Seth Adjei Baah: Commerce and Industry in Ghana

Interview with Seth Adjei Baah, President of Ghana National Chamber of Commerce and Industry

Let’s try to visualize the situation that Ghana is in, growing at a huge rate recently. What is your assessment of the economy of Ghana, not only the economy but is the country moving in the right direction? What about from the private sector’s perspective?

The Ghanaian economy is indeed currently on the path of sustainable growth and in the right direction. This is evidence in the growth rates recorded over the last few years. The economy recorded as high as 14.0 percent growth in GDP in 2011. Currently, Ghana is one of the fastest growing economies in the world. I must add, however, that most of the growth recorded over the last two years was in the oil sector with the other sectors such as manufacturing recording minimal growth. I think we should have capitalized on the impressive performance in 2011 but as has been the trend in our economic development over the years, election years always comes with economic challenges. Unfortunately, we couldn’t take advantage of the impressive performance in 2011 to get investors in to further improve on our growth.

Even though Ghana has a good reputation in terms of democracy, the investors were still scared by the election?

Yes, they were naturally very scared because they didn’t know what would happen during and after election. Unfortunately, the western world do not see Africa as a continent with different countries but one country ravaged by war based on what is happening in a few countries within the continent. I must indicate that Africa is a peaceful continent and ready to do business with the entire world.

If you talk to investors you get the impression that they are not sure about the outcome of the election petition currently in court, so they want to wait until the court decides. We have tried as much as possible to promote and get people to be interested in Ghana, but they wanted to wait. It’s not because of who becomes President, it’s because of how Ghanaians are going to accept the results and what is going to happen after that. Investors are not sure and are therefore hesitant to come in.

How do you deal with that problem?

The only way to deal with the situation is to expedite action and quickly come out with a verdict on the election petition currently in court. Some people out there are not sure what is going to happen so they are just watching and waiting which is really affecting the economy. Let me take this opportunity to assure the foreign investors that Ghanaians cherish peace and we will do anything possible to ensure that we maintain the current peace prevailing in the country.

We know people in Ghana are more peaceful than some people regionally. Even that doesn’t make a difference?

For us, we know it is peaceful but for someone who is going to put his money in Africa who doesn’t know much about Africa, it’s different. When you talk about Africa, the foreigners look at other countries where there are wars and they think we are all at war. This perception is having a negative effect on our economic development. When they see that Ghana is peaceful with a democratic system, I believe they will come here.

Regarding trade and industry, what are the sectors that you feel are the most interesting for investors?

Right now, everyone is interested in Ghana because of the discovering of oil in commercial quantity and so most of the recent investments in the country are directed at the oil industry. Unfortunately for us as a nation, we don’t have many people with knowledge on the exploration of oil so it’s difficult to get into the oil industry. Although Ghanaians have the opportunity to participate in the downstream industry we lack the know-how so it makes it very difficult for us to integrate. The challenge with the oil industry is that it does not create immediate employment for the indigenous people.

We are looking to create employment for our people where we can get the masses working but the oil industry is not that platform for creating the much needed employment in Ghana. Therefore, we should get back into the manufacturing industries; that is the way out. Unfortunately the manufacturing sector is not growing as desired due to a number of challenges. In 2011, before the election, manufacturing grew by just 1.7% and 2012 was worse. That is what we have to look at, to see how best we can help the manufacturing sector to grow. If manufacturing is growing, then we will be in a position to create the needed employment for our people.

Does the government support this?

It is a challenging issue but we will continue to advocate for a better business environment for the private sector to thrive. You have to push until you get the results you want. The government is looking for funds to implement its policies. Consequently, if oil happens to give the government the much needed funds, they will concentrate all their attention on the oil sector to the detriment of other industries like the manufacturing sector. For me our attention as a nation should be focused on the manufacturing and the agriculture sector because that is the only way we can reduce the current high rate of unemployment. How many people are being employed by the oil sector? We need to improve our manufacturing sector by adding value to our raw materials.

What can international investors do about that? Are there opportunities?

They can do a lot. Ghana is an agrarian economy. Unfortunately the agriculture sector is beset with a lot of challenges and we need to address these challenges with the assistance of foreign investors. We need to move away from the current subsistence farming to commercialize farming and also add value to our agriculture produce. I mean we need to embrace agro-processing. We are the second highest producer of cocoa in the world and the best quality cocoa in the world comes from Ghana. We export about 95% of our cocoa beans in the raw form. Why shouldn’t we add value to it here so we can export chocolate to you?

I agree but why didn’t that happen ten or twenty years ago?

For me I see it as deliberate attempt by our foreign counterparts to continuously receive cheap cocoa beans from us so they are adamant about setting up the factories in Ghana to process the cocoa. What is even more disturbing is that they dictate the price at which they buy the cocoa beans from us. However, when we want to buy the chocolate, they price the chocolate for us. They give us low price for our cocoa beans but sell the chocolate to us at a high price. But we are the ones who produce the cocoa beans. This is what has been happening over the years and we need to change. That is why we are having this interview to let the world know about some of these things. What we need now is for foreign investors in collaboration with the local investors to establish the factories here so we can add value to our cocoa beans and export chocolate. But the way things are right now, there is just nothing coming to us. The farmers are doing their best but in the end, someone should be able to say we want to reward you with this amount. Another example is that we have been mining over the years but we don’t have one refinery in Ghana. It is quite painful.

We all know the economy doesn’t create employment without SMEs and you are representing SMEs and others here. In your sector, what are the incentives for investors to come and invest?

There are a number of incentives. We have been able to establish free zones and anybody who comes within these free zones benefits from tax and duty advantages. This is what we are doing to encourage investors to come so they can set up their factories here. We are so flexible that free zones are in many places in Ghana. In my village there is a free zone and the government has approved that. These are all good incentives for any investor to take advantage of.

Are these new incentives?

These were developed a few years ago to make Ghana more attractive. You won’t get this anywhere else in the world. The regulatory environment has also improved tremendously over the years. Currently, if all your documents are ready you could register your business within five working days. We are trying to improve the other aspect of the business environment.

Maybe the investors don’t know about it?

It’s not that the investors don’t know. We have had a lot of business promotions out there but unfortunately the investor does not want to leave their comfort zone. It’s more of the perception of African countries that is weighing heavily against us. We are putting in place the necessary structures to attract investors.

You need to create an image of Ghana so people don’t confuse you with other countries.

That is exactly what we are doing now.

Let’s talk about the Chamber of Commerce itself. What are your biggest challenges? Is it to find new members? What is your policy to help bring in the maximum number of companies?

We represent the voice of the private sector and we are to ensure that their grievances are heard and addressed by the managers of the economy. Fortunately, we have a good quarterly engagement with the government. Every quarter we meet to bring our issues, grievances and challenges. Unfortunately, most of the issues have not been addressed, not because government doesn’t want to address them but they are so complex that they sometimes need patience and time.

I must admit that finding new members has always been challenging but we are trying our best to get more people to join the Chamber. Unlike the Francophone countries where all registered businesses are mandated to join the chamber of commerce, Ghana is not like that. There is freedom of association in Ghana, so you can’t force anybody to join the chamber.

The private sector can do better if the cost of doing business is reduced. Unfortunately, every now and then, the cost of doing business keeps on rising. Fuel prices were increased by 20% six months ago and I heard two days ago that it has been increased again. Given that there is no consistent supply of power from the national grid, business operators in Ghana have no option than to use generator sets. Running your business with a generator set is very expensive and it adds costs to the already existing high cost. I have a hotel and in my hotel for instance we spend up to about US$18,000 dollars a month on fuel alone. This is an added cost.

The whole infrastructure, including energy, is not following the growth of the country.

I agree with you. Water is expensive; it’s hard to transport raw materials, our roads are in a very deplorable state. Previously it took about one and a half to two hours from my village to Accra. Currently, it will take you four hours because the road is bad. These are some of the challenges. Apart from that, we think that information should move easily to enhance your business, which is not the case today.

The banks in the country charge as high as 32% interest rates on their loans. In Ghana, SMEs form the majority of businesses but they can’t even get bank loans at 20% interest rate. We go to savings and loans and they take 6% to 10% interest rates per month. How do we expect these SMEs to expand? They are virtually working for the banks. If you look at the financial statements of the banks, they are the richest organizations in the country. If you are looking for the top 100 organizations, the banks are leading the way. Why? Because they take a lot of money from the private sector operators. This situation is further crippling the ability of the SMEs to expand. You retain your profit to expand your business but if all profit is used to pay loans then what are we doing? It’s a big challenge. The cost of doing business has been a big challenge for us in Ghana and because of that we find it hard to expand our businesses.

The other issue is the depreciation of our currency. I was traveling less than ten days ago and the dollar was being traded for 1.92. As of today, it is almost 2.1 which is more than 15% depreciation. The negative effect of this depreciation on firms which import their raw material is enormous.

As much as we try, we don’t see growth. People are doing quite well. I have confidence in the private sector in Ghana. They are trying their best but the challenges are enormous and we have to find a way to help them.

How can the international community help?

We need an injection of capital into the economy. The international community should assist by making available to the SMEs long and medium term loans at affordable rate. Currently, if you are take a loan from bank, it’s only the banks that benefit. What sort of business investment can you make to be able to make profit unless you’re just trading – buying and selling? I think this is something that needs to be addressed.

What is your five year vision for the development of Ghana?

My dream is that by the time I leave office, the private sector in Ghana will really be the engine of economic growth and development. I want the private sector to be able to position themselves, strategize, expand their businesses and take the lead in the socio economic development of Ghana. I think that currently the private sector in Ghana is being led by foreigners and it’s not ideal. We need to have indigenous people leading the development of the nation and that is my dream. I want to empower people, equip them, and support them to take that lead. If we are able to do that, I think I’m done.

This is your third year as President of Ghana National Chamber of Commerce and Industry. Can you reapply? How does it work?

We have a two term system. I am almost at the end of the first term and then I can reapply if I want to. It is quite challenging but it is an opportunity to serve the people. For me one of the most important things in life is to provide support to others and I enjoy doing it.

After your term, what are your other ambitions?

I will still be available to provide my services to help build the economy of Ghana for the betterment of the citizens.

You could be a Minister of Trade and Industry.

It’s possible. However, it depends on the government and who they decide to appoint to do the work.

Any other comments?

I think as much as possible; the western world should not see Africa as a country ravaged by war. They should see Africa as a continent and believe in us. Most European countries couldn’t match or even achieve half of the growth in Ghana, but they still look down upon us. When it comes to investment and bringing their money, they continue to stand back and watch. Even if they make an investment, it’s not enough to be able to make an impact. Europe is giving a lot of offers and promises. They should look within and see if that will really help Africa. For me, I think this Economic Partnership Agreements (EPA) won’t help us. They are developing their industries in their respective countries and want to export to Ghana without taxes and duties. This I believe will collapse the factories in our country since our nascent indigenous factories cannot compete with the well developed factories in Europe.

We need to continue to develop the private sector in Ghana and encourage people to go into manufacturing. I am very optimistic that with time they will grow and beat the giants that are over there. I wish the international investors would come here with us. Let us all partner and establish the industries here. It will be cheaper because we have the raw materials here. If they want to help us achieve our vision then they should come and invest in Ghana.