• How Investors Can Win In Ghana’s Volatile Market

    This article was culled from Doing Business in Ghana 2015.
    When it comes to Ghana, the main concern about investing here is not necessarily about detecting the opportunity, mostly it’s about the lack of resources to manage and undertake the plan in a more effective and results driven approach. The effectiveness of your employee engagement strategies, choosing the right entry strategy, strategic alliance with local players—all play a key role.  A strong consensus is emerging that partnerships with the local private sector firms in Ghana are the primary route into Ghana, since they have a strong vested interest in a partnership’s success. They also have a much better knowledge of business conditions than the government.
    There remain sharp discrepancies between Ghanaian firms and investors from mature economies in their approaches to investment on the country. Although the modern financial system has developed numerous ways of measuring and assessing risk, the Ghanaian experience so far suggests that chronic underinvestment in Africa has as much to do with poor perception as real risk.
    When it comes to Ghana there are a number of clear lessons:
    Establish the right entry strategy.
    A foreign investor may team up with a Ghanaian entrepreneur or company for a joint venture, usually in the form of a partnership or a limited company. However, under the Ghana Investment Promotion Centre Act, 1994 (Act 478), a minimum equity capital ofUS$10,000 is required from any foreign investor who intends to enter into a joint venture partnership with a Ghanaian in any area of economic activity, except trading. In trading, the minimum equity capital requirement is US$300,000.
    Foreign investors are permitted 100-per-cent ownership of an enterprise provided the investor satisfies section 19 (2b) of the GIPC Act, 1994 (Act 478). Wholly foreign-owned enterprises must have a minimum paid up capital, the equivalent of US$50,000 in all areas of economic activity except import trading, where the minimum equity capital requirement is US$300,000. In the cases of export trading and liaison (external) offices, there is no minimum foreign equity requirement.
    Regulations require that you have a joint-venture partner especially in the Ghana’s oil and gas sector where the Local Content Law necessitates a joint venture partnership. Carefully select the right local partner/target by understanding the equity story, the shareholding structure in what may be a family business, the M&A experience of the shareholders, management capability and integrity are critical for would-be global acquirers.  Your local partner should be able to build on local understanding, establish relationships and networks assist in managing risks and help execute the entry strategy. Also make sure everyone involved is very clear on the joint venture’s goals and objectives, and has a good understanding of how those goals are to be accomplished.
    Conversely, although entering the Ghanaian market via an acquisition can be expensive and time consuming, it can provide immediate access to existing distribution channels, networks, and the opportunity to gain deep local market insights that companies can scale up to address other markets.
    Understand the evolution of government policies
    You need to understand the evolution of government policies in Ghana and make sure your plans and intents align with these policies. Create a good relationship with government and make sure that this relationship aligns with your business objectives. Work with management consultants in order to get a sound understanding of the Ghanaian market and a broad knowledge of the macro-economic and political environment. This includes insight into the availability of resources and local labor, regulation, tax legislation, culture, the competitive market and access to capital.
    Prepare for enough initial cash flow
    Because of high interest rates, borrowing money from banks in Ghana is very expensive. It is therefore critical that foreign investors have ample cash flow to keep their businesses going in the early stages. When starting a business in Ghana, it is important to come with a sufficient cash flow, because one of the issues in the country is bank interest rates, which are above 20%.
    Understanding the local market
    Companies interested in entering and winning in Ghana need to devise a structured approach to understand and do business with Ghanaian consumers. By focusing on the unique needs, behaviors, and preferences of Ghana’s consumer segments, and by applying an orderly approach to market entry and ongoing success; companies can capture the Ghanaian opportunity on their own terms, and in the process, ensure long-term profitable growth.
    Foreign investors need to understand that Ghana is different demographics and that the strategy that worked for them in other countries or territories doesn’t necessarily mean that same strategy will be successful in Ghana.
    Talent acquisition and development
    Empowering the Ghanaian organization
    You will need a well-placed staffing strategy that pulls the best local resources together and acquires foreign expertise where necessary.
    Many multinationals in Ghana are stuck in a profitability trap characterized by a lack of commitment to build country-specific operations and management systems. When expatriate company heads are brought in, their efforts often fall victim to short rotation cycles that inhibit the execution of long-term strategy.
    Local empowerment should extend beyond the country head to lower levels of management, which can help drive innovation and entrepreneurialism on the ground and decrease times to market for new products.
    You need the right people—especially in middle management, a group critical to the successful execution of a growth strategy.
    In order to progress in this direction you need to move in three directions:
    First, create more globally visible local roles, which may include representation on executive committees. Such positions emphasize entrepreneurialism and greater authority and offer higher compensation.
    Secondly, promote a meritocratic culture: accelerated career tracks, fair and transparent advancement processes, the absence of a “glass ceiling” for locals, a performance-based system that motivates self-starters and differentiated incentives for high performers.
    Thirdly, offer mobility and tailored leadership programs. Structured global rotations for strong performers and leadership-development courses (especially with some form of certification) are proving to be effective recruiting and retention tools.

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