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MARCH 2015 / ISSUE 046 GH¢10.00
Touris Prop u m: p s industr pa y
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THE FIRST BUSINESS READ IN GHANA
Union Savings & Loans leads in SMEs banking
Follow us online at www.ghanabizfinance.com
CONTENTS ISSUE 046 / MARCH 2015
16 Mining
Mr Philip Oti-Mensah, Chief Executive Officer, Union Savings & Loans
6
Briefs
Summaries of activities and events in the business and financial world.
10 Economy
Improved revenue mobilisation and expenditure rationalisation measures are features of a growth model that has failed in the past and may fail today.
14 Industry
Governments have been battling to stimulate the growth of the private sector but industries still face a myriad of challenges. What can be done for them to overcome these hurdles?
Manganese, a mineral whose economic importance in steelmaking and iron production is indispensable, is exported by Ghana. When more manganese is used locally through valueaddition, the gains may be more than the foreign exchange from exports.
20 Trade
There are opportunities for Ghanaian exporters to do good business in China. Yet the export businesses have not explored and exploited the Chinese market fully.
24 Exporters of scrap metals are
mounting pressure on the government to lift the ban on scrap exports. Will the government succumb?
28 Science & Technology
Government recognises that climate change offers opportunities that could be employed to achieve its development goals. The opportunities, however, come with challenges that must be surmounted.
34 Cover
The story of how Union Savings and Loans Company leads the pack in SMEs banking in Ghana unfolds, as Union has strategised to maintain its dominance.
38 Tourism
In Ghana, many people now choose hotels that offer exercise facilities and spas. The spa industry is primed to benefit from this phenomenon.
Industry: Page 14
Find us 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.
MARCH 2015
42 Exhibition
A two-day exhibition of Konica Minolta’s office documentation and print machines was eventful.
44 Perspectives
All over the world, all types of businesses are exposed to the risks of cybercrime. So they seek protection through cyber insurance. 48 Starting a business could be a scary and intimidating thing. But if you are considering becoming an entrepreneur, do not forget the benefits and profits.
50 Regional Integration
Each ECOWAS country has been implementing its own industrial development policy. Implementing the West African Common Industrial Policy could improve the situation in the subregion.
54 Outlook
Some Western anti-corruption economists and their acolytes have a narrow view of corruption which offered the perfect intellectual cover for them to ignore the ‘new corruption’ right under their noses, reveals American Professor Janine R. Wedel.
56 Events
Know where, when and how to attend conferences of your choice.
57 Stats & Indices
Figures speak louder than words for the economy.
58 Commodities
Find the prices of agricultural produce in selected local markets, as researched and compiled by Esoko.
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GHANA BUSINESS & FINANCE
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… It is an urgent priority General Manager Josiah Spio-Garbrah jspiogarbrah@ghanabizfinance.com adverts@ghanabizfinance.com +233 264 510 396 Editor Ayuureyisiya Kapini Atafori editor@ghanabizfinance.com Senior Staff Writer Kweku Darko Ankrah kdankrah@ghanabizfinance.com Staff Writer Adnan Adams Mohammed Columnist Jerry Halm Contributors Martin Luther C. King Oppong Baah Anthony Sedzro Art-Graphics & Design Manager Benjamin Tetteh Photography & Production Daniel Sackey Yobo Circulation & Subscription Jeffrey Dapaah subscription@ghanabizfinance.com Editorial Committee Prof. Paul N. Buatsi Prof. Kwame Addo Ms Johanna Awotwi Mr Gaddy Laryea Mr Ray de Bono Mr Nana Robert Mensah Mr Frederick Alipui Ms Dede-Esi Amanor-Wilks Ms 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 info@ghanabizfinance.com Brand Advisor Dmax Studios in Malta, EU. (www.dmax.tv) Credits
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Ghana Business & Finance magazine is published by
Is it not a sad and objectionable commentary on the way Ghana does things? Ghana is running before it learns how to walk in its attempt to manage its hydro-carbon resources. No effective legal framework for the exploration and production (E&P) of crude oil was put in place before Ghana started producing oil in commercial quantities. The law now being used was promulgated when the country did not discover oil in commercial amounts. The Petroleum Exploration and Production Law, 1984 (PNDCL 84) mainly governs the upstream sub-sector of the petroleum industry. When Ghana formally became an oil-producing country on December 15, 2010, the governments had not enacted a law to replace PNDCL 84. There was enough time to prepare for an Act of Parliament to regulate the industry. Oil was discovered in 2007 under President John Kufuor – three years before Present John Atta Mills turned the knob of the drill at the offshore Jubilee field. In another case of running before walking, Ghana has the Petroleum Revenue Management Act, 2011 (Act 815), Petroleum Commission Act, 2011 (Act 821) and Petroleum (Local Content and Local Participation) Regulations, 2013, (LI 2204) which, though have shortcomings, mainly govern mid-stream and down-stream activities. Is it normal that one does things which are usually supposed to be done second first? Yes, it is in Ghana’s way of running oil E&P activities. No wonder Ghana did not maximise the gains from the contracts with the foreign companies which obtained oil blocks. It is anachronistic, paradoxical and retrogressive for Ghana to continue to apply PNDCL 84 to regulate the E&P of the oil industry in 2015! Apparently, realising the seeming absurdity in what can be said to be a comedy of errors with regard to the efficient management and regulation of upstream activities, government sought a replacement for PNDCL 84. Even with tardiness, enough care was not taken to draft a law that could be honoured in the hall of fame of international best practices. The first E&P Bill was withdrawn from Parliament in 2010, after some civil society groups and energy experts pilloried aspects of its provisions. After dithering, the Petroleum (Exploration and Production) Bill, 2013 was approved by Cabinet. But as to whether the E&P Bill has been placed before Parliament or not, we could not ascertain. Be as it may, civil society organisations (CSOs) such as the Natural Resource Governance Institute, Integrated Social Development Centre, Civil Society Platform on Oil and Gas, Africa Centre for Energy Policy (ACEP) and Ghana Institute of Governance and Security (GIGS) have, however, been stressing the urgency in passing the Bill. But their calls, and the appeals by hydro-carbons experts and concerned citizens, seem to have fallen on deaf ears. Not that these CSOs, the experts and publicspirited Ghanaians are content with all the clauses of the Bill. They have criticised some aspects of the Bill. At a news conference last December, the Executive Director of ACEP, Dr Mohammed Amin Adam, in drawing the attention of stakeholders to the weaknesses of the Bill, decried the non-existence of the best practice of open and competitive public tender process in the award of petroleum licences in the Bill. Dr Adam explicated that the petroleum licences are currently awarded through an administrative process which is susceptible to the cancer of corruption. He indicated that the failure to enforce Section 32 (2) (m) of PNDCL 84 which mandates the application of competitive bidding demonstrates the lack of political will by the previous governments. This inaction facilitates corruption. There has not been competitive bidding of oil blocks, though the law requires it. At present, oil blocks are offered under what is described as the hybrid agreement system in which the government only receives royalties, taxes and has some carried interest while the oil conglomerates take a larger chunk of the petro-money. Apart from raising serious concerns over the fiscal provisions in the Bill, experts like the Executive Director of the GIGS, David Agbee, attacked the non-inclusion of mandatory requirements for the disclosure of oil contracts. Employing its legallyprovided discretion, the government has published only seven out of 23 active oil contracts. GB&F calls for a comprehensive disclosure framework in the Bill that will engender transparency in oil/gas governance. GB&F also appeals to Parliament to consider the criticisms of the Bill ponderously in the broad national interest before passing it. All stakeholders, particularly civil society, must put pressure on the government and Parliament to expedite the passage of the Bill. For, it is an urgent priority.
Ayuureyisiya Kapini Atafori Acting Editor (+233 024 2385374)
MARCH 2015
Letters to the Editor send your letters to the editor at
editor@ghanabizfinance.com
GHANA BUSINESS & FINANCE
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EDITOR’S SUITE
Expedite passage of Petroleum Bill
ECONOMY
Being prudent with public expenditure falters BY KENNEDY ADDAI KUFFOUR
Over the years successive governments have instituted policies and strategies to succour the situational and peculiar challenges they have been confronted with. Candidly, Ghana has been subjected to severe economic, fiscal and social stress in recent years. These include challenges associated with the implementation of the single-spine wage policy, shortfall in grants from development partners, non-realisation of projected revenue from the production of oil, larger-than-expected petroleum and utility subsidies, higher interest costs arising from the steep rise in short-term domestic interest rates and continued disruption in gas supply from the West African Gas Pipeline (WAGP).
To borrow the words of Finance Minister Seth Terpker in his presentation of the April 2014 policy statement to Parliament: “consolidated set of measures that we have been using to manage our economy to correct the imbalances that have occurred in recent years and to lay the foundation for transforming the structure of the economy.” In line with this, a number of improved revenue mobilisation, performance and expenditure rationlisation measures had been cobbled together by the government. The revenue measures which include national fiscal stabilisation levy – levy
10
of five per cent of profit before tax of banking, insurance and other financial services, communication, and brewery sectors, special import levy of one and two per cent on some imported goods, environmental tax of 10 per cent on plastic and import duty of 20 per cent and value-added (VAT) on imported mobile handset were put together. But most of them have not yielded the expected returns and effects. In 2013, these measures in total yielded about GHC168 million, 0.2 per cent of Gross Domestic Product (GDP), and was projected to return GHC630 million (0.6 per cent of GDP) in
GHANA BUSINESS & FINANCE
2014. But as stated by the Finance Minister “preliminary data for the first nine months of the year indicate that, revenues are below the targets for the period.”
Measures introduced
The expenditure rationalisation measures introduced to contribute to the achievement of fiscal target are: regular adjustment of fuel and utility prices to achieve better targeting and reduce related subsidies, minimising waste in expenditure on goods and services and capital, moratorium on the award of new contracts and
MARCH 2015
TRADE
Exporters miss out in Ghana-China trade BY ADNAN ADAMS MOHAMMED
Ghana’s trade with China has now eclipsed that of the United States (US), one of Ghana’s principal trading partners. The issue mostly raised by some economists is that Chinese investments in Ghana do not favour the country’s industrialisation in terms of capacity building and job creation. But with recent investments in Ghana by Chinese companies, it appears that trend is changing. China’s emergence as Africa’s largest trading partner has attracted the attention of the world, especially the seemingly envious West. Trade and investment flows between Africa and China have increased dramatically in the past decade. Encouraged by China’s ‘go abroad’ policy, government financial support, growth in consumption, resources demand and by the gain from external assistance to Africa, ChinaAfrica relationship entered a new phase in 2010. The first two months of 2010 recorded about US$17.67 billion. During that period, China exported US$8.7 billion to Africa, a 42 per cent increase year-on-year. African exports to China, however, totalled US$9 billion. Clearly, China benefits from importing natural resources from Africa, and exporting goods to the continent. Yet it is unclear whether this model works for all African countries. While Chinese investments could deliver a fortune for Africa, particularly Ghana, it could also bring disaster. The ExportImport Bank (Eximbank) of China is committed to continue investing in Africa despite the perceived risks and the reduced returns to industrial investments. African banks are actively seeking co-operation with those from
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China. ECOBANK, a Pan African Bank, signed a co-operative agreement with Bank of China in February 2010, coinciding with a visit to China by officials of the African Development Bank. South Africa-based bank, First Rand, signed a memorandum of understanding (MOU) with the China Africa Development Fund in March, 2010.
Zero-tariff policy
The zero-tariff policy was introduced largely for manufactured and processed products such as plastics, chemicals, industrial tools, vehicles, machinery
GHANA BUSINESS & FINANCE
and spare parts. The policy aims to strengthen the competitiveness of African exports into the Chinese market, increase African commodity exports to China and encourage the establishment of beneficiations in Africa. The policy presents new exporting opportunities for African countries, in the short and long term. It could contribute to job creation and industrial development in Africa when applied in a utilitarian manner. The key question is: Judging by China’s previous engagement in Africa, is China’s investment beneficial to Ghana and will it help the country to
MARCH 2015
TRADE
Increased pressure for lift of ban on scrap metals exports BY ADNAN ADAMS MOHAMMED
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GHANA BUSINESS & FINANCE
MARCH 2015
COVER
Union Savings & Loans leads in SMEs banking
BY KWEKU DARKO ANKRAH
Union Savings and Loans Company, a fast-growing indigenous “tier 2” banking institution has carved a niche for itself as the leading Small and Medium Enterprises (SMEs) bank of choice in Ghana. The bank has rolled out innovative and supportive products and aggressive -marketing projects to ensure its continuous dominance in the SME Banking sector. Ultimately, Union Savings and Loans seeks to become the number one SMEs ‘bank’ by increasing financial inclusion for SMEs and providing bespoke products and services for the sector. This agenda has witnessed Union dedicate more than 80 per cent of its loan portfolio to SMEs, diversified across different sectors. It has also introduced a novel “Union SME Clinic”
34
which seeks to build management capacity of owners and managers of SMEs. Union has also introduced the OmniBanking platforms as part of expanded infrastructure aimed at
GHANA BUSINESS & FINANCE
bringing financial services to “every corner of the country.” Currently, Union, which won the ‘2014 Best SME Finance Company in Ghana’ from the reputable Londonbased Global Banking & Finance Review, is rated among the top three of the “tier 2” banking (savings and loans) operators in the country. Financial analysts opine that Union`s pioneering strategic move into the SMEs sector is the smartest business move in a highly competitive financial arena. This gives Union an edge over its competitors. Union`s move is also in tandem with the findings of the latest Ghana Banking Survey undertaken by international accounting firm, PricewaterhouseCoopers (PwC)Ghana, titled ‘Harnessing the SME potential.’ The survey stated that “In
MARCH 2015
TOURISM
Prop up spa & wellness industry to increase revenue BY KWEKU DARKO ANKRAH
38
GHANA BUSINESS & FINANCE
MARCH 2015
PERSPECTIVES
Better Safe Than Sorry:
How Start-ups are Staying Protected in Cyberspace BY JASON ANKENY
Even business intelligence firms can learn a thing or two about doing business in the digital era. Just ask Bowman & Partners, a Roanoke, Texas-based start-up that mines a wealth of brand and consumer data to create customer management strategies and marketing initiatives for clients that include Comcast Business, United Healthcare and Windstream Communications. Like many businesses, Bowman & Partners has shifted much of its workload to the cloud, and when principal Paul Bowman began chasing a contract with a major healthcare firm, he proposed a cloud-based dashboard to gather information straight from the company’s call centers, offering insights into medical activity and patient trends from across the country. Not so fast, the healthcare company said. “Because we would be collecting and housing personal health information in the cloud, they let us know pretty early into the negotiations that we’d need to expand our level of insurance,” Bowman says. “If anything were to go wrong, we needed to make sure we were covered.” Bowman & Partners discussed its options with Business Insurance Now, an online agent that had previously sold the company a general liability policy offering protection against injury claims, property damage and other physical-world concerns. Business Insurance Now put together a cyber insurance package safeguarding Bowman & Partners from the perils
44
of the virtual world, such as data breaches, network attacks and business interruptions. The cyber risk policy, in tandem with other insurance upgrades requested by the healthcare provider, helped Bowman & Partners seal the deal.
Online risk
Bowman & Partners isn’t the only company looking to minimize its online risk in order to maximize financial reward. American businesses were expected to spend US$2 billion on cyber insurance premiums in 2014, a 67 percent increase from the US$1.2 billion they forked over a year earlier, according to Betterley Risk Consultants. While that’s just a fraction of the US$1 trillion in net premiums the U.S. insurance industry wrote in 2013, experts forecast that spending on cyber insurance will grow exponentially in the years ahead. Security software developer McAfee estimates that cybercrime already costs the global economy US$445 billion a year, a figure destined to surge as more companies and consumers across the
GHANA BUSINESS & FINANCE
planet connect to the web. It’s not just big-box retailers and other large corporations in the cross hairs. Forty-four percent of American small businesses have been victimized by cyber attacks, according to the National Small Business Association, which adds that each breach racks up an average of US$8,700 in damages. “Cybercrime is in the news all the time, but there’s a huge misconception that it only impacts big companies,” says Ted Devine, CEO of smallbusiness insurance provider Insureon, Business Insurance Now’s parent company. “The reality is that anybody that has forms of client data exposes themselves to cyber risk. Whether it’s a mom who owns a cupcake store that might take credit cards or a consulting firm that deals with healthcare data, the risk is incredible. Running any business without cyber protection is like jumping out of a plane without a parachute.” Cyber insurance policies trace their origins to the dot-com boom of the late 1990s. “We saw that [the internet] was a fundamental change
MARCH 2015
REGIONAL INTEGRATION
ECOWAS implements West African Common Industrial Policy Since its creation in 1975, the Economic Community of West African States (ECOWAS) has taken many initiatives to promote consultation and regional synergies and support the Member States in their socio-economic development efforts. It has not been able to implement regional initiatives in the area of industrial development or, if it has, the initiatives have only been partially implemented, which has not enabled the attainment of the anticipated objectives.
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ach country has continued implementing its own national industrial development policy with consultation at the sub-regional level. This has proved inefficient despite the economic, social, industrial and commercial development initiatives supported by the international community for Africa. This has led to the following repercussions: creation of similar and competitive production units in the region (breweries, cement factories, oil mills, etc.); excessive dependence on imported inputs, including raw materials, capital goods, machines and human capital; and lack of interest in processing endogenous resources in support of the export in the raw state of raw materials whose global prices were generally attractive until 1980. West Africa’s industrial fabric and industrial performance as well as
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the degree of processing of the vast mineral wealth and other abundant local raw materials have remained low. The sub-region’s industrial sector is not sufficiently diversified to produce a wide variety of intermediate and finished products. No country in the sub-region has been able to acquire a robust industrial base, notwithstanding the thorough reforms implemented during the 1990s (establishment of single investment windows; launch or accelerated privatisation programmes; decision to make the private sector the engine of growth and sustainable economic development, etc.). West Africa’s manufacturing industry, which is dominated by the agro industry, accounted for 7.36 per cent of the sub-regional Gross Domestic Product (GDP). Over four-fifths (80 per cent) of the manufacturing added value in 2006
GHANA BUSINESS & FINANCE
came from four countries: Nigeria, Côte d’Ivoire, Ghana and Senegal, whose shares were 39.7 per cent, 23.4 per cent, 10 per cent and 9.3 per cent respectively. The sub-region’s situation in the international context is, therefore, marked by the rapid circulation of information, which is sustained by the development of Information and Communication Technologies (ICT), globalisation, creation of the World Trade Organisation (WTO) and implementation of its agreements, the Economic Partnership Agreement (EPA) which has been negotiated between ECOWAS Member States and the European Union (EU), and the increasingly tangible consolidation of South-South co-operation.
Strengthening integration
In the face of the situation of West Africa’s industrial sector described MARCH 2015
OUTLOOK
The West and ‘Third World’:
Who Is More Corrupt? … beyond bribery BY JANINE R. WEDEL
Last month Greeks delivered a sharp blow to the European Union (EU) by voting in the left-wing Syriza Party, which has vowed to end years of painful austerity policies. But Syriza owes much of its popularity for its opposition to something else: elite corruption. As one news report put it, “Many in Greece feel slashed public spending has hit the most vulnerable hardest, while leaving … corruption of the apparent elites untouched.” This sense that something on high smells bad has galvanized protesters in recent years in countries as different as Brazil, Turkey, Ukraine, and the United States. They seem to share an intuitive sense that the system is gamed against them, that it compromises their livelihoods and futures, and that it makes it harder to have their voices heard, let alone discover who is responsible. Petty corruption, such as having to pay a bribe to a bureaucrat or customs official, also leads to discontent around the world. Some scholars call this “need corruption,” because it is driven by everyday people trying to navigate an impossible system to receive basic goods and services. And since corruption became a “hot” issue in the 1990s, global efforts to combat it have concentrated largely on this “need corruption,” with major 54
players like the World Bank (Is the Bretton Woods incarnation free from institutional graft as some of its officials have been indicted or convicted for one form or another of corruption?) and Transparency International (TI) at the forefront. But it is often the corruption of elite insiders, not petty bribery, that most foments distrust of leaders and public institutions. As I describe in my new book ‘Unaccountable: How Elite Power Brokers Corrupt our Finances, Freedom, and Security,’ this “new corruption” may be less visible, but it is practiced on a wide scale by a set of global power brokers who have rigged the system to their advantage in innovative ways. The worldwide protests triggered by this form of corruption are proof that a growing number of people have turned into
GHANA BUSINESS & FINANCE
disaffected outsiders, all too aware that they stand squarely apart from this system of power and influence. This is the most damaging and far-reaching form of corruption that exists today. And this “new corruption” — difficult to detect, but insidious — deserves our attention. The essence of this new (legal) corruption –- the violation of public trust – harks back to ancient notions of corruption. Yet its practitioners follow a thoroughly 21st-century playbook, written over the past few decades as privatization, deregulation, the end of the Cold War, and the advent of the digital age have transformed the world. These developments have broken down barriers and created new openings for elites to exercise their power and influence in a system that is more complex and opaque than ever, enabling MARCH 2015