illustration only.

OCTOBER 8, 2013

SPECIAL COMMENT: INTERNATIONAL SOVEREIGN ISSUANCE IN AFRICA 2013/2014

DECEMBER 2013 GHANA BUSINESS & FINANCE mpared to other countries, its role should be considered in coordination with other external financial flows, such as grants and ficance of China as a financier in Africa.

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Slow pick up for businesses towards Christmas festivities

By Oppong Baah

Christmas celebration made its way to the Ghanaian soil in 1482 when the Portuguese, without a land title or building permit, put up a castle, hoisted their flag and without due regard to the sensibilities of the local people changed the name of the town from Edina to Elmina. Make no mistake about it, the Portuguese were not on a leisure trip but a business, wealth-searching enterprise, that would better the lives of not only themselves but also their compatriots back home. To ensure that they achieved their objective with ease, the white imperialists embarked on what they termed a civilization of the natives mission which had christian evangelization and formal education components.

Under the christian evangelization popped up the celebration of christmas which has been with the people ever since.

Though Christmas celebrated on December 25th is theologically meant to be a day of solemn religious activities all geared towards the glorification of Jesus Christ, the God-man, who sacrificed his life on the cross to redeem sinful man from eternal doom and separation from his maker, Jehovah, it has, through the years and with business manipulations turned into a period of serious business undertakings and a time to amass wealth.

Worldwide, the Christmas festivity is a serious business worth billions of dollars. For many businesses, particularly, those involved in retail and hospitality, the festive season is one of the busiest times of the year, with consumers bingeing on good cheer, splurging on presents for loved ones and scavenging for deals in the postchristmas sales.

In 1931, for instance, Coca-Cola Corporation contracted the Swedish Sundblom to create a coke-drinking Santa Claus (Father Christmas).

Sundblom modelled his Santa Claus on his friend, Lou Prentice, chosen for his cheerful chubby face.

The Corporation insisted that Santa’s fur-trimmed suit be brighter, Coca-Cola red. And Santa was born – a blend of Christian crusader, pagan god, and commercial idol.

The challenge for many businesses is making sure they are properly stocked. For others it mean sluggish growth, poor profits, staff shortages and late payments.

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SMEs without decent levels of working capital can find themselves in serious difficulties. Their takings in the run-up to Christmas are wiped out by rent payments on the 25 of December and cash flow is subsequently very slow as customers’ payments arrive in dribs and drabs.”

Time is money, the sages say, but to the Ghanaian Christmasshopper, the preChristmas business hustle is yet to reach its climax.

According to business observers, this year’s Christmas by all indications will not be bereft of the hustle and bubble exchanges between traders and customers. Despite the fact that trading activities have not seen any meaningful upward thrust, store and shop owners, and traders of all categories are not sitting on their oars to be overtaken by events – they are stockpiling their warehouses with goods.

Aunt Esi, a cloth seller at Makola says; “It is always like that in early December. The customers rush to buy as the festival closes in. Many of them wait until the last hour hoping against hope that prices will fall. Christmas shoppers are late buyers.”

Mr. Johnson Amaning, a forex bureau manager, commenting on how the traders were preparing themselves for the Christmas crunch indicated that “we are hard hit by the lack of US dollars.

Officially, one US dollar is equivalent to GHC2,0571 but due to the rush, the Gao people sell one US dollar for GHC2.340 to the traders. The traders need dollars to import more goods to satisfy their customers”. A Kente cloth dealer for over two decades, Maame Serwaa, has this to say: “Many colourful and prominent activities like weddings and celebration of marriages that need special attires like Kente take place during the Christmas festivities so I am stocking my store with all types of Kente cloths that have customer appeal.”

Though the day is still young, there seems to be noticeable upward changes in the prices of almost all commodities. Sachet water has moved from between GHC1.20 and GHC 1.50 per bag to GHC 1.50 - GHC 1.80 per bag; a loaf of bread sells between GHC1.20 and GHC 7.00; the price of a tin of Milo has catapulted from GHC 6.50 to between GHC 7.00 and GHC 7.50; the price of a Kente cloth (female size) has jumped from GHC 250.00 to GHC 400.00 while prices of local foodstuffs have also gone up.

According to market watchers, an issue that may have a serious impact on prices of goods this Christmas season, is a court case in far away Abuja –ECOWAS Community Court of Justice.

Nigerian traders in Ghana have dragged the government of Ghana to the sub-regional court for the enforcement of a new Ghana Investment Promotion Council Act put in place in July, 2013. The traders from the land of Niger and Benue

DECEMBER 2013

Rivers are contending that the Act is in contravention of the ECOWAS Protocol on Free Movement of Goods and People and are praying the Court to intervene and stop Ghana from continuing with its implementation and enforcement. Aside barring foreigners from engaging themselves in retail business in the country’s markets, the legislation has raised the minimum capital for foreigners wishing to do business in the country from US 300,000 to US 1 million in cash or goods.

Though Mr. George Ofori, President of the Ghana Union Traders Association (GUTA), recently rubbished the action of the ECOWAS brothers and sisters to ‘BUSINESS FINDER’ with assertion that “until ECOWAS has one common law directing trade in the region , the laws in the respective countries must continue to work to protect the indigenous traders in the host country”, market analysts are not enthused by this. They believe that the estimated 2.5 million Nigerians in Ghana, most of whom are into retailing business mostly in the markets, do a yeoman’s work in making goods affordable to customers.

Kofi Emmanuel, a mobile phone seller at the Kwame Nkrumah Circle said “the earlier the court case is resolved the better for small scale sellers like me. Their phones are cheaper than those sold by Ghanaians and we buy from them on credit.”

Imputing to Emmanuel’s lamentation, Auntie Dede, a trader at Kantamanto, blurted that “without those people (Nigerians) prices of goods would be too high for the ordinary customer.

Just wait and see what happens this Christmas season.”

Supportively, Baba Musa chipped in: “I always buy my lace materials from the Nigerians. They have a nose for good lace materials and they also sell cheap.”

Time is money, the sages say, but to the Ghanaian Christmasshopper, the pre-Christmas business hustle is yet to reach its climax. Chaotic vehicular and human traffic scenes are yet to manifest themselves strongly in the country’s main shopping centres allowing commuters fairly easy movement. Missing conspicuously is the impressive display of Christmas items at every place possible including shoulders of streets and roads.

Also, seemingly absent is the perpetual fracas – the alleged takeaway of customers – that exist between shop owners and street hawkers.

As the days roll by, both the traders and street hawkers in unison lament the low sales in the system, pointing out the window-shopping attitude of customers in anticipation of a later-day reduction sales. Like law that favours the vigilant but not the indolent, businesses cash in on customers’ tendency to enjoy themselves at Christmas and make hay while the celebration lasts by raking in huge sums of money.

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In an article for the ‘EVENING STANDARD’, David Prosser writes that: “ Many SMEs struggle with cash flow difficulties after being hit by rent demands on Christmas Day and delays in customer payments.

VODAFONE

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VODAFONE GHANA LAUNCHES ‘RED’ CAMPAIGN 1

5

1. Funny Face and Anita Erskine 2. Guests at the ‘Red’ Campaign 3. Funny Face interacting with a Vodafone staff 4. l-r Harris Broumidis, CEO of Vodafone Ghana and Utche Ofodile, Chief Marketing Officer of Vodafone Ghana 5. unveiling the ‘Red’ campaign 6. Funny Face and staff of Vodafone Ghana 7. cross section of guests

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DECEMBER 2013

INTERNATIONAL POLITICS

The rise of China’s influence in Africa and the decline of the West Xi Jinping, Chinese President

he African continent is increasingly becoming the global common hub for doing business. A continent which not long ago was described as a ‘hopeless continent’ have risen above all odds to actually show the potential that it possesses. Africa’s economic structural reforms have shown a strong resilience following the global economic crisis in 2008 by rebounding back very quickly, and looking more boisterous, going forward.

The economic fundamentals are clearly in favour of Africa and just what exactly do I mean by that?__I am talking about the potential, the capacity; the zeal and the robust economic posture of continental Africa. The numbers are clearly in favour of Africa with steadier exchange rates, robust commodity prices, increased private capital flows and modest inflation. Africa has got a very good fiscal story with debt to GDP ratios at the sovereign level which are no where near the burden of what is seen in Europe, the United States and other parts of the world.

Exports are booming and export markets have become more diversified. Foreign direct investment has increased by a factor of six over the past decade. Private entrepreneurs have emerged as a dynamic force for change, driving innovation and transforming outdated business models. There is an emergent middle class, although its size is often exaggerated. For the first time in over a generation, the number of people living in poverty has fallen. Fewer children are dying before their fifth birthday and more are getting into school.

However, there is a growing schism between the relationship of Africa with the West (US). I watch this debate with much enthusiasm and moreover, I expect this to be the case especially looking at the increasing awareness in and on Africa in the past decade.

Africa has had 50 years of development partnership with the West and even though still continues to, but really, there is not much change experienced on the continent. This has sent a lot of frustration shared by people not only on the African continent but by people in the West as well. Questions are being thrown at the West as to why after several years and several billions poured into Africa, there has not been a significant change on the continent. This and other questions are very legitimate to be tabled before both the donor West and recipient Africa.

The most intriguing aspect is that, Africans themselves are up on their toes and asking questions as to whether they are better off without the West/traditional donors or are there alternatives to this model. Can we as Africans form a different development partnership which can bring us the change that we so seek?

DECEMBER 2013

These questions have led Africa to sit at the same table with China, the new development partner. The China-Africa relation dates back to the 1960s and 1970s. But really, the relation came to the fore in 2006 when 48 African leaders attended a joint forum in Beijing. The Forum on China – Africa Cooperation is the name of the meeting between the People’s Republic of China and the states of Africa. There have been five summits held to date, with the most recent meeting having occurred from July 19 – 20, 2012 in Beijing, China.

In 1980, the total Sino-African trade volume was US$1 billion.

In 1999, it was US$6.5 billion and in 2000, US$10 billion. By 2005, the total Sino-Africa trade had reached US$39.7 billion before it jumped to US$55 billion in 2006, making China the second largest trading partner of Africa after the United States which had trade worth US$91 billion with African nations. In 2010, trade between Africa and China was worth 114 billion and in 2011, US$166.3 billion. In the first 10 months of 2012 it was US$163.9 billion. Currently, there are an estimated 800 Chinese corporations doing business in Africa, most of which are private companies investing in the infrastructure, energy and banking sectors.

At the level of attitude, China sees its interest in development as directly linked with Africa. Of course, that is what has necessitated the constant engagement between African countries and China in the last decade. China has a huge population to feed; talk of potable water, arable land, oil, minerals etc.

China therefore sees Africa as the best destination to meet the increasing demand domestically.

Nonetheless, since China began seriously investing in Africa, it has been routinely cast as a stealthy imperialist with a voracious appetite for commodities and no qualms about exploiting Africans to get them. It is no wonder that China has received criticism from all over, especially from the US and UK. Despite all the euphoria, China’s motives for investing in Africa are actually quite pure and very visible. The increasing infrastructure development is quite visible, and their quest to offer support to spur economic growth on the continent is a course worthy of mentioning.

Paul Frimpong is a Policy Analyst at CEPA and is also a Chartered Economist (ACCEGlobal) who writes on the macroeconomy and global affairs. He is also an African Affairs Analyst and Emerging Markets Strategist Tel: +233 -241 229 548 Email: py.frimpong@yahoo.com/ py.frimpong90@gmail.com

GHANA BUSINESS & FINANCE

37

AVIATION

Uneasy times for Ghana’s aviation industry

By Martin-Luther C. King

Uneasy times threaten to truncate the fortunes of Ghana’s domestic aviation industry as some local carriers threaten to pull out of the country. The combination of dwindling number of passengers and a widening tax net now conspire to make the country unattractive for indigenous airline operators.

any operators also worry that the business environment in the country is generally not friendly for private investors. “In a market where airlines don’t have up to a million passengers per annum, you have high cost of operation and everybody loses money. If you look at last year with the number of passengers airlifted by four airlines, each aircraft carried with an average of just about 36,000, which is nothing compared to domestic airlines in the UK which carried about 1.4 million passengers,” observed Kwaku Antwi-Boasiako, chief operating officer of Antrak Airline, one of the domestic airlines looking for better options outside Ghana.

Authority (NCAA). The airline operators want to locate to Ghana in a bid to stay in business. The Nigeria Civil Aviation Authority had imposed a new fee of $400,000 on foreign registered and $300,000 on Nigerian carriers per trip. The move had angered airline operators in the country who say the latest development is not in tandem with global practice.

For Ghana’s airline operators, the high cost of aviation fuel as well as a growing list of local operators being given the nod to operate among others was reason for their threats to pull out.

For their Nigerian counterparts however, the imposition of a new tariff by the Nigeria Civil Aviation Authority of $400,000 and $300,000 for foreign registered and Nigerian carrier per trip is the Poor aviation infrastructure, reason for the threat. The latest especially the lack of runway imposition means Nigerian airline operators are charged that amount lights at the regional airports, for every take-off they make.

Ghana’s aviation industry faces many challenges. Key among them is high cost of aviation fuel, deplorable runways at key airports and high insurance levies on vehicles that go on the tarmac. Specifically, operators has meant that domestic have fingered the Ghana Airports The new fee also affects private jet Company Limited (GACL) as the carriers must schedule their owners who engage in unscheduled, major culprit, not least because of or charter operations. Aside this its alleged imposition of arbitrary flights between 6am and 5pm fresh charge, the operators are also levies without any due consultation local time every day. to pay navigational, landing and with them. “The GACL does things parking charges, passenger service without recourse to us. They don’t charge and 5 per cent of the total understand that they are there to support us. They are loading revenue made if the flight is chartered. Industry players in costs to the industry, and it is all because there is a lack of Nigeria say the development will see airline operators move coordination of policy in the aviation sector,” laments Africa their operations to Ghana where the charges are not only World Airlines (AWA)’s Chief Operating Officer, Mr. Apiigy moderate but reasonable.

Afenu.

But Ghana’s domestic aviation, comparatively, has seen a boost The GACL in recent times required of domestic operators to in the last half-decade, with the number of licensees growing increase the insurance policy on their vehicles operating on from two to five. Starbow, Africa World Airlines and 540 the tarmac from US$500,000 to US$1million, a move that are among the recent entrants into the industry. Antrak and incensed some local operators. There are also the taxes paid on CityLink have held their licences for more than a decade. The spare parts imported by domestic airlines, while foreign carriers latter however has suspended its services because of operational enjoy tax-free importation. challenges. The operators fly to the four major domestic airports in the country—Kumasi, Sunyani, Tamale and Takoradi— But even as Ghanaian airline operators are setting their sights from Accra. outside Ghana in search of better business environments, their Nigerian counterparts are, however, threatening to move their Poor aviation infrastructure, especially the lack of runway operations to Ghana over the imposition of new tariffs by the lights at the regional airports, has meant that domestic carriers country’s aviation regulatory body the Nigeria Civil Aviation must schedule their flights between 6am and 5pm local time

38

GHANA BUSINESS & FINANCE

DECEMBER 2013

AVIATION

FLIGHT SCHEDULES Airline

Service

AC

Origin

GMT

Code No. TYPE

SUNDAY Air Mali

I5

413

CR2

Bamako

16:05

British Airways BA

081

772

Heathrow

20:40

Delta Airlines

DL

026

767

New York

10:55

KLM

KL

589

332/333 Amsterdam 19:55

MONDAY British Airways BA

081/078

KLM

589/590 332/333 Amsterdam 19:55

KL

772

Heathrow

20:40

TUESDAY

every day. Limited space at the terminal buildings in Kotoka International Airport (KIA) and the four regional airports is also among the concerns of the industry.

British Airways BA

Ghana is served by a number of domestic airlines including Africa World Airlines, with daily flights to and from Kumasi and Tamale; Antrak Air, with reliable daily flights to and from Kumasi, Sunyani, Takoradi and Tamale; Fly Africa 540, with flights to Kumasi; Starbow, offering flights to and from Accra and Kumasi, Tamale and Takoradi; and, Aerogem Aviation, which operates cargo and charter flights.

WEDNESDAY

Ironically, expectations that the country’s new oil economy would spin-off in a lucrative Accra-Takoradi route for domestic airlines has not quite materialized as that route has rather become very expensive for most domestic carriers to operate due to low passenger patronage and load factor.

Delta Airlines KLM

As a result of the burgeoning air traffic flow that greeted the early days of the oil discovery in the Western Region in 2007, the market for domestic flights to Takoradi, the capital city of the Western Region, grew sharply, mostly with the sudden growing interest of the business community in the region.

Domestic and regional airlines including CityLink, Antrak Air, Starbow and Fly 540 started daily flights to Takoradi, using the Takoradi Military Air Strip as their temporary landing port.

However, the number of airlines plying the route has since reduced from four to two. Even then, the two airlines, Starbow and Antrak, mostly ply the Accra-Takoradi route to and fro, almost empty though they still had to pay full cost for their daily operations.

Ghana’s aviation industry, with an average growth-rate of 10 percent, is one of the fastest growing and most competitive in the West African sub-region. Total passenger output grew from 0.6million in 2000 to 1.8million in 2011. Passenger traffic into the country is expected to hit 6 million by 2015.

Such an encouraging pace of growth makes Ghana’s aviation industry one of the fastest-growing and the most competitive in the West African sub-region, driven mainly by the strong growth of the country’s economy. But with recent rumbles in the sector, a question mark seems to have suddenly appeared over its hitherto bright and flourishing prospects.

DECEMBER 2013

Delta Airlines

DL

KLM

KL

081/078

772

Heathrow

20:40

26/7

767

New York

10:55

589/590 332/333 Amsterdam 19:55

British Airways BA

081/078

KLM

589/590 332/333 Amsterdam 19:55

KL

772

Heathrow

20:40

THURSDAY British Airways BA

081/078

772

Heathrow

20:40

DL

26/7

767

New York

10:55

KL

589

I5

413

CR2

Bamako

09:50

British Airways BA

081

772

Heathrow

20:40

Delta Airlines

DL

26

767

New York

10:55

KLM

KL

589

British Airways BA

081

772

Heathrow

20:40

Delta Airlines

26

767

New York

10:55

332/333 Amsterdam 19:55

FRIDAY Air Mali

332/333 Amsterdam 19:55

SATURDAY

DL

South African Airways (Accra to Johannesburg) DAYS Monday

TIME (departure)

Arrival

22: 30 pm

6:30 am

Tuesday

22: 30 pm

6:30 am

Wednesday

22: 30 pm

6:30 am

Thursday

22: 30 pm

6:30 am

Friday

22: 30 pm

6:30 am

22: 30 pm

6:30 am

22: 30 pm

6:30 am

Saturday Sunday

Source: http://www.ghanaairports.com.gh/FlightSchedules.htm

GHANA BUSINESS & FINANCE

39

INSURANCE

Ghana’s motor insurance industry

- growing amidst challenges

By Oppong Baah

“Due to the number of insurance companies and the rush for business, companies do not have the time to inspect documents of vehicles like roadworthy certificates but go ahead to insure even dilapidated vehicles based on the normal charge, in some cases even giving discounts�

The advent of the insurance industry in the country is synonymous with the setting up of Enterprise Insurance Company Limited (EIC). Enterprise Insurance takes its root from the Royal Exchange Assurance Corporation of the United Kingdom (UK) which started business in Ghana (the then Gold Coast) in 1924. In 1952, after 28 years as an agency, the Royal Exchange Assurance registered as an insurance company in the country to provide the full complement of life and non-life insurance business. During the period, another UK insurance firm, Guardian Assurance Company Limited (GAC), also opened offices in the country. The SIC Insurance Company which has its roots from the Gold Coast Insurance Company came to existence in 1955. It was renamed Ghana Insurance Company in 1957, when Ghana attained independence. In 1965, a landmark legislation was passed to ensure enhanced participation of the indigenous people in the insurance industry. In accordance to the Insurance Act of 1965 (Act 288), Section 9, all non-domestic insurance firms were barred from insuring Ghanaian lives. In 1972 further changes occurred in the industry with the promulgation of Insurance (Amendment) Decree, NRCD 95, which mandated the selling of forty per cent shares of foreign owned companies to the

40

Ghanaian public. Also in another legislation in 1976, SMCD 31, the government acquired twenty per cent shareholding in all foreign insurance firms registered in Ghana.

In accordance with the provisions of the current legislation, Insurance Act 2006, the insurance business is strictly separated into life and non-life (general business) entities. Due to the mandatory nature of the motor vehicle insurance most of the proliferating latter-day companies tend towards the non-life segment of the business, especially, motor (auto) insurance.

Under this section are: third party covers; third party, fire and theft cover; and comprehensive cover. All the three covers aim at protecting policyholders from legal liability for death, bodily injury and destruction of property of other road users, whilst at the same time ensuring that policy holders cherished vehicles are adequately covered in the event of road accident. In industry terms the objective is to restore policyholders to their previous positions.

The business is growing rapidly but it is fraught with challenges like any other human institution. According to Mr. D.K. Agyekum, Branch Manager of Unique Insurance Company,

GHANA BUSINESS & FINANCE

DECEMBER 2013

In reality certain claims made are maliciously done and a recent survey conducted by the International Insurance Associations put the level of detected and suspected fraud in insurance claims between five to ten percent daily. Observers say while it is necessary to subject claimants to proper documents verification and queries to clamp down on claims made with deception, excessive or unnecessary long officialdom procedures and bottlenecks need to be discouraged during claims payments.

Industry watchers say motor vehicle premiums in Ghana are the lowest along the West African Coast, that is, in the ECOWAS sub-region. But commercial vehicle operators think otherwise. They strongly contend that premiums are on the high side. “For fifteen years I have operated a vehicle without an accident so why should the companies continue to take huge sums of money from me for doing nothing or providing me with no service. This is totally ‘monkey dey work baboon dey chop business’”, driver Kwabena Manu summed up the feelings of most of his colleagues. Such misunderstanding among stakeholders depicts the lack of communication within the industry.

“the major challenge is about underwriting of motor insurance –assessing the risk and determining the premium to be paid”.

To ensure that the bottleneck hindering the growth of the His sentiments are shared by officials from other high profile business is removed and sanity reigns, the National Insurance insurance companies. Explaining the issue he said “Due to Commission (NIC) was established in 2006. The Insurance Act the number of insurance companies and the rush for business, 2006, Act 724, is to check anomalies within the industry. The companies do not have the time to Act among others makes provisions for inspect documents of vehicles like regular on-site inspection, licensing and “ The motor insurance roadworthy certificates but go ahead to appropriate sanctions against defaulting insure even dilapidated vehicles based companies. The motor insurance business business has a bright on the normal charge, in some cases has a bright future since vehicle insurance even giving discounts”. is compulsory by law and large numbers future since vehicle of vehicles come into the country daily insurance is compulsory from overseas.

He said “In the case of an accident occurring, the company is forced to by law and large pay compensation which could have In addition to this, the new breed of been avoided if officials have done the middle class citizens has passion and numbers of vehicles right thing on the onset”. Related to the appetite for vehicles. The way forward underwriting issue are the commissioned come into the country therefore is for the regulatory body, the agents dotted all over the country NIC, to be very proactive in its work. daily from overseas.” who seem just to be only interested in It must insist that companies charge their commissions. Whatever be the the minimum—required premium. The condition of a vehicle in order not to forgo their commission, companies on their part should come together and religiously they collect premium from clients (customers) and issue them ensure proper underwriting by charging correct premiums and with receipts and stickers. bring to an end the practice whereby some companies charge premiums below the approved minimum rates by NIC. “The Some clients notably the large companies, owe certain NIC should be very strict and sanction companies who do not insurance companies huge sums of money from credit facilities go by the rules”, Mr. Agyekum stressed. granted them. “Our dilemma is that since we are in serious business competition we do not want to lose our client but To improve the communication imbalance, insurance agents, they continue to default in payment”, a Star Assurance official sales executives and marketers need proper communications bemoaned. skills to really school their clients on the tenets of insurance to remove the mistrust existing within the rank and file of Another challenge is the payment of claims. The perception the industry. People must understand why the need to buy a of policy holders and non-policyholders alike is that when it policy and not to be forced by law to part with their money on comes to the payments of claims, what claimants go through something they do not understand or appreciate. is painfully and directly opposite to the mouth-watering incentives insurance agents offer prospective customers. Often The market is wide and the sky is the limit but the continuous policyholders come face to face with clauses, terms, conditions growth of the business depends on the sincerity and honesty and limitations that never flashed their eyes when signing on to of all stake holders - any attempt by a section of the players to the policies. Industry operators counter this by saying that most take advantage of the others will have grave consequences on of the time claimants are ignorant about the processes leading the industry. Not to be forgotten is that growth depends on the to the application for claims. For instance, a person making an general economy of the country. If people cannot make ends application for a claim needs to have a police accident report, meet they will never think of insurance.

DECEMBER 2013

GHANA BUSINESS & FINANCE

41

INSURANCE

medical reports, sworn affidavit, and a passport size picture of himself. Though it is not mandatory for a person making a claim to hire a lawyer due to the cumbersome and bureaucratic nature of the process, claimants more often than not go for the services of lawyers. In the end, however, claimants find out that they would have been better financially if they had fought their battles without the assistance of legal practitioners.

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Ghana Business & Finance, African Business Media, House No. 7, Lamb Street (off Farrar Avenue), Adabraka, Accra, Ghana P. O. Box O 772, Osu, Accra, Ghana, Tel: +233 302 240 786, Fax: +233 302 240 783 ghanabusinessfinance@gmail.com

IN FOCUS

MANTRAC GHANA

- 75 years of power and reliability

For over 75 years, Mantrac Ghana Ltd. has been providing and servicing one of the foremost brands in heavy earth-moving equipment in Ghana’s construction and mining industries. That brand is Caterpillar, which for many Ghanaians, is synonymous to earth-moving machinery. hen Caterpillar was first founded in 1925, the then Gold Coast was chosen as one of the few countries to have the new machinery sold in, and ever since then, Caterpillar with its CAT brand, has been a reliable partner to Ghana’s growth and developmental process. Mantrac Ghana Ltd., the sole authorized dealer of the CAT brand in Ghana is part of the giant Mantrac Group operating as the official Caterpillar dealer in Egypt, Kenya, Tanzania, Uganda, Nigeria, Sierra Leone, Iraq and parts of Russia in addition to the group’s UK-based subsidiary, Unatrac which serves the group’s offshore customers through a representative.

Emad Adeeb, currently the Managing Director of Mantrac Ghana in a chat with GB&F recalls the difficult journey Mantrac has had to travel to build its sole brand, Caterpillar, the number

44

one name in mining and construction equipment in Ghana “The journey has been very tough as you may agree, you cannot sell a great brand in the dark, you will definitely need to communicate and also ensure your products delivers up to the customers expectations.” Mantrac Ghana deals in a full range of CAT construction equipment including Wheel Loaders, Skid Steer Loaders, Dump Articulated Trucks, Backhoe Loaders, Excavators, Motor Graders, Track-Type Tractors, BCP products. Moreover, Mantrac Ghana Ltd. distributes Mining, Power Systems and Forklifts.

The making of a Brand

Throughout its seven and a half decades of existence in Ghana, Caterpillar has always been the preferred choice for players in the mining and construction industries, but this feat was not achieved with Mantrac resting on its oars

GHANA BUSINESS & FINANCE

“Buying Caterpillar machines is not just a product but an investment, hence we have built our brand on delivering value to the customer with massive after-sales support at the doorstep of the customers. Secondly we have been very innovative in our offering, giving a new face to every product we introduce as the years goes by” Emad Adeeb reveals.

Herein lies the success of Mantrac in being able to build a brand that has been able to withstand competition and time to still be “the first point of call when it comes to Construction Equipment” as Emad Adeeb adds. In being able to adapt to changing trends and to still offer the most reliable choice to players in Ghana’s mining and construction industries, Mantrac has always been playing to suit the demands of the market “What we have been able to do is to tailor our product offerings to the market in other to be relevant to the booming construction sector in Ghana,” says Emad.

DECEMBER 2013

Investing in Ghana

For a company which is literally older than the nation Ghana and that sees itself more Ghanaian than most indigenous Ghanaian companies, Mantrac believes in investing in the Ghanaian economy and by so doing entrenching its hold as the number one name in heavy machine dealership in Ghana. Importantly, Mantrac’s growth strategies sync perfectly into Ghana’s Local Content Law which ultimately aims at indigenous Ghanaian companies taking advantage of the opportunities available in the Oil and Gas industry.As Emad says “Mantrac Ghana after 75 years in operation is more of a Ghanaian Company than any other, we currently have over 800 employees with over 90 per cent being Ghaianains. Apart from the machines coming from abroad, the major work is done locally by Ghanaians.” Having helped in building Ghana’s mining industry, Mantrac sees a need in supporting Ghana’s burgeoning Oil and Gas sector to grow.

DECEMBER 2013

Accordingly, the company with decades of experience in power solutions for the oil and gas industry, has initiated a $30 million investment to construct an Engine Rebuild Center near Takoradi to serve the oil and Gas industry.

The project which is expected to be completed in 2014 would be one of the biggest in the sub region, if not in Africa and it comes in addition to a major training facility which has been constructed by the company to sharpen the technical expertise of its technical staff to support the workshop operations for the Oil and Gas industry. And in the view of the Managing Director, this heavy investments shows the “great confidence we have in Ghana’s economy. The investments done so far compares to none in our industry after operating for over 75 years.”

Being Responsive to Customers’ needs

Realizing the important role that excellent service delivery coupled with efficient after-sales services play in an

Growing in the midst of challenges

A liberalized economy has come with it bad trade practices which have sometimes made Ghana a dumping ground for substandard goods, but in spite of this “product quality and support must be checked to ensure Ghanaians get value for money”. As Emad admits, the growth prospects in Ghana’s economy is huge but the other side of the coin is that “there is the influx of substandard products which compete with tried-and-tested brands.”

Reinforcing his belief in favourable competition, Emad reiterates the point that “The challenge of competition is a an enormous opportunity for us in Mantrac to stand out of the pack.”

Though Emad laments the influx of substandard brands onto the Ghanaian market in the last two or three years, he believes in the ability of his brand to stay ahead of the pack saying “they can beat us on price but we cannot be beaten on quality, value and segmented product lines.” Thus, even against the backdrop of a seemingly tough competition being mounted by substandard products against the Caterpillar brand on the Ghanaian market, Mantrac still sees a favourable out-turn in its projections, seeing itself as a “Benchmark for Caterpillar dealership and also an organization that leads the market with an outstanding customer loyalty culminating in increased revenue and support to the development of Ghana.”

GHANA BUSINESS & FINANCE

45

IN FOCUS

industry of this nature, Mantrac Ghana has been very proactive in designing mechanisms to always avail itself when the customer needs it. Mantrac has a network of 4 branches to support customers at the shortest possible time, namely in Accra, Takoradi, Tarkwa and Kumasi, in addition to the major workshops in Accra and Kumasi to service all its customers machinery backed by a 24/7 shuttle service. Not only has the company made client service a core part of its operations but being sensitive to the needs of the Ghanaian market, Mantrac has designed a payment plan for its customers “we have a global collaboration with Stanbic Bank across all our territories for them to finance customer purchases under what we call Cat Finance” Emad reveals. “We understand customers in Ghana not only want us to provide them with the right equipment, but also to be able to offer them integrated equipment purchasing solutions” he adds.

CONFERENCES & EVENTS

EPC Contract and Risk Management

The goal of this conference is to ensure contract compliance while mitigating risks that arise during contracting process. From establishing a contract management system to exploring tools and strategies for risk management, attendees will overcome obstacles in creating contracts and managing disputes that arise. Expanding on this will be a focus on what makes a contract most profitable, as well as improving EPC contract negotiation skills and project execution strategies.

Date: Jan 14-16, 2014 Venue: Embassy Suites Houston Downtown,Houston, Texas, United States Contact: Michelle Thomas The NBC Tower 455 N CityFront Plaza Drive Chicago, IL Tel: 312 540 3000 ext 6491, Email: MichelleT@marcusevansch.com

Sixth Annual International Business Conference

This Conference is to provide an international platform for academics, business and government officials from around the world to come to exchange ideas to exploit global business management strategies for promoting global economic development.

Date: Dec 27-28, 2013 Venue: Metropolitan Detroit Area, Dearborn, Michigan, United States Contact: Matthew Kuofie at gsmi_usa@msn.com mhkuofie_gsmi@msn.com or Visit www.gsmi-usa.com to register.

4th Annual Middle East and Africa Insurance Summit

Middle East and Africa promises astounding growth and potential in the insurance sector with the Middle East witnessing a rapid trend of mandatory health insurance in major countries along with an increased awareness for product innovations and enhancing the distribution channels. The 4th Annual Middle East and Africa Insurance Summit will address burning issues and challenges faced by the MEA region and brainstorm on solutions that will achieve the vision to have a regulated, consolidated and lucrative business model in the dynamic and ever-growing insurance sector Date: Jan 20-21, 2014 Venue: Dusit Thani, Dubai, United Arab Emirates Contact: Mohor Mukherjee at mohor.mukherjee@fleminggulf.com , T +971 4609 1570, F +971 4609 158

HR and Talent Management in Oil & Gas 2014

With an estimated 50% of the ageing workforce heading towards retirement in the next five years and around 120,000 new employees needed to meet the growing skills shortage, it is more important than ever for oil & gas companies to attract, recruit and retain talent in order to achieve sustainable growth.

Through dynamic presentations, case studies and roundtable discussions, the HR and Talent Management in Oil & Gas 2014 conference will enable you to: enhance your brand to attract skilled workers, women & graduates into your organisation; create a culture of engagement and satisfaction to retain top talent; ensure knowledge retention using both traditional and digital training strategies; address local content larger recruitment pool or HR challenge, among others.

Date: Jan 23-24, 2014 Venue: London, United Kingdom Contact: Call +44 (0) 20 7550 5943 or email enquiries@insideintelligence.com

46

LP Masterclass (Private Equity Finance in Southern Africa)

The 13th International Business and Economy Conference

The objective of IBEC 2014 is to provide a forum for intellectual discussion among scholars and practitioners. We seek to provide a platform to analyze the strategic challenges faced by firms, educators, governments, and other institutions in the global arena.

Date: January 9-12 2014 Venue: Tianjin Polytechnic University, China Contact: Liu Jiaru on +13001303869, cctits_liu@aliyun.com

GHANA BUSINESS & FINANCE

The South African Private Equity and Venture Capital Association (SAVCA) in conjunction with the Financial Times Live and the Emerging Markets Private Equity Association (EMPEA) is organising South Africa’s annual private equity conference.

Following on the success of the 2013 sell-out summit, we reconvene next February to consider the opportunities and developments in the region, including fundraising trends, deal flow and deal financing. The agenda also includes frank conversations with industry stalwarts, seasoned CEOs of portfolio companies and limited partner investors into private equity.

Date: 11 February 2014 Venue: Spier, Stellenbosch, South Africa Contact: T: +44 (0) 20 7775 6653, FTLive@ft.com

DECEMBER 2013

2014

Editorial Calendar First Quarter

January Special

A special feature on Ghana’s Aviation Sector

Investment

A look at the best sectors for investments in the Ghanaian economy for the year 2014

Economy

Macroeconomic outlook for the Ghanaian economy for the year 2014

Insurance

Exploring ways of growing as well as increasing the financial base of the industry in a bid to strengthen the sector to take on bigger businesses and enter into high risk businesses as exist, in for instance, the oil sector.

Banking & Finance

As 2014 portends good economic fortunes for emerging economies like Ghana,will banks respond to this favourable outlook by lowering their interest rates for owners of industries to be able to assess cheap credit to grow their businesses?

Trade & Industry

As the Interim Economic Partnership Agreement (EPA) between Ghana and the EU ends by 1st October 2014 ,will Ghana sign the full EPA?

February Special

There has been a recent increase in the level of interest by South African businesses in Ghanaian companies. GB&F in partnership with the South African High Commission in Ghana will present a special feature on South African business interests in Ghana.

Energy

The gas resource from the Ghana Gas project comes on stream soon, how can the government and players in the private sector maximise the benefits of this resource to increase the country’s energy generation level? And what are some of the allied industries that will benefit from this resource?

Economy

What are some of the key areas of the economy that government will target to drive growth in the economy in 2014?

Insurance

How are insurance companies adapting to new technologies to expand and grow their businesses?

Banking & Finance

The Merchant Bank crisis shows clearly the effects of over-exposure to debts on banks. How can the banking industry learn from this experience?

Trade & Industry

Ghana seems to have slumped to 67 on the Doing Business 2014 index of the World Bank from 62 in the previous year out of 189 countries surveyed. What are some of the reforms government would introduce to ease the the struggles of doing business in the country?

March Special

A special feature on the private pensions fund managers and how they are investing the monies of the Ghanaian worker.

Economy

Would the government take decisive measures to march productivity with levels of wages in order to cut down the huge wage bill on the economy?

Energy

What is the extent of work done so far in creating the West African Power Pool for the sub-region?

Investment

As FDI inflows into Africa is projected to grow in 2014 and beyond, how is Ghana positioning itself to attract a reasonable percentage of this foreign capital to grow its economy?

Trade & Industry

Ghana recorded a trade deficit of 335.80 USD Million in the second quarter of 2013, an improvement over the third quarter of 2012 when the country’s Balance of Trade stood at a record low of -1638.10 USD Million. What would be some of the strategic policies to be implemented to further decrease the deficit to the point where the country would have trade surplus as happened in the first quarter of 2010?

* Listings are subject to change

DECEMBER 2013

GHANA BUSINESS & FINANCE

47

The slogan “The customer is always right” is said to have been originally coined

by Harry Gordon Selfridge, the founder of Selfridge’s department store in London in 1909 and is mostly used by organizations to define the parameters of good customer service. Unfortunately this slogan has generated a lot of debate causing some organizations to abandon it for more realistic taglines that symbolizes practical solutions to customer problems.

Mercy Tetteh in her article “Is the Customer Always Right” clearly states that most companies use “The Customer is Always Right” adage as a trading policy to define their keenness to put the customer first thereby making their customer feel special. This strategy she argues is aimed at achieving profit. According to her, companies go as far as enforcing the ”customer is always right” policy on their employees even when at times they are wrong. In her opinion, this old adage that the customer is always right is not entirely true but rather worked for businesses in the past.

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Similar sentiments have been expressed by other contributors to the customer is always right debate. Gordon Bethune, best known for turning Continental Airlines around in his book “From Worst to First,” made it very clear that the maxim “the customer is always right” didn’t hold water at all times.

According to him, in conflicts situations between employees and unruly customers he would consistently side with his employees. According to him, one or two customers are surely going to be unreasonably demanding and there is a choice between supporting your employees, who work with you

GHANA BUSINESS & FINANCE

every day and make your product what it is and some irate customer who demands the impossible. He further states that, “organizations can’t treat their employees like serfs but rather have to value them”. Of course there are plenty of examples of bad employees giving lousy customer service but trying to solve this by declaring the customer “always right” is counter-productive says Gordon Bethune.

Yvonne Grinam-Nicholson, a business communications consultant adds her voice to this customer is always right debate when she claims that “today, we

DECEMBER 2013

Secondly, others are of the view that some customers are just bad for business.

Most businesses think that “the more customers the better”. However, several instances of customers treating employees’ rudely exist to justify the claim that some customers are simply bad for business. It is also argued that irate customers don’t accord the needed respect for employees of organizations but rather create confusion between company’s management and its staff through their incessant complaints.

In this case, it’s not a matter of losing business from an irate customer that matters but the respect and courtesy that some customers lack for employees who provide the service. In such a situation, the organization might be better-off without the customer.

“...several instances of customers treating employees’ rudely exist to justify the claim that some customers are simply bad for business” are eons away from that point in time and I think many of us will agree that a few businesses would be better off, if instead of agreeing with that mantra, they fired that noisy customer because there are times when the customer is not always right”.

A number of reasons are assigned to why the customer is always right slogan is wrong or unacceptable for providing customer service solutions.

First of all, it is argued that the adage gives abrasive customers an unfair advantage because by using the slogan “The customer is always right” abusive

DECEMBER 2013

A case is also made that the customer is always right slogan results in worse customer service instead. Hal Rosenbluth the CEO of Rosenbluth International, a corporate travel agency wrote an interesting book called “Put the customer second – Put your people first and watch’em kick butt”. In this book, he notes that when you put the employees first, they put the customers first. He re-iterates that employees who are happy at work give better customer service because they care more about other people including customers. On the other hand, when the company and management consistently side with customers instead of with employees, it sends a clear message that employees are not valued and treating them fairly is not important. It also feels as if employees have no right to respect from customers and have to put up with everything from customer. When this attitude prevails according to Rosenbluth, employees stop caring about service. At that point, real good service is almost impossible and what the best customers can hope for is fake good service.

On the flip side, arguments exist to prove that “the customer is always right” motto is relevant. It is believed that the customer can never be made to feel wrong even when the customer is plain wrong. The customer has options

in the era of competition and as such businesses cannot afford to be arrogant or aloof even when dealing with an unreasonable customer.

Moreover, the customer has influence in the market place as a lot of people depend on word of mouth to make decisions on which supplier or product to use and as such imperative to treat the customer right. Simply put, in the era of word of mouth and endorsements, the customer is king. As a seller treats the customer as king, the customer is inclined to brag about the wonderful experience he or she had to friends and family many of whom take the endorsements seriously.

In a nutshell, the nature of the buyer/ customer to seller/supplier relationship is not one of equals but rather the seller/ supplier is more often than not seen as a servant of the buyer/customer. In view of this, it is said that the most successful business people or organizations are those who never forget this unequal relationship but rather accept the fact that the customer has and will always have an upper hand in business relationships. Simply put, customer is business and business is customer and this is the underlining reason why the customer will always be right.

About the Writer Ebo Bhavnani is the Relationship Manager, Public Sector Group, at Guaranty Trust Bank (Ghana) Ltd. He holds a Bachelor’s degree in Political Science, an M.Phil in International Relations from the University of Cambridge and a second Master’s degree in International Marketing Management from the University of Leeds.

GHANA BUSINESS & FINANCE

49

WORLD PERSPECTIVES OUTLOOK

customers can demand just about anything thus making employees’ job more difficult in pleasing difficult customers. Also, it means that abusive customers get better treatment than reasonable customers.

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World economic growth, which stands at a disappointing 2.8 percent in 2013, will see a slight increase to 3.1 percent in 2014, an expert has predicted. The small predicted improvement, which is less than had been previously hoped for, is due to the slow recovery of mature economies likely being offset by the ongoing slowdown of emerging markets, said Bart van Ark, chief economist of the Conference Board, a non-profit economic research institute based in New York. recession than had been anticipated, and it was only in the second half of this year that Europe showed signs of recovery.”I think it’s still early to call it the end of recession as some people do, but... it might very well look like that Europe has hit the bottom here and may be coming out of this second recession that it has been (in) since 2008, 2009,” he said, noting that the recovery in the euro zone will not be “V-shaped”.

According to economists from the Conference Board, global economic growth improvement in 2014 is going to come from mature markets, differing from previous years, as mature markets are beginning to see somewhat faster growth.Van Ark said that Europe, after two years of recession, may see a positive growth rate, which will not be very fast but will still be positive.

In terms of emerging markets, van Ark believes the bigger surprise for many economists from the Conference Board has been to see emerging markets performing poorly this year.

Economic slowdown in China and Brazil turned out to be a little more moderate than they had expected, but India and Mexico experienced larger, unexpected declines, he said. “In the case of China, we have seen some significant slowdown in the beginning of this year. In the second half of the year, we actually see some recovery,” he said.

Bart van Ark, Chief Economist of the Conference Board

conomic slowdown this year is “partly related to the mature economies and partly related to the emerging economies,” van Ark noted. Growth in mature economies has not been strong in 2013. In the United States, government uncertainty and political brinkmanship over the past couple of months, as well as payroll tax hikes at the beginning of this year, have slowed the U.S. economy “considerably more than we had anticipated,” he said.

Van Ark said the private part of the U.S. economy is quite strong, but it is the government part that has really been holding the country back for most of the year. Productivity growth has been very slow in the U.S. economy, and it is unusual for it to be so slow for such a long time, which raises the fundamental question of whether the U.S. economy can rapidly increase technology and innovation to improve its productivity performance, he said.He added that at the same time, Europe experienced a much deeper and longer-lasting

DECEMBER 2013

Economists from the Conference Board predicted that China’s growth rate will slow to 7 percent in 2014 from 7.5 percent in 2013. “Our projection going forward is that China will continue to slow its economy down over the next few years, and the best outcome is that the slowdown will be gradual, and will not be choppy or volatile,” he said.

However, van Ark stressed that “slowdown is not necessarily bad. A slowdown is part of a maturing economy.” Talking about the Federal Reserve’s quantitative easing program, van Ark said the anticipated Fed tapering of quantitative easing -or reducing asset purchases -- has raised inflationary pressure and led to currency depreciation in emerging markets. “But the real problem in the emerging markets are that we are beginning to see some real structure issues in these economies that are related to the transition... from a very fast growth model based on investment and exports to a growth model that depends more on consumer markets and services industries,” he said.

“That transition to the kind of more mature but slower growth path is something that takes a little while, and in some case several years, for countries to make,” said the economist.

GHANA BUSINESS & FINANCE

51

WORLD OUTLOOK

Slow global growth to see moderate rebound in 2014: Economist

WORLD OUTLOOK

Emerging-market banks threatened by end of credit boom The world’s largest emerging markets recovered quickly from the 2008 financial crisis because consumers and companies went on a borrowing binge. Now that credit spree is coming back to haunt banks in those countries. As economies cool, delinquent loans are rising from Turkey to South Africa. India is injecting money into state-run lenders facing a surge in soured debt, while Chinese banks have been told to increase provisions for the same reason. n outflow of funds from emerging markets earlier this year, sparked by speculation that the Federal Reserve would soon begin tapering its easy-credit policy, forced up interest rates in those countries and pushed down currencies. While the flight of capital halted after the Fed decided in September to continue its asset purchases, a reversal could threaten economies and banks in developing nations. “Credit growth in emerging markets has been phenomenal since 2008 because risk has been underpriced once again, thanks to zero percent interest rates in the developed world,” said Satyajit Das, author of a half dozen books on financial risk who is based in Sydney. “Many borrowers will struggle to repay the debt, and the money flows out of these markets will make the problems worse. We’re ripe for a new emerging-market crisis.”

Since Brazil’s largest banks curtailed lending last year, the government has used state-owned firms to continue expanding credit. State lenders’ share of loans jumped to more than 50 percent of the total from about 35 percent in 2007, according to central bank data.

Currency Reserves

Even China, which doesn’t rely on inward cash flows to finance its economic expansion, faces a choice of restructuring its indebted and inefficient state-owned industries or allowing inflation to take hold, according to Das and other analysts. Like their Western counterparts, emerging-market governments probably will rescue failing banks if credit deteriorates, adding to those countries’ economic woes, Das said.

Chinese bank assets are more than twice the country’s GDP, the highest ratio among emerging markets. Lenders in China also have the highest leverage, with total assets 20 times equity, compared with 13 in Brazil and South Africa and 8 in Turkey.

Even so, China is better equipped than other emerging markets to deal with a collapsing banking system because it has almost $4 trillion of foreign-currency reserves and doesn’t rely on inflows to finance its banks, companies or consumers. While other developing countries built up reserves, they would have a harder time plugging holes at their banks and defending declining currencies when Western money flows out. Turkey’s reserves would almost be exhausted if bad loans reached 25 percent of the total, which happened during that country’s last banking crisis in 2001, data compiled by Bloomberg show.

South Africa’s reserves wouldn’t be sufficient to bail out its banks if nonperforming loans hit that level.

Credit Expansion

‘Inflationary Pressures’

The MSCI Emerging Markets Banks Index has dropped 6 percent this year, compared with an 18 percent gain for the MSCI World Banks Index, which tracks lenders in developed markets. While it’s natural for lending to expand along with an economy, credit has outpaced economic growth in most emerging markets. In China, borrowing by companies surged to 132 percent of gross domestic product last year from 104 percent in 2008, according to the World Bank. In Turkey, it jumped to 54 percent from 33 percent and in Brazil to 68 percent from 53 percent. Credit in South Africa exceeded 150 percent of GDP in 2012. Consumer debt is growing just as fast in some countries. Those increases have taken place against a backdrop of slowing economies. China, which expanded at an average rate of 10.6 percent in the decade ending 2011, grew only 7.7 percentlast year, according to data compiled by Bloomberg. India’s 5 percent growth last year was down from a 7.8 percent average.

Asset Bubbles

Banking crises typically are preceded by asset-price bubbles, large capital inflows and credit booms, according to a study by Harvard University professors Carmen Reinhart and Kenneth Rogoff. Their analysis of 66 countries over two centuries, published in the November issue of the Journal of Banking and Finance, found that the causes for the crises are the same in developed and emerging economies.

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About $40 billion flowed out of the 10 largest emerging markets, excluding China, from April through July, according to data compiled by Nikolaos Panigirtzoglou, a London-based analyst at JPMorgan Chase & Co. That reversed in August and September as tapering fears abated, he wrote in an Oct. 21 report. “Central banks are increasing interest rates due to inflationary pressures that arise from currency losses,” said Steil of the Council on Foreign Relations. “But that limits growth.

It’s a double-edged sword.” Steil said he expects emerging markets with the largest current account deficits to end up turning to the International Monetary Fund. Das, the author and former trader, said he’s concerned that the IMF doesn’t have the resources to help this time around.

“During the last emergingmarket crisis, the rest of the world was doing really well,” Das said. “Now the developed world is still licking its own wounds. Even the IMF is financially constrained. It will be tougher to find help.

GHANA BUSINESS & FINANCE

DECEMBER 2013

MANAGEMENT

Effective deployment of ICT

for management and business

By Julius Ceasar-Tokoli

These are very exciting times we are living in! Never in human history has the world been this small. Truly a global village, nothing goes on at some spot without it sounding around the globe the very second it happens. And this has been possible only through Information and communications technology (ICT).

An integral component of today’s ICT technology is the internet. And especially with the development of Web 2.0 has the unprecedented developments on the web become possible. Well, I need not bore you with all of these developments happening on the web since you are already quite conversant with them. My beef though is the extent to which we are deploying this and other ICT platforms to transform business and management.

With the preponderance of smartphones and tablets, should we continue doing business the old-fashioned way? Should large organizations continue acquiring huge edifices to accommodate staff? Should management continue expecting staff to daily commute to work? Is the 9-5 working time still relevant? And should customers continue to brave all the inconvenience, including possible criminal attacks and traffic jams just so they can access what they need?

These are some of the pertinent questions that management should be asking themselves vis-Ă -vis the modern technological world to enable streamlining management and business processes.

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The Basis for Change

Many of the fundamental assumptions and philosophies of management are now relics that only belong to the museum.

Most of those principles were developed for a world with more limited knowledge, aristocracy, oligarchy, industry and crude technology. Times have now changed drastically!

Thanks to the commercialization of the internet, the information and knowledge age is now with us; replacing the industrial age. The latter part of the 20th century to date has seen a period of unparalleled rise in information and knowledge.

Such are no longer the preserve of the rich, the professor and the politician. Yet fundamentally, management still thinks largely in medieval terms. And this has stunted the growth and prosperity that should accompany such knowledge. I dare say that ironically, we are now living in the most impoverished period of mankind’s history, relatively speaking, in view of the technology, information and knowledge that we possess but which are not being effectively deployed. If management were to effectively harness these, poverty could be reduced significantly.

GHANA BUSINESS & FINANCE

DECEMBER 2013

In the industrial age, huge edifices were required by large organizations. Apart from machinery that needed housing and the sheer number of employees that required premises, such edifices also projected the image of the organization. But in this age of ICT technologies are those still necessary?

In the information age, the provision of services outranks manufacturing. And what do most service providers basically need to function? Computers, tablets, the internet and smartphones! Given this reality and the fact that these devices and the internet have become increasingly affordable and accessible, is it wise to continue investing in huge office premises for staff? Currently, as was the case in the industrial age, so many knowledge workers and others still commute to work to do what they could have done from their bedrooms!

What I have observed is that we are really underutilizing the resources we have and are rather compounding the cost of doing business. For instance, in most organizations, the use of the internet is limited to sending and receiving emails only.

Some staff cannot even as little as use it for research to enhance their work because corporate IT policy does not permit to go on the worldwide web. Ridiculous indeed! Their main reason?

That it would interfere with productivity. Yet these staff have access to the internet on their personal mobile devices such as smartphones and tablets! My point then is this: It is impossible to micromanage employees on how and when to access the web in this age. Why then should management not revise their appraisal and control systems to reflect modern exigencies and realities?

e-Commerce Electronic commerce or e-Commerce is the operation of a shop or a supermarket on the Web. A full-cycle e-commerce platform comes with a well-stocked shop with product catalogues, price descriptions and virtual shopping carts. They allow customers to virtually shop for anything and have it delivered at their preferred address.

In Ghana, the deployment of e-commerce has been rebuffed by many, thinking Ghana is not yet ready for it. They often cite the unavailability of credit-card payment and verification systems, the haphazard address system and the seemingly infantile web lifestyle as the main reasons. However, these are not insurmountable.

Currently, there are companies in Ghana dedicated to developing electronic payment systems that can be deployed online. Apart from that, other payment options such as payment on delivery, mobile money transfers and the use of e-zwich cards, among others, can prove very effective in delivering the service.

Regarding the address system, that can be circumvented. If courier service dispatch riders can locate specific addresses why not those of e-commerce operators? Besides, the e-commerce target market is those in the middle-to-upper classes. And generally, these have verifiable office and residential addresses.

With respects to the web lifestyle, certainly those in the target market are already there. Hence deploying such a service will go a long way to meet their needs since they make up the very busy but more enlightened or exposed group that would require the service.

Some Platforms to Enhance Management and Business

Fully Harness ICT Technology

Intranets/Extranets One web platform that management can deploy to streamline management and business processes is the intranet/extranet. As secure web sites, intranets permit regulated access by employees and management and make available apps such as scheduler, conferencing, email, project manager and many more. On the other hand extranets give access to external parties such as customers and suppliers to information such as product availability, invitations to tender and the like. By deploying such technologies, feet on the office floor are reduced since employees can work from anywhere in the world and customers/ suppliers from anywhere in the world can do business with the company. The added benefit is that there is a drastic cut in the expenditure on utility services. Besides, the extra office spaces can be rented out for more income.

It also requires the hiring of the right kind of personnel who would appreciate and effectively use the systems to benefit the business.

When staff need not commute daily to work and don’t have to work 9-5 daily, invariably, there would be less stress, less hospital bills, and less incidences of calling in sick. Instead, employees would be in the position to explore, experiment and thus be more creative and innovative; critical requirements for the knowledge and information age. e-Business Web sites e-Business or electronic business simply means running business electronically. But in the information age, this has come to be associated more with the Web. By deploying an e-business platform, the company transfers its physical activities or operations onto the web platform. By means of a good ICT consultant, the company can identify very useful apps available or those to be developed to meet customer requirements. e-Business sites, akin to intranets/extranets, also make business more efficient and effective. Additionally, they make life easier for customers and suppliers alike. By deploying such a technology, a company would be able to streamline its human resource needs, reduce business costs and, thereby, improve profits.

With so many electronic payment platforms currently available, this is certainly a viable technologically-driven business platform that comes handy.

DECEMBER 2013

From what we have been discussing, it is clear that there’s so much potency in the effective harnessing of ICT technology with business and management processes. But note my use of the word “effective”. This is because some may deploy the technology alright but not effectively. To be effective is to produce the desired result. Thus for ICT technology to be deployed to meet the desired results, there is the need for good adequate planning and the employment of the right consultant(s). Such consultant would not just provide the technology but also design the management structures that are required to make business and management operations seamless.

Clearly, we are hugely under-utilizing the web, such a powerful platform that has transformed the world. And we are also under-utilizing the devices that we use. Some of us for instance buy those devices simply to make a show of them or to take and share photos and do “facebooking”. While those are not wrong in themselves, we need to appreciate the business and management potentials in these devices and thus harness them effectively for good management and business results.

It is my hope that very soon we shall see such transformations in our society. And if we do so, we would be able to reduce poverty since many would be able to start their own businesses without a huge capital outlay. Also, more time would be spared for families to spend not only quality time but enough time together for more closely-knit family relationships. And this can also help in curbing delinquency and other anti-social behavior.

The author is CEO/Managing Partner at Soleil Consults; a Management, Strategy and IT firm located in Accra-Ghana (mlt@ soleilvision.com)

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MANAGEMENT

What You Need to Run Your Business

JOB OPENINGS

Human Resource Manager Duties include recruitment, selection, arranging Interviews etc Location: Accra Minimum Qualification: Minimum of a First Degree and must be a member of IHRMP or possess 5 years experience or both Contact: Visit www.ghanajobfair.com/view-job/ to apply for this job

Chief Accountant

Professors

The successful applicant will prepare asset, liability, and capital account entries by compiling and analyzing account information. He/she will also document financial transactions by entering account information and recommend financial actions by analyzing accounting options. Summarizes current financial status by collecting information; preparing balance sheet, profit and loss statement, and other reports. He/she will substantiate financial transactions by auditing documents whilst maintaining accounting controls by preparing and recommending policies and procedures. Additional duties include guiding accounting clerical staff by coordinating activities and answering questions and reconciling financial discrepancies by collecting and analyzing account information.

Location: Accra Minimum Qualification: First Degree in Accounting with at least 5 years experience Contact: Visit www.ghanajobfair.com/view-job/ to apply for this job

The Assemblies of God Institute of Higher Learning intends to commence operations in January 2014. There will be three academic faculties each with three departments. Professors are being sought to lecture in these faculties.

Location: Kumasi Minimum Qualification: Should preferably have a PhD or equivalent professional qualification with considerable teaching and researching skills Contact: Sent CV and and all relevant documents to agghanahq@ucomgh.com or call 0302-511448 / 0303-930848 / 023-4705802

Senior Business Advisor / Deputy Project Leader Successful applicant will be engaged in communicating with a range of horticulture public and private sector stakeholders, at different levels • Under the overall leadership of the Project Leader, contribute to the planning and management of the GhanaVeg project • Assist the Project Leader in the design of work plans, in reporting, in monitoring of key outputs, outcomes and deliverables, and in performance evaluation.

• Preparations of Business Platform meetings, High-Level Round Tables between private sector representatives and highlevel policy makers.

Location: Accra Minimum Qualification: Successful applicant must have a minimum of five years’ experience in setting-up and managing a grants facility with a Master’s degree in one of the following areas: business administration, finance, economics, accounting, and/or related field. He/She must also have a professional working experience in Monitoring and Evaluation of projects, preferably in the agricultural sector.

Contact: Send CVs to ibello@ifdc.org copied to joep.vandenbroek@wur.nl

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Senior Business Development Executive A multi-national management consulting firm that helps organisations extend and achieve high performance is seeking someone to among other things be in charge of its business development team.

Location:Accra Minimum Qualification:Minimum of a First Degree with three years of postgraduate hands-on experience with a reputable organisation.Candidate must be energetic and must have proven leadership skills.

Contact: Send application letters and CVs to executive. placement@aol.com

Corporate Controller - Senior Manager This is a senior position reporting to the CFO. It is a core role in the finance team with an overall responsibility of supporting the senior managemnet in smooth and timely period-end reporting, accounts transactional processing, preparing key general ledger reconciliations among other duties.

Location: Accra Minimum Qualification: A certified accounting designation(Certified Professional Accountant,Chartered Accountant) with at least 10 years of post-qualification experience Contact: Send application and CV to jobs@careersinghana.com

GHANA BUSINESS & FINANCE

DECEMBER 2013

Defeating Dictators

by George Ayittey

After publishing Africa Betrayed (1992) and Africa Unchained (2005), intellectual gadfly, Professor George B.N.Ayittey has crafted yet another masterpiece, Defeating Dictators: Fighting Tyranny in Africa and Around the World (2011) in which he adumbrates the deceptive habits of highly defective despotic regimes in Africa and beyond. Ayittey contends that a dictator is a dictator. He further points out that “The only good dictator is a dead one”(218). The crux of the argument in his book is that Africans and other people chaffing under the yoke of despotism should steer clear of confusing ideological with systemic dictatorship— dictatorship that emerges from faulty institutions and systems. Any political system that concentrates power in the hands of one person, he argues, will inevitably degenerate into a dictatorship. The culprit is the system—not ideology or culture.

Defeating Dictators is a vitriolic lampoon on abuse of power, electoral gerrymandering and rape of democracy in the developing world. Ayittey observes that “modern dictators come in different shades; races, skin colors and religions, and they profess various ideologies” (7). This notwithstanding, despots have a lot in common: they are leaders who are not chosen by their people and, therefore, do not represent the people’s aspirations. As opposition mounts against them, they refine their tactics and learn new tricks in an attempt to stem the tide of pro-democracy forces. Despotic governments are highly deceptive regimes that are recognizable from distinctive traits.

Unyielding grip on power is the hallmark of every dictator in Africa. Elections are farcical and always won by the despot. As Ayittey would have it, dictators “…fix the rules of the game and secure 90 percent of the vote all the time” (201). Dictators grow senile, and then they start to groom their sons, wives, and half-brothers to succeed them. African despots are notorious for these treasonous acts of insanity: Paul Biya of Cameroon, Abdoulaye Wade of Senegal, Hosni Mubarak of Egypt, Ben Ali of Tunisia, Colonel Qaddafi of Libya, Yoweri Museveni of Uganda, Idris Deby of Chad and more.

Dictators have the knack for looting the nation’s coffers. More often than not, the country is broke because the dictator and his henchmen have looted the treasury unashamedly and stashed their loot in foreign bank accounts—the safe haven

DECEMBER 2013

is Switzerland. The dire consequence is that the country is saddled with a mountain of foreign debt. Ayittey laments the fact that “Paul Biya, the dictator of Cameroon, who has been in power for 29 years, has received a long series of loans—known as ‘Poverty Reduction Growth Facilities’— from the IMF” (181). When the same poor Cameroonians in whose names he had received the loans protested in 2008 against skyrocketing food prices and a constitutional amendment that was intended to extend Biya’s rule to 2018, Mr. Biya ordered his brutal security forces to fire live bullets at protesters.One hundred people died instantly. Ayittey notes that “many of the victims were apparently shot in the head at point-blank range…”

(181).

Dictators are impervious to reason.

The only voice a dictator listens to is his own voice. Political repression is an effective weapon in the hands of African despots. Opposition parties are either outlawed or accorded very little political leeway. Key opposition leaders are arrested, intimidated, hounded and even killed. Cowed into submission, some intellectuals in the opposition tend to switch camps. In other words, they become political prostitutes. Though highly educated with PhDs, a multitude of them have sold off their consciences, integrity and principles as they kowtow to the diktats of barbarous dictators. To borrow words from Ayittey again, “as prostitutes, they have partaken of the plunder, misrule and repression of their people” (185).

The pet aversion of all dictators is press freedom. Censorship is imposed; journalists, newspaper editors, and columnists are harassed and arrested for telling the truth. Newspapers, radio and television stations that are critical of the despot are shut down. Ayittey points out that “it is important to keep in mind that a despotic regime can always block or shut down a critical media outlet and that the remaining ones are often state controlled” (180). Although freedom of expression is guaranteed by Article 19 of the UN Universal Declaration of Human Rights of 1948, Article 9 of the Banjul Charter of Human and People’s rights, and the constitutions of many countries in Africa, this has not deterred Africa’s dictators from violating this fundamental human right of citizens.

In a nutshell, at time when the entire world is agog with expectations about what the Arab spring portends for countless people gripped by stifling fear and apprehension under dictatorial regimes in Africa and around the world, Ayittey has produced a work that may fulfill the crucial function of a blueprint for oppositional militancy, a veritable modus operandi for undoing dictators in the contemporary world. Defeating Dictators is the handiwork of an academic virtuoso. The language is lucid and free of sophistry. This book is a treasure trove of information that deserves to be read meticulously by every student of Africa’s political economy.

Students, researchers and casual readers would find Ayittey’s new brainwave a fascinating book to read.

GHANA BUSINESS & FINANCE

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BOOK REVIEW

gainst the backdrop of leadership paralysis in Africa leading to a multitude of problems and untold hardships on the citizenry, a critique despotic rule in Africa seems in order. Dr. George Ayittey’s book Defeating Dictators: Fighting Tyranny in Africa and Around the World does this critique in a masterful way. Dr. Ayittey is a Ghanaian Economist and President of Free Africa Foundation.The book is reviewed by Dr. Vakunta who is a professor of Modern Languages at the Department of Defense Language Institute, Monterey-California, USA.

AUTO REVIEW

Toyota launches the new Yaris Toyota Ghana Company Limited, recently launched the new 1.3 litre automatic Yaris in Accra onto the Ghanaian automobile market. The new Toyota Yaris has a dynamic exterior and quality interior design to meet customer’s specification.

Mr Eric Darko, General Manager, Operations of Toyota Ghana, said some of the features of the new Yaris include a console box, multi information meter display, glove box and seat belt with pre-tensioner and force limiter. He said the new Yaris has a high quality performance and durability, excellent fuel economy, re-assuring safety performance and larger cargo space.

“In line with this, we are providing very convenient and superior quality after sales service to customers, which we call Express Maintenance Service,” he added. He said the new Yaris has been re-designed completely with enhanced features for customer comfort.

“The joy of owning the new Yaris is an opportunity and a whole new ownership experience,” he added.

Mr Takahiko Takabayashi, Managing Director, Toyota Ghana said the company’s philosophy is to supply durable vehicles supported by the superior after sale service to ensure complete customer satisfaction.

He said the company is always very keen to providing customers with the best vehicle life experience.

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GHANA BUSINESS & FINANCE

DECEMBER 2013