Finance and Investment Banking in Ghana: Richard Dugan Presents McOttley Holdings

Interview with Richard Dugan, Group President at McOttley Holdings

How do you asses the sector itself on the regional and Ghanaian level, as well as globally? What are the latest trends?

Our biggest strength as an institution is the financial side, where we have two players: money lending and investment banking. The investment banking side is regulated by the Securities and Exchange Commission, and the money lending side is regulated by Bank of Ghana. From the economic perspective, those two sectors are still green in the market. We have not gone to it for development yet. In the current trends, since the change of the government, there is a reform going through the sectors, both the Bank of Ghana side and the Securities and Exchange Commission side in the quest of strengthening the financial sector in Ghana. At the moment, we are more at the reform stage. The regulators are trying to find out how they can make it much more viable, more stable, more successful than it used to be. We have made our mistakes, but how do we move forward? Currently, all operators are looking in more of a regulatory direction. Bank of Ghana is looking at how depositors’ funds can be safe vis a vis how the NPL can also be reduced so that loans can perform better than they are now. The Regulator of the Securities and Exchange Commission is also looking at how they can change. At this point, the investment banks and the mainstream banks are doing almost exactly the same thing. Products and dynamics were almost identical, so now they are trying to use products to differentiate the sectors and the industry. Investment banking should have a specific product just for that platform. The mainstream banking or the Bank of Ghana companies should also have products that speak to that side of regulation. We can now say that business is back on track and we can move forward.

What are the different sectors you are present in? What are your competitive advantages and where do you distinguish yourself? What is your brand?

Last year, we made the Ghana Club 100 for the first time. It was a good work by the team and we congratulate them for being able to push the company there even though the economy is going through a shift.

As an institution, we have a few competitive advantages. McOttley is just five years old this April. What makes us stand out is that we are young, we are energetic, innovative, flexible to change, which some other competitors are not. We are a new generation of the industry, at a new phase; therefore, since we fall within the reforms and the regulatory change, we have a better arm to be able to sink in the new directions that the regulators are going. In terms of the product side, when it comes to thinking outside the box, that is something that we have a lot of leverage from there because we have gotten to deal with the clients more closely and we know what the clients are looking for. We are working around the clock to ensure that we are coming up with new things to help us stay on top of the market. In terms of competitive advantage company to company, we have a very strong brand that we have built in only five years. We have done a good job selling ourselves to the markets and with the endorsement of the clients on the brand that we have built because we want to ensure that the quality consistency is there. When it comes to the brand equity we are very careful because that is what we hold dear. If the clients can always have our brand in their minds and hearts it will give us more opportunity to be able to go deeper into the market. We have spread quite fast. Our investment banking branch network is spread throughout Kumasi and Obuasi in the Ashanti region, Tamale in the northern region, and Tarkwa in the western region. This branch network makes it easier for our clients to be able to assess our product and services wherever we are. We have been able to make a good footprint, but we have just crossed our gestation period. Therefore, we are now looking at how to grow, stabilize, sustain, and continue moving forward.

What other sectors are you present in?

One of the things that became a problem for us when we started was that we saw the need to have much more investment vehicles to give us options because Ghana is still a growing market. We are still finding our feet on some of the new sectors. There are many more opportunities that we can take advantage of. The good news is that we did not go large scale from the beginning just to see how the market will react to the kind of vision that we have. We have done a bit of real estate, fast moving commodities, logistics, and manufacturing. We have the financial sector, which is creating liability and assets, but we can have other alternatives in case the market is having a downturn. That becomes an advantage that we can fall back on. As a young leader, I also want to contribute to the economy and our other government perspective of creating jobs. In the past five years, we have employed about 200 people. That is quite a good start. If we are able to sustain that, we can grow that much more. So, we diversified to test those industries as well to see if it is somewhere where we can have a presence. In a gestation period, you can play around to see what your comfort zone is. Financials are our main focus. Now, we are consolidating.

What are some of the challenges that your industry faces? How do you solve these problems?

There are quite a lot of challenges as a business. Manpower is one of the biggest problems that we face as entrepreneurs because in the 21st century, there is a higher cost of hiring but low outputs. You need much more monitoring and control to get employees to see the vision through. So, it becomes quite difficult, but it means that we need to stay closer to our people, our team, and employees and try every day to show that you are keeping them in check. But, it still costs the business because you definitely cannot watch over all the things that you do, you still want to rely on people to do the job. In the midst of this, we try our best to identify the issues and then quickly recover so we can keep on track from there. The biggest issue we face is the human resource side, getting the right fit for the job at the right time. The second issue we face is our capitalization process. Every business life is contingent on the capitalization that it keeps. The bigger the capitalization, the faster it can grow. The smaller the capitalization, the longer it takes to grow. You do not have room for mistakes with capital because you will get stuck. We have gone through many phases to get to where we are. Currently, we are still seeing how we can diversify in terms of getting some partners to come in. At this point, we need to open the doors and get people to come and share our vision. We can then work towards growth and sustainability. These two things are critical. The third issue is that there are a lot of policy changes that we do not have control over. How quickly we adjust to policy change is one of the biggest things that we find ourselves concerned with as an institution. Unfortunately for us as a country, there is an agenda to quickly turn things around; therefore, it makes it quite difficult because the timeline for implementation is shorter. It comes very abruptly, and the impact sometimes is very great on the business. As an institution and as a team, we are trying our best to continue on.

What are your priorities currently?

As an institution, currently we are going through a lot of restructuring processes. We have made some mistakes. We have done some things that could have been done better. As an entrepreneur, you have to quickly acknowledge where you have gone wrong and work towards getting back on track. Our priority is first to consolidate and find where our strengths are and focus on those, rather than the things that are not our core mandate. The second thing is to see how quickly we can get new capitalization to come in to keep us on the right path of our work. The third thing is how we can work with our regulators because we have two institutions that are heavily regulated and bringing in a lot of reform. We have to work together to see how quickly we can cross that bridge to be on the same path with what the regulators want. As difficult as it is, it is not impossible. We have to quickly reevaluate our processes and our models to fit into that side. Corporate governance in Africa is one of the most difficult things. As a shareholder or as a business leader who has a share in the business, you believe that the buck stops with you. Therefore, there are certain responsibilities that you have to take. That is the African perspective. How can we get support, our staff, and everyone to all understand that they have an obligation to the standard clients, to the regulator, and to the economy as a whole? It is quite difficult getting everybody onboard, but we are getting there gradually. So, our current priorities are to keep the business to our best core functions where our strength and expertise are, keep low where we do not have much expertise, examine where we can recapitalize, get more joint ventures or partners involved, and find out how we can can fit to the regulatory reforms so that we can keep running the business in a sustainable way.

Give us an example of success story.

As a business, we have made some good strides in the past. We have helped fund a few businesses to be able to get where they are today. Because of confidentiality I cannot go into detail of which companies they are. One of the places that we have done very well is the government contractors, of which we have funded a few. We are in the process of making sure that they can also deliver to the economy as a whole. Last year, we made the Ghana Club 100 for the first time. It was a good work by the team and we congratulate them for being able to push the company there even though the economy is going through a shift. There are a number of investment banks coming up which means a lot for the team and we appreciate that. Apart from that, we have carried a couple of awards locally and internationally as well in terms of our customer service. We have done a couple of things as an institution in the investment banking side. At the back end, we have played a couple of our CSR, Corporate Social Responsibility, projects. Even in our small state, we still believe that we owe the country a responsibility by ensuring that we pay our taxes, file whatever we have to to keep in check, and at the same time, give back to the community that we serve, and they feel our impact. We believe that there are more success stories ahead of us.

Project yourself in the medium term, two to three years’ time. What would you like to have achieved by then?

We want to pick up the investment banking sector, irrespective of the reforms that are going on. We still have potential there. Our vision we are working towards is to ensure that we do not just have a local presence, but a global presence. We are putting through a lot of plans to get foreign transaction partners and proper shareholding partners. If we are in Ghana and we have people who need funding and things to be done and we cannot have it done here, we will have transaction partners outside the country that can do that. We are currently working on widening our network base to be able to ensure that anything that we can do either locally or externally, we should be able to play. We are also using product diversification, product innovations, creating more products to answer the needs of the Ghanaian market and the people. We want to be not just an asset management of Ghana, but an asset management that is globally recognized. It takes time to build, but in the next three years, we believe that we should be able to get there. In the next three years, we want to be known as the leading SME credit in the country. With the products and the structure we are trying to implement, we should be able to achieve that. There are leaders there, but it is one thing being the champion and another thing sustaining the championship. We believe that we can also become a champion.

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