According to statistical report from the World Bank, in the 2016 doing Business data for Ghana, the Ease of Doing Business rank (out of 189 economies), you will see in below stats that proves we need to do more as a country in doing business and address our challenges going forward.
|INCOME CATEGORY||Lower middle income|
|GNI PER CAPITA (US$)||1,620|
|DOING BUSINESS 2016 RANK||114 (change in rank -2)|
|DOING BUSINESS 2015 RANK||112|
Ease of Doing Business in Ghana deteriorated to 114 in 2015 from 112 in 2014. Ease of Doing Business in Ghana averaged 82.13 from 2008 until 2015, reaching an all-time high of 114 in 2015 and a record low of 60 in 2010.
The Ease of doing business index ranks countries against each other based on how the regulatory environment is conducive to business operation stronger protections of property rights. Economies with a high rank (1 to 20) have simpler and more friendly regulations for businesses. Ease of Doing Business in Ghana is reported by the World Bank as showed above.
Although Some 11.5 million people working in Ghana including Multi-National Companies which is the estimated workforce of the country have helped the economy withstand the global crises of the past years relatively unscathed. Reason enough for us to take a closer look at what doing business in Ghana is about.
International companies are facing an increasingly competitive landscape more especially in capital city (Accra). An uncertain economic outlook, as well as cultural and regulatory differences, creates a challenging scenario for such firms. International expansion has a number of advantages for corporations, including higher growth potential and access to cheaper resources and labor.
With over a decade of assisting foreign companies, especially small and medium size enterprises (SMEs), market and sell their products, technologies, and services in Ghana, I have come to understand what the major problems are for these kinds of companies more especially international firms when operating or growing their businesses here. Below I offer what we consider biggest practical challenges for foreign companies in the Ghanaian market and how to address them.
In Ghana, many administrative and bureaucratic tasks that have been simplified by our regulators can still be quite time-consuming. Everything from opening a bank account, to registering your company, to gaining product approval, can drag on for months or even contract approvals for operational purposes. The lack of a strong rule of law and an inconsistent application of regulations means that such processes are not always designed for international company’s convenience.
In addition, many procedures that would be handled electronically require reams of paperwork which need to be filled in and stamped by hand. The time required to complete these efforts can be unexpectedly lengthy. We know of many foreign companies that hire 1-2 full-time staffers in Ghana, hoping they will lead their marketing and sales efforts, only to find that their employees spend more than half of their time completing administrative tasks.
To be successful in Ghana as a business, your company will also need a full-time administrative team in place which can handle all of your company’s paperwork in Ghana. This support will free up time for your sales staff to focus exclusively on promoting your company’s products, without having to spend time getting approvals from offices all over town.
Also, our regulated structures and procedures must sometimes prioritize the end operational activities of these international firms since they impact our economy positively. We saw the total assets of our banking industry as at the end of November 2015 hitting GH¢61.1 billion, representing a 21.5 percent growth with total deposit as at the end of November 2015 also hitting GH¢38.7billion, representing 28 percent growth, while total gross advances were GH¢29.5 billion which represented 20.9 percent growth.
Non-performing loans (NPL) ratio of the banking system as at the end of November 2015 was 14 percent while capital adequacy ratio for the banking industry was 17.6 percent and I will personally attribute these incremental growth to the recent operations of credit bureaus in Ghana, having put measured in place to curtail and prevent loan defaulters in the country.
Cash, Borrowing, and Resource Management. Cash is King! We’ve all heard this maxim and it is more true today than ever before. A healthy profit may look nice on your financial statements, but if capital expenditures or receivable collections are draining your cash, you won’t be able to stay in business for long. Too often executives and small business owners fail to focus enough on cash flow generation.
In order to head off this problem, businesses must either be adequately capitalized and must shore up cash reserves to meet all obligations as they are needed and to handle downturns and emergencies that may arise. Cash management becomes even more important during recessionary times when cash is flowing more slowly into the business and creditors are less lenient in extending time to pay.
For small businesses, handling business accounting and taxes may be within the capabilities of the business owners, but professional help is usually a good idea. The complexity of a business’ books go up with each client and employee, so getting assistance with managing cash and the bookkeeping can allow you to excel when others are calling it quits.
Cash flow challenges are exacerbated by the lending climate, particularly for small businesses. Bankers are unlikely to be more liberal in their lending policies any time soon in Ghana.
Another hindrance international company’s face in Ghana is cultural misunderstandings arising from miscommunication. Although there are an increasing number of Ghanaian people highly proficient in English, it is uncommon to find someone who understands the subtleties of the language and possesses a strong enough understanding of both the English and foreign languages (Spanish, French, Portuguese, etc.) to navigate delicate business negotiations more especially when it has to do with international contracts.
We have witnessed numerous instances where heads of foreign companies make a trip to Ghana, have several productive meetings, and return home with strong business prospects. While communication between the foreign and Ghanaian companies goes smoothly at first, things start to break down as business issues get more complex and the Ghanaian side has difficulty explaining to the foreign company business practices that are unique to Ghana in a way that is understandable to a western audience.
What started as a promising prospect for both sides often breaks down due to misunderstandings. To avoid such problems, it is important to have an international team in place which can bridge Ghanaian and western cultural differences.
Human resource in Ghana. Year in and year out, international companies in Ghana rate human resources as among the biggest challenges of doing business here. While western employees tend to delegate responsibility and have flexible lines of authority, Ghanaian workers are accustomed to a more hierarchical structure in which each person has a clearly defined role.
Such differences can often lead to tensions between western managers who are used to employees who take their own initiative, and Ghanaian staff who have been trained from a young age to always follow instructions from the top.
It will be important for international companies to have a clear set of procedures regarding incentives for outstanding work and punitive measures for substandard performance. In addition, regardless of the size of the company, you should divide employees into small teams which each have a clear leader who oversees the group and reports directly to his or her superior. To best motivate your Ghanaian employees, it will be necessary to closely monitor their work while also encouraging them to be creative and take risks.
Uncertainty. All of us, and especially business leaders find great discomfort in uncertainty. Because of global debt and economic struggles, uncertainty is more pronounced today than in the past. The sad news is that uncertainty leads to a short-term focus. Due to uncertainty, companies tend to shy away from long-term planning in favor of shorter-term goals.
While this might feel right, a failure to strategically plan five to ten years into the future can end up destroying value. Businesses must learn to balance the need for a more reactive, short-term focus with the need for informed, long-term strategies. Uncertainty tends to put many into a general malaise unable to get anything done.
The ever-running news cycle leaves everyone feeling a bit on edge. This causes business owners and executives to hunker down and customers to stop spending. You need to shut out the world ending news and get back to work.
For business culture, please note that, to succeed in Ghana, your company must realize that it cannot take the same business model, which may have served you well in your own country, and simply apply it to the Ghanaian market. You will need to be flexible and adjust to a country that practices business according to “Ghanaian characteristics” deeply related to is traditions.
Without a presence and close supervision in Ghana, it will be difficult for your company to ensure its best interests are being advanced by its agents and employees. To adjust to these cultural differences, it is important to be humble and to learn from the new culture you are dealing with so you can have the cultural sophistication to grasp the complexities of this market.
Marketing and Customer Loyalty in Ghana. Along the same lines as increased selection and competition is the challenge to market to potential customers effectively and retain your existing customers. Smartphones, social media, texting, email, twitter and other communication channels are making it easy for businesses and individuals to get their messages out.
Figuring out the right marketing channels is key for businesses to be successful in the future. Where are your customers and how do you best reach them and what is the right messaging? Once you get a new customer, how do you keep these customers when they are constantly barraged by competitors of all types, sizes, and locations, trying to convince them that they can do it better or provide it cheaper?
Identifying what your customers want and doing a better job of giving it to them will make all the difference in your company’s future. The conservative spending climate is also causing a shrinking customer base. Consumers are still quite conservative with their pocketbooks, and as a result, organic growth from current and new customers is not growing as quickly as businesses would like.
Business owners and executives in Ghana are spending more time figuring out how to go above and beyond to keep existing customers, while at the same time figuring out how to cost-effectively reach new customers without competing solely on price, which always ends up to be a race to the bottom.
Another great key challenge International business face in Ghana is finding the right staff. Without exception, every business executive I speak to says that one of their biggest challenges is staff. Finding the right staff, retaining them, and ensuring they buy into the vision of the business.
I’ll freely admit that I have no magic answers here. In fact, if someone could develop a formula for recruiting and engaging the right team members, they would make millions. A small business is almost like a family, and, like many families, they can work well, or they can be dysfunctional. In big companies, the human resource challenge is politics and fit in the workplace, but when it comes to small business, its personalities and skill.
When you work in a small environment, each team member’s personality can have a huge impact on the harmony and productivity of the business. The key is to learn how to deal with different personalities, figure out what drives each individual team member and tailor your management accordingly. Despite high unemployment in Ghana, many companies struggle to find the right talent with the right skills for their business.
Many new IT base International business jobs in Ghana require high-tech skills and some require several years of training. Because of changing technology, businesses are struggling to find qualified workers with IT skills, problem solving abilities, and deductive reasoning skills.
One Ghanaian word you will hear constantly while doing business in Ghana is ‘kpakpakpa’. Translated into English, the word means smart, fast business relationship. The importance of building strong relationships in business is not a novel concept for western businesses. However, in Ghana, kpakpakpa’ plays a far more important role than it does in the West.
While in the other parts of the world, you may be able broker a deal just through formal business meetings; in Ghana it is necessary to spend time getting to know your Ghanaian counterparts outside the boardroom during tea sessions and dinner banquets.
In order to develop such relationships, it is important to have the patience to build them. Due to the necessary time commitment, contracts may take three to five times longer to complete in Ghana than they do in the West. For your company to succeed in Ghana it is important to spend time cultivating relationships with counterpart businesses, government agencies, and trade organizations.
There are genuine opportunities for foreign companies seeking to expand in the Ghanaian market. However, the challenges of this market are just as real. In order to succeed in this market, your company will have to take a realistic approach to Ghana, and you will have to leave your preconceived notions of how business should be done at home.
Many foreign companies are thriving in Ghana, but they have only been able to achieve this success by having patience, cultural understanding, and perseverance.
Even though Ghana is still in its infancy period, factors such as steady political stability, consistent economic growth, ease of doing business, rich natural reserves, and skilled labor and less expensive workforce makes Ghana an attractive place to invest as well as start small and medium ventures.
With norms revised to make Ghana more business friendly, the Government must try to create awareness among individuals, future entrepreneurs, and potential investors (international and local) that Ghana is the upcoming business hub.
I would strongly suggest investors to look into this attractive West African nation for their future investment, and rest assured they would get more returns than they expect!
Author: Gabriel Ofori Yeboah
Associate-Data Management & Reporting
Dun & Bradstreet Credit Bureau Ltd.
Mobile no.: (+233) (24) 6751535