A World of Opportunity Awaits SMEs That Embrace International Trade

“Today, the bamboo bikes are sold as far away as the United States, Japan, Turkey, Germany, the United Kingdom, Netherlands, and Belgium.”

Logistical costs, packaging and potential tariffs are among the major barriers to international trade for small and medium-sized enterprises.

Even without the challenges associated with exportation, small business entrepreneurs are constantly juggling competing priorities, such as obtaining financing for continuous production, increasing sales and marketing domestically, and managing payroll on a shoestring budget. The drive to export tends to fall behind these other priorities.

Still, given the growing interconnectivity of global markets and robustness of Internet-enabled commerce, it has never been more convenient and profitable for small businesses to pursue growth opportunities abroad.

Take the inspiring case of Afrocentric Bamboo Bikes Ltd., the for-profit arm of Ghana Bamboo Bikes Initiative. When this organization first launched, its primary goal was to address the transportation needs of school children and farmers in Ghana’s rural areas. Then, gradually, as word spread through the Internet, particularly on social media, the company evolved from building high-quality handcrafted bamboo bike frames for only the local community to serving international export markets.

Today, the bamboo bikes are sold as far away as the United States, Japan, Turkey, Germany, the United Kingdom, Netherlands, and Belgium. Overseas purchases now account for about 80% of orders, according to a recent estimate.

The fresh fruit and produce sector is one area where Ghana can boast of several well-established exporters. Blue Skies, for example, ships its produce from Ghana, cut and packed locally, to major retailers around the world, including Waitrose in the United Kingdom. Another success story is Albe Farms, a pineapple grower with production facilities in Akuapim and Ga West districts. The company engages in direct export to giant distributors in Germany and Holland.

According to the Ghana Export Promotion Authority, an agency mandated to develop and promote Ghanaian exports, there are currently more than 3000 registered private sector exporting companies in the country.

Here are a few key points GEPA and other experts recommend to companies considering exporting.

  • Educate Yourself: You need to develop a firm understanding of international business practices. This may require conducting research to gain a solid understanding of best industry practices, quality standards, and tax regulations within the targeted export market.
  • Do Your Homework: Conduct a thorough analysis of the export market. This means researching the size and concentration of the specific product in the target export country, the market share held by competitors, and actual and projected consumption projections.
  • Know your buyer: Perform a credit history check on your buyer to establish whether or not they are willing and able to pay. Additional due diligence can be performed by seeking information from the buyer’s business associates and other suppliers.
  • Understand cultural norms: It is important to consider cultural norms and customs of the country you are exporting your products to. This may influence how you brand, label and package your product. For instance, in some countries, using certain colors is offensive; also, buyers in certain countries might also prefer labels in their local language.
  • Hire dedicated staff: Hire dedicated personnel to ensure proper recordkeeping, as well as dealing with shippers, agents, and distributors. Hiring a lawyer to prepare legal documents and to advise on compliance issues and appropriate procedures is crucial.
  • Team Up: Consider teaming with a local partner. It is always advantageous to have a partner on the ground that understand the local market and can help with developing relationships and negotiating deals.
  • Be Nimble: Be prepared to rearrange the way your business operates, should it be required, to become internationally competitive. This means setting aside funds to support product and market development. It is recommended that a business maintain enough funds to support export market development for at least 12 months without receiving returns.
  • Certification and Accreditation: Many countries require accreditation and certification for specific products, which can be time-consuming and costly. Understanding the effects of this process on your business and objectives is crucial.
  • Consider all the risks and potential pitfalls: Doing business in a foreign country exposes an organization to numerous commercial threats and liabilities, many of which can be mitigated with insurance and proper risk management. Some of the more common export risk involve running afoul of regulatory and compliance obligations. On the operational side, companies routinely run into issues such as theft, damage to goods and other supply chain mishaps.
  • Find a reputable logistics partner. Many international buyers have strict supply chain requirements so it is important to find a logistics partner with international capabilities that can meet those standards.

There are innumerable opportunities for SMEs of varying sizes in Ghana to grow their businesses through international trade, but the road to success requires commitment and resolve on the part of management.

At the same time, an SME that decides to venture into international trade must be nimble enough to change course when necessary, always alert to where and how the trade winds are blowing.

Remember: As economies evolve, trade evolves too.

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The Promise of 2017: A Renewed focus on Ghana’s SMEs

“Specifically, Akufo-Addo has promised a reduction in the Value Added Tax for micro to small enterprises from the current 17.5% to a 3% flat tax.”

The new year begins in Ghana with great excitement and cautious optimism for owners and operators of small to medium enterprises. Pertaining to the new incoming government, sentiment in the business community is bullish, but not overly euphoric, suggesting many entrepreneurs are taking a wait-and-see approach.

While we anticipate the political change to have a significant impact on businesses going forward, we also see many other big themes shaping the business landscape in Ghana for small to midsize enterprises (SMEs) in 2017.
Below, we examine four of the major themes:

Improved Access to Critical Financing

For many SMEs in Ghana, access to financing has always been the biggest challenge to growth. This challenge worsened during the global economic crisis of the past decade as more banks became cautious about assessing risk. The economic uncertainty during this period also forced many SMEs to put off investment plans, impacting demand for new loans.

The new year could bring a change in the demand and supply of financing. On the demand side, a turnaround in the economy – low inflation and a stabilized cedi – should encourage more entrepreneurs to seek loans to further their business interests.

On the supply side, new entities have formed to focus on SMEs. For example, the newly formed Premium Bank, formerly City Investments Company Limited, will focus on lending to the SME sector as its core business. The bank has planned for 2017 an aggressive expansion program to roll-out new branches in Tema, Kumasi, Takoradi and Tarkwa.

Outsourcing to Specialty Service Providers

As business owners focus on growing their core business, it will become even more necessary for SMEs to outsource critical functions, such as human resources, billing, marketing and advertising, packaging, and accounting. There are also significant cost benefits to outsourcing back-office and administrative processes to a competent third party provider.

Fortunately, there are more specialty service providers in Ghana today who can provide these top-level services to SMEs. These include payroll and credit card processing, as well as data call centers to provide round-the-clock customer service.

Sharing Economy Takes Off

Uber formally launched in Ghana in 2016, marking a significant take-off for the sharing economy in Ghana. This year we anticipate the number of drivers and cars using the ride-sharing platform to increase, though issues with traditional taxi drivers and technical glitches still need to be resolved.

Already a significant number of Ghanaian renters and hoteliers advertise on room-sharing platform Airbnb. As homeownership rates increase, we expect this trend to also rise.

Overall, as the sharing economy takes off, we see a new breed of young entrepreneurs entering the SME space, creating jobs for themselves and others, and paving another path to financial independence.

New Government with Big Promises

Ghana’s president-elect Nana Addo Dankwa Akufo-Addo has promised to replicate Germany’s successful model of fostering the development of SMEs to support its large economy. In a speech in August, Akufo-Addo noted the significant role played by 3.6 million small industries that provide more than 60% of all jobs in Germany.

The president-elect said he would work to expand opportunities for small businesses in agro-processing, agribusiness, light manufacturing and industrial activity.

Another major policy the new government has promised to roll out is the one-district-one-factory policy. During the campaign, Akufo-Addo described this policy as an integral part of a rapid industrial development agenda. The president-elect said his team has identified more than 300 projects across the nation’s 216 districts.

These policy initiatives aside, we anticipate the government taking a fresh look at credit infrastructure across the banking system, and how to improve loan delivery to SMEs. The outgoing government of John Mahama touted the establishment of a collateral registry, subsidized lending schemes and investment funds for SMEs, and licensing of Credit Reference Bureaus among the initiatives it pushed to help small businesses. These initiatives are likely to be reviewed and strengthened in a new administration.

Finally, the incoming government’s tax reform policies could stimulate SME growth if implemented. Specifically, Akufo-Addo has promised a reduction in the Value Added Tax for micro to small enterprises from the current 17.5% to a 3% flat tax.

Donald Trump Starts Trade Wars

As the United States also prepares to swear in Donald Trump as its new president, fear of a global trade war between the world’s largest economies is looming large.

Trump has vowed to erect new tariffs on imports that compete with American products, a move that would hurt small businesses around the world. He has also threatened to start trade wars with Mexico and China.

Should there be a trade war between United States and China, there are going to be many casualties, including SMEs operating in smaller countries like Ghana that typically buy more than they produce. In Ghana, for example, finding markets overseas for our natural resources is critical to the nation’s economic growth and the success of SMEs.

Still, it’s too early in the year to know for sure what impact Trump’s protectionist policy would have on global trade. But it may just be – as Trump says – ‘yuuge’.

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As a Growth Strategy, M&A can Help SMEs Thrive in today’s Business Climate


“It is important that the motivation for entering into such transaction align with a company’s long-term strategic goals.”

In an era of global competition, integrated markets and complex macroeconomic conditions, mergers and acquisitions (M&A) can be a reliable survival and growth strategy for struggling small to medium sized enterprises.

Take Ghana’s SMEs, which account for 92% of all the registered businesses in the country. Inadequate financing, lack of suitable management, antiquated technology, poor marketing and promotional capabilities, among other challenges, have made it very difficult for the average SME in the country to survive, let alone flourish.

Whether a company is looking to expand into new markets beyond its traditional borders, seeking additional talent with specific technical ability or simply needing to add scale to gain a competitive advantage over peers, M&A has proven to be an effective option for many entrepreneurs. Although fewer than in other developed markets, Ghanaian businesses across many industry segments, including financial services, retail banking, telecommunications, industrial manufacturing, have benefited tremendously from consolidation – in many cases as targets of an acquirer.

Following are five specific reasons why SME owners and entrepreneurs should consider consolidation as an optional pathway going forward.

1. Expanding Product Offering or Services

Acquiring or merging with another business is one of the quickest ways to expand product or service offerings and grow revenue.

In any given industry, creating a flagship brand that is widely
recognized and respected requires significant investment, time
and effort. Maintaining that brand recognition also means continued investment in marketing and advertising.

A potential M&A transaction could involve the teaming of a buyer that is flush with cash but lacks a recognizable brand with a seller that owns a well-established brand but is cash-strapped. In this case, consolidation would achieve a mutually beneficial goal of expanding and adding value to the goods or services produced.

2. Gaining Additional Technical Capabilities

A lack of skilled technical labor is driving consolidation in many industries around the globe. For example, IT companies in India are increasingly targeted for acquisition by foreign buyers looking for hard-to-find programmers and developers.

In Ghana, talent-driven acquisitions could benefit companies and industries that are lacking in new functionality, product or services. For example, commercial loan providers could potentially secure talent in the small business loan area by purchasing a microfinance entity.

3. Capturing Efficiency Savings

Efficiency savings can be achieved through an M&A transaction if it involves the acquisition of critical resources used in product development or a process or technology that improves operating costs.

This oftentimes is the case with natural resource transactions, where an end product manufacturer would buy the company that provides its raw materials. For example, a pineapple juice maker would buy a large pineapple grower in order to have better control of input pricing and lower its operating costs. For industries where fixed costs represent a substantial percentage of total costs, such as manufacturing, distribution and sales, the cost reduction benefits are most substantial.

4. Fighting off Price Competition

Ghana’s steel industry, for example, is hurting from competition – both locally and foreign-made. Already Ghana produces more steel than the local market is able to consume – by last count, installed capacity of domestic steel producers is around 450,000 tons per year compared to local demand of 300,000 tons per year.

Imports from China, Turkey, Russia, and India, among others, have further exacerbated the situation for Ghana’s steel producers. According to an industry group, much of the steel imported to Ghana is coming from China, and it is 20% to 50% cheaper than competing products, experts say.

Clearly, this industry is ripe for consolidation. By adding scale, a local steel maker could potentially improve its pricing power and at the same time have a better chance at fight off foreign competitors.

5. Accessing New Markets – Maybe Internationally

More emerging market companies are venturing outside their home base to acquire companies overseas. The companies pursuing this strategy are mostly interested in tapping into new markets and customers, or as previously mentioned, seeking to obtain strategic resources such as raw materials, technology or know-how.

There are certainly inherent risks in acquiring a business overseas, especially for a local enterprise that is not accustomed to the market and customers in that specific region. However, if hard-nosed due diligence is performed, a company may be able to find an international expansion opportunity that opens up its business to a whole new customer base.

In short, M&A is an effective growth strategy for businesses that are willing and able to invest in the right opportunities. It is important that the motivation for entering into such transaction align with a company’s long-term strategic goals. Proper due diligence is essential in order to fully understand the risks and rewards of partnering with another entity.

Many companies have experienced epic failures as a result of pursuing unsuitable acquisitions. However, more often than not, heavy-lifting in the beginning can pay off loads in the end.

We look forward to reading your thoughts on this post. Share views in the comment box below.

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Six Ways Ghana’s SMEs can Cure Self-Inflicted Wounds


A common complaint against SMEs in Ghana is inadequate bookkeeping – always a sure sign to investors that a business is not properly managed.

Difficulty gaining access to financing, whether from banks, equity investors, and other lending institutions, creates significant operational and growth impediments for Ghana’s small to medium sized enterprises. In many cases, the challenges around access stem from systemic issues, like lack of adequate collateral and credit history. Also, due to high default rates, loan underwriters follow stringent guidelines and often have to deny applications from very promising entrepreneurs who fail to meet those standards.

The systemic issues notwithstanding, many of Ghana’s SMEs, which contribute about 70% of the country’s gross domestic product (GDP) and account for 75% of employment are too often victims of their own self-inflicted wounds – avoidable infractions which make them unattractive to lenders and investors.

Following are six practical ways entrepreneurs can cure those infractions and attract lenders and investors.

1. Have a Clear Business Plan
It is impossible to overstate the importance of having a clear, written business plan that defines an SME’s goals in the short, medium and long term. An ideal business plan spells out growth targets, expansion opportunities, and succession plans. At the very least, it should contain a clear response to this question: What are you offering to whom, and why will they be prepared to buy it?

2. Hire Capable Professionals
The shrewdest investors put their money in people, not just the business. The more qualified and experienced your team is the better your chances of convincing an investor or lender to trust you with their money. This means, even for a family run business, ensuring the people in key operational positions have industry and technical expertise to do the job, and the track record to prove it. Remember, a small business owner is not expected to be an expert in all aspects of the business. The ability to delegate key functions to qualified professionals, such as accountants, bankers and lawyers, is a hallmark of a good entrepreneur.

3. Proper Accounting Matters
A common complaint against SMEs in Ghana is inadequate bookkeeping – always a sure sign to investors that a business is not properly managed. This is a rather common infraction because many times SME owners and managers tend to focus more on operational issues at the expense of regular monitoring cash flows and budgets. Rather than wait until the end of the year or quarter to discuss financing, it is important to hold regular meetings with the heads of accounting to ensure they are paying meticulous attention to all the numbers. Reputable SMEs typically hire an outside auditor to provide an independent audit of all financings.

4. Seek Independent Advice
Many of the most successful SMEs have advisory boards, consisting of professionals who are not on the executive team, to provide unqualified and independent advice. Advisory boards not only provide independent oversight in areas such as compliance and risk management, but can also bring creative expertise in areas like marketing and branding. It is important to have board members with varied expertise covering all aspects of the business. It is best to pick individuals who are not timid about sharing their views or challenging management’s views, strategies and decisions.

5. Comply with the Law
Lenders and investors frequently conduct an independent background check on the individuals responsible for running the enterprise and the enterprise itself. This may include a criminal background check and a review of historic business practices from legal and other government records. Regardless of how profitable a business may be, unscrupulous sales activity, cheating on taxes, or overstated qualifications of principals, such as fake doctorates, are major red flags for lenders and investors.

6. What is the Exit Strategy?
Investors, particularly equity investors, want a quick return on their investment and prefer to invest in SMEs that are able to articulate how this can be achieved within a reasonable time frame. An exit strategy shows an entrepreneur’s long-term, strategic vision for the business, and includes any plans to sell the business, transfer ownership, or take it public. Succession plan is a crucial element of this discussion since it could have bearing on the terms of the loan or investment. For example, an investor may want to time the duration of the loan with the planned transfer of control to a less familiar or new management.

Lending and investment criteria vary significantly by institution. Generally, SMEs with a track record of performance, a minimum of three years of sustained profitability, are more attractive candidates. Proof of innovation, as in what new products and services are being developed, and a healthy sales pipeline are very crucial elements.

Overall, a loan or investment has a greater chance of being approved if the lender or investor has clear insight into an SME’s operation and business practices. With limited transparency, investors and lenders are forced to demand significant collateral or impose unstainable repayment terms, making failure inevitable for the SME.

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With Succession Planning, SME Owners Can Leave a Healthy Legacy


“What happens to the business in the event the enterprising owner shifts focus to a new venture, dies, is injured or retires? Is there a competent deputy who can take the reins immediately and hit the ground running?”

Large corporations often have successions plans, usually executed by their board of directors, to prevent business interruptions or disruptions resulting from the loss of a founding entrepreneur or key executive to another venture, retirement, illness or death.

Ironically, many small and medium-sized enterprises do not bother to put such contingency plans in place, even though they face greater irreparable damage when there is a leadership vacuum.

Plan Ahead Today
In Ghana, as with many West African countries, where many people do not prioritize planning for their estates, the death of an SME owner often leads to management disputes, family squabbles over succession, and legal wrangling. These and other reasons lead to business failure in the absence of a succession plan.

For example, for SMEs, particularly privately held, family-run enterprises, business operations revolve around the vision of a single individual or few individuals, typically an enterprising owner or family patriarch who built the business from the ground up. Due to their strong, direct relationships with key investors, partners and customers, the long-term viability of the company rests solely with this individual.

What happens to the business in the event the enterprising owner shifts focus to a new venture, dies, is injured or retires? Is there a competent deputy who can take the reins immediately and hit the ground running? How can the business owner ensure the successful transfer of leadership? Will the succeeding management be able to command the loyalty of all stakeholders? Also, if no one exists to take the reins in the absence of an owner, is there an exit strategy for the business and how and who would implement it?

These critical questions can best be articulated in a comprehensive succession plan.

Choosing a Successor
Transferring control of a business to a successor is sometimes complicated. As such, it is crucial that the shareholders begin this process years in advance of a planned exit from the company.

Ideally, the SME owner should consider a successor who already understands the business model and brand. If such a candidate is not available internally, a formal process to search externally should be initiated in earnest. If the business is ran by a board, a committee should be organized to field potential candidates.

In a family-run business, selecting a successor means choosing between children or close relatives. That is both an opportunity and a challenge. It is important to carefully select the family member or members with the proper skills to manage the business. The successor must be technically competent, and also have the leadership qualities needed to fulfill the mission of the business.

An SME owner should not assume their children share the same dreams and aspirations for the business, and want to take over. It is okay to select a family member who has a different skill set as long as their ambitions align with the company’s.

In the succession plan, clearly define the role of the successor, the company’s mission, and financial details, particularly how equity in the business will be divided. Make sure the would-be successor understands and is fully on board with this plan.

Communicating the Plan
Once a successor is identified, it is imperative that the SME owner first communicates the plan to those in key positions within the organization. It is important to share the timeframe for transition with staff to alleviate the potential for panic and insecurity.

During the transition period, consider introducing the successor to important clients through face-to-face meetings. This is a great way to get them comfortable with the successor and build a personal relationship with this person.

Building Support Staff
It is important to not only groom a successor long before stepping down from the helm but also build a solid team to support and help the successor you select.

During the transition period, it is advisable to work with the chosen successor to identify key employees who will also be promoted to management positions or assigned new responsibilities. These are individuals who are on board with the would-be successor, have a vested interest in the success of the company, and can be trusted to manage various aspects of the business with minimal supervision.

Allow the successor to announce the management changes at the end of the transition, as a sign to all stakeholders that he or she is in control and is empowered to make important decisions.

Putting Finances in Order
A good succession plan should include an analysis of current finances and a five-to-10 year financial plan for the company. Whatever the financial health of the company is at the time of transition, it is critical for the successor to have the accurate picture of the company’s finances.

If downsizing or divestiture are being considered, these options must be articulated in the succession plan so the incoming management can weigh them and act accordingly.

Ultimately, the best legacy an SME owner can leave a successor is honesty and transparency.

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Ghana Should Not Sit on Sidelines as Steel Industry is Decimated


“It is difficult to tell whether the punitive levies on imported Chinese steel would be effective. So far it has had a lackluster effect in the United States and across the European Union”

The recent clarion call from Ghana’s steel manufacturers for government to impose levies on imported finished steel products echoes the growing frustration among global steel producers over the flood of cheaper foreign-made steel and its impact on domestic prices and profitability.

Across the European Union, Japan, and the United States, steelmakers are sounding dire warnings. The EU’s trade commissioner Cecilia Malmstrom said recently that “the scale of the emergency in the [steel] sector means it is now life or death for many companies.”

And, at the just-concluded G7 Summit, the leaders of the United Kingdom, United States, Japan, Germany, France, Italy and Canada, declared that the steel crisis “needs to be urgently addressed through elimination of market-distorting measures.”

Ghana’s Steel Problem
Ghana’s steel industry and the nearly 9000 workers it employs in factories across the country also face an existential crisis, according to the Steel Manufacturers Association of Ghana.

Already Ghana produces more steel than the local market is able to consume – installed capacity of domestic steel producers is around 450,000 tons per year compared to local demand of 300,000 tons per year. When imports from China, Turkey, Russia, and India, among others, are included, the untenable situation faced by Ghana’s steel industry cannot be overstated.

Indeed, SMAG and others have been calling for protectionist measures for a number of years. In April 2014, in a circuitous response to industry pressure, Ghana banned the export (not import) of ferrous scrap metal, a measure intended to make more raw materials available to sustain local steel manufacturers. The government, however, did not tackle the real issue – which is controlling the flood of imported steel.

Now, as the crisis intensifies, SMAG is once again asking the government to impose a 25% special levy on imported finished steel products, in addition to the existing 20% import duty. It warns that if government does not intervene, local steel factories would have no choice but to shut down, causing many workers to lose their jobs.

The Steel Dragon
Much of the steel imported to Ghana (and essentially any other country that is developing its infrastructure) is coming from China, and they are 20% to 50% cheaper than competing products, experts say.

China seems unfazed by the global uproar. Rather than curtailing production, the country, which produces as much steel as the rest of the world combined, has cranked up steel production.

In March alone, Chinese mills produced a record 70.65m tons of steel, 51% of global output and five times as much as the whole European Union, according to the UK’s Telegraph newspaper. In fact, China is on pace to beat its 2015 record as the largest exporter of steel by any country this century.

A Steely Global Response
The crisis over steel imports is fueling some of the fiercest protectionist campaigns ever launched by industry trade groups, regulators and governments. In the United States, regulators have slapped Chinese steelmakers with final import duties of 266% on cold-rolled flat steel, with the possibility of total punitive duties increasing to more than 500% in the coming months.

In the EU, the European Commission has imposed a record number of measures, including 37 anti-dumping and anti-subsidy measures on steel products. Sixteen of these measures specifically target Chinese steel imports.

Will Protectionism Work?
It is difficult to tell whether the punitive levies on imported Chinese steel would be effective. So far it has had a lackluster effect in the United States and across the European Union.

Some of the difficulty has to do with the fact that manufacturers actually need low-priced steel to remain competitive. In certain countries, steel production cost more because of higher labor and environmental costs. Also, many local steel industries in countries that import Chinese steel are not equipped to manufacture all the different types of steel consuming industries need.

For instance, in Ghana, none of the steel products used by the country’s oil and gas industry are manufactured locally, according to Oxford Business Group’s 2013 report. Another case in point: Wire Weaving Industries (Ghana) imports galvanized steel for barbed wire, welded mesh and other metal products because local firms cannot produce the necessary film coating.

Still, a do-nothing approach is not an option. No government should sit on the sideline and watch as an entire industry is decimated. Also, as SMAG warns, the threat of massive job losses within Ghana’s steel industry is real. Other countries are currently experiencing this pain. In Europe, 85,000 steel workers or 20% of the workforce have lost their jobs since 2008, according to the trade group Eurofer.

In our view, imposing hefty levies on imported steel is just the first step in a long list of actions the government needs to take.

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Sunlight is Best Disinfectant Against Illicit Use of Offshore Tax Havens


“There are many academics who defend the existence and use of offshore tax havens, asserting that it encourages healthy tax competition between countries”

Tax avoidance among the world’s most powerful and wealthy has been the topic du jour since the April release of the Panama Papers, a cache of 11.5 million confidential documents detailing information about 214,000 companies set up in various offshore tax havens.

The papers, leaked from a Panamanian law firm, put an unflattering spotlight on a number of state and government leaders – several in Africa – as well as private citizens who use offshore banks and other shell businesses to keep their financial dealings secret.

Despite the global uproar, including the resignation of Iceland’s prime minister, people still are unclear about how offshore tax shelters function. Also, many fail to understand that offshore tax havens and shell companies are not illegal in themselves unless they are purposely being used for tax evasion, money laundering, and other types of fraudulent purposes. Identifying the purpose and intent of an offshore tax arrangement is difficult but is the only way to distinguish its legality.

Simplistically, tax havens are jurisdictions (usually a state or country) where taxes are deliberately levied at a very low rate, and where banks and financial regulators allow and encourage non-resident foreigners (individuals or corporations) to invest their monies without providing detailed information about the source of funds or the identity of the true owners.

Economist Gabriel Zucman, author of the Hidden Wealth of Nations, believes nearly $8 trillion or 8% of all the financial wealth in the world are stashed in offshore tax havens. He also estimates that 30% of Africa’s total wealth is in tax havens, compared to Russia, where it is more than 50%.

There are many academics who defend the existence and use of offshore tax havens, asserting that it encourages healthy tax competition between countries and provides an incentive for politicians and governments to pass sensible tax laws that do not place undue hardships on citizens. They argue that competition between governments for tax revenue is as good for individuals as competition between corporations is for consumers. The former helps to keep taxes low and the latter the price of goods cheap.

There is also a fine line between tax avoidance and tax evasion, though the distinction is often ignored in the noisy debate over tax havens. You could use the analogy of a person who ships a vehicle from the United States to Ghana through Togo to avoid paying high import taxes levied at Tema Harbor versus the person who brings a vehicle to Ghana by smuggling it through Takoradi Harbor. As the Web site Investopedia explains, evading taxes is illegal in most countries but avoiding paying unnecessary tax is one of the keys to building wealth. Again, crossing the line between shrewd tax planning and illegal tax evasion frequently centers on intent.

The opposing arguments that have been made against offshore tax shelters, by economists like Zucman, are that they strangle local governments, and worsen the global gap in wealth and income between the rich and poor. First, it hides vast sums of wealth from taxation that would otherwise be used to develop struggling economies for the benefit of all its citizens. Second; while the rich get richer by harboring their monies overseas, the poor are left to shoulder the tax burden at home, making it harder for them to also get rich.

While there are passionate proponents on both sides of the tax haven debate, there are many more who agree that the global banking system could use greater transparency. The fact is the secrecy which controls certain offshore tax jurisdictions encourages criminal money laundering, which sullies the entire practice of banking offshore for those using legitimately acquired assets. Whether it be a drug cartel seeking to hide drug money or a terrorist organization looking for a vehicle to use to pass funds to operatives around the world, sunlight may be the best disinfectant to prevent illicit financial flow through offshore tax havens.

In 2014, G-20 nations pledged to begin automatic exchange of financial information – where countries can share information on bank accounts, transactions and financial flows on a periodic basis. In the past this proposal has failed to gain traction due to the sheer volume of data that would need be transferred from nation to nation, and concerns over data and privacy. The number of international tax information exchange agreements between countries has grown from 40 in 2008 to 3000.

Still, organizations like the Organization for Economic Co-operation and Development (OECD) and Global Financial Integrity are calling on governments to do more to improve transparency. In particular, they warn that developing countries – particularly in Africa – stand to lose even more if they do not enact policies to detect and deter cross-border tax evasion and anti-money laundering laws and practices.

Ultimately, developing countries owe it to themselves to implement equitable tax laws that encourage citizens to invest and save their hard-earned monies at home, and not overseas.

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In a Nation Bustling With ‘Scrappers,’ Emotional Intelligence not High Academic Results Might be Your Next Employee’s Best Quality

When looking to fill lucrative graduate-level jobs or internships, many managers and human resource personnel at major corporations instinctively seek out “the best and brightest” coming out of the nation’s top universities.

Frequently, though, they make the mistake of defining “best and brightest” to be only those graduates with stellar grades, honing in on so-called first and second class honor students who on paper show excellent academic prowess.

While it may sound like a sensible approach, it is not always the best approach. In fact, in many cases the emphasis on academic achievement is a lazy way to find the right candidates to fill the right jobs. This argument is increasingly being made by a number of human resource experts who argue that hiring managers often do a great disservice to their organizations by ignoring a large swath of the graduate population with less-than-stellar academic results but who tend to have other demonstrable “human” skills more valuable in the real world. These human skills – sometimes described as emotional intelligence – include determination, confidence, striving for goals despite setbacks, staying cool under pressure, harmony and collaboration, persuasion and influence.

The argument here is academic results cannot fully substitute for such competencies. In fact, research shows the higher a person climbs up the leadership ladder in any organization the more emotional intelligence becomes an essential quality. This is particularly true in today’s fast-paced business climate, where success depends on how well and how quickly an organization is able to compete and adapt to disruptive market conditions.

Grit over Grades
Angela Duckworth, a U.S.-based psychologist, has spent more than a decade studying what types of people are successful in jobs of all kinds. She’s one of the foremost proponents of grit over academic performance. Through her studies, Duckworth argues that even in academic settings, self-disciplined students outperform high IQ students over an extended period. Her research also suggest that while high academic performance from a top university is important, grit, achieved from life experience, is far more valuable to become a successful leader.

According to Duckworth, individuals who struggle to pull themselves through crisis, who understand their shortcomings and are able to overcome them, are more prepared to take chances and make the difficult choices business leaders often confront.

Another person who has championed this notion of corporations hiring more “scrappers” over candidates with perfect resumes is Regina Hartley, another U.S.-based Human Resource Executive who recently gave a widely-acclaimed TED Talk on this subject. After 25 years hiring for one of the largest companies in the world, Hartley advised companies to never miss the opportunity to hire a “scrapper” or an “underestimated contender whose secret weapons are passion and purpose.” Scrappers believe the only thing standing in the way of their success are themselves and they are determined to overcome every hurdle, she said.

Hartley faults hiring managers for being too quick to discard the resumes of people who do not have a “perfect” resume – candidates who do not come with elite university education, great internships, and high GPA. She said these hiring managers ignore the fact that many high academic achievers are also ‘silver spoon’ candidates – individuals who may have fought their way into elite universities but whose drive for perfection along the way has led them to avoid taking risks to keep their spotless records unblemished.

Juxtaposed with someone who has experienced failure or growth by overcoming traumatic situations, Hartley said the “scrapper” usually is better prepared for the uncertainty of business situations.

‘Scrappers’ Abound in Ghana
Ghana’s large informal sector consists of many graduates who are unable to find work in the formal sector. Consequently, these graduates have become self-dependent entrepreneurs using raw business talent and grit to make ends meet. Their stories vary, but it’s fair to say there are many who have achieved remarkable success with very little formal training.

Whether it is buying and selling consumer goods, catering, sewing or web-based services, these self-styled entrepreneurs have managed to develop critical business skills on their own because corporations were not willing to give them an opportunity. The sense of passion and purpose which many of them bring to their small businesses would be invaluable to established companies that are seeking resourceful and hardworking employees.

We believe that, in addition to investing in infrastructure and skills development to boost productivity, companies should seriously consider hiring more nontraditional pool of candidates from both the rural and urban areas of the country. Particular attention should be paid to candidate’s life experiences, the “real stories” behind who they are and what they’ve been able to achieve.

Sure, technical abilities are important. Most jobs have threshold abilities – those are also crucial. But in many cases, those skills can be taught – like operating a machine, ensuring quality control in a manufacturing setting, or customer service skills. Tenacity and resilience, on the other hand, are rarely learned on the job – if ever.

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Ghanaian’s were Born Ready to Share, But Can They Make Money Off it?

The sharing-based economy, also known as the collaborative consumption or peer-to-peer economy, could have easily been conceived in Ghana.

Long before Uber and Lyft made ride-sharing a multi-billion dollar global business and turned ordinary car owners into part-time chauffeurs, or before Airbnb made millions of ordinary homeowners successful hoteliers, Ghanaians were car-pooling and home-sharing (even bed-sharing) as a matter of necessity and convenience. School-going children who couldn’t afford their own learned at a very early age to share textbooks, notes, desks and much more. Indeed, squeamishness about sharing has never been a part of the Ghanaian DNA – not in a country where siblings and friends prefer eating from the same bowl.

‘Sharing’ is Trending
Still, it is the developed countries that have turned “sharing” into a business model that is transforming (some would argue, disrupting) traditional business models across the globe. The Internet and mobile applications made sharing more accessible to the masses, but, fundamentally, the innovators of these businesses simply capitalized on a post-global recession mentality; the recognition that cost-conscious consumers would rather rent what they need for a small fee than own it at a significant cost.

Distrust of big business and the rise of the independent contractor also helped drive the growth of peer-to-peer businesses. More individuals now are stepping up to provide services or commodities that were previously available only through corporations. Pedestrians are sharing their bicycles and cars with traffic-weary city commuters; homeowners are renting single rooms to travelers for a fee; and laborers are sharing tools and equipment for temporary work – all at a touch of a button. Experts predict global revenues from the sharing economy could grow to $335 billion by 2025.

Who wants to Share?
In a recent survey of global communities most receptive to sharing, Asia-Pacific respondents came up on top as more receptive to participating in share communities, with the highest percentage willing to share their own goods (78%) and likely to rent from others (81%). In Latin America and the Middle East/Africa, 70 percent and 68 percent of respondents, respectively, are willing to share their personal property and 73 percent and 71 percent, respectively, are likely to rent products from others.

The study, conducted by Nielsen, showed that while more than half of respondents in Europe (54%) and North America (52%) are willing to rent their possessions for pay, fewer (44% and 43% respectively) want to lease goods and services from others.

Can Ghanaians Make Money from Sharing?
Ghana’s ever-growing urban population of young, unemployed but technology-savvy labor force would benefit immensely should this phenomenon take off here. According to recent statistics, the urban population in Ghana accounted for 53% of the total population – considerably higher than in other parts of Sub-Saharan Africa. Also, since the sharing economy relies heavily on web-based technology, Ghana’s current 90% mobile penetration rate makes the country an ideal place for such businesses to thrive.

For example, a peer-to-peer business like US-based TaskRabbit, described as eBay for real-world labor, can easily be replicated in Ghana. The company, which has raised nearly $40 million in funding since launching in 2008, allows ordinary people to hire temporary help for random, every-day tasks such as shopping errands, moving, and household chores. Many of the contractors on TaskRabbit have been pre-screened, which provides a level of security and comfort for the consumer.

Already a business similar to TaskRabbit is thriving in South Africa. A cleaning service known as SweepSouth connects people with temporary cleaners looking for jobs in their area. The startup has hundreds of cleaners active on its platform, and thousands of cleans are performed each month.

Some Internet-based sharing businesses have launched in Ghana though they are not widely known. Meanwhile, some foreign-based peer-to-peer businesses are making their way to Ghana. For instance, a number of Ghanaian property owners have listed their homes on Airbnb – a peer-to-peer business that has turned the global hotel industry on its head. It’s been reported that Uber, the popular ride-sharing service that has upended America’s taxi industry, has plans to expand to Ghana and Nigeria.

Impact on Local Economies
While all of these are positive developments, many regulators and governments are questioning the long-term impact and viability of the sharing-economy business model on traditional businesses and communities. There are real concerns about protecting traditional service providers and industries, losing out on tax revenues, public safety, and quality compliance.

Meanwhile, economists are frantically researching how peer-to-peer businesses are impacting local spending and job creation. Initial studies show that urban cities that have embraced sharing-based models are generating more jobs and creating business opportunities for young adults, who are now able to make a little extra money from their underutilized assets, be it a car, home, tools, or professional skills.

It is difficult for governments to ignore the many advantages of peer-to-peer businesses, such as the potential boost to employment and entrepreneurship; increased competition, which means lower prices and choices for consumers; and a rise in digital literacy and connectivity.

We expect these same forces to propel sharing-based businesses in Ghana. Economic necessity, our cultural affinity with sharing and the strong entrepreneurial spirit that has long fueled our informal sector, would surely serve as additional driving forces.

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Ghana’s Most Promising Carmaker Hits The Road Less Travelled

As Ghanaian carmaker Kantanka Automobile Co. embarks on its mission to prove that strong, robust, durable and reliable automobiles can be produced in Africa, a journey that few have travelled, it is important to evaluate how other emerging market automakers have managed to create successful brands and learn from their experience.

Government; ‘The Best Driver’
In nearly all cases, one thing is clear: A vibrant automotive industry, regardless of whether it has global ambitions or seeking mainly to be a domestic market player, requires active government participation. This is especially true in Korea, India, China and Brazil, where there is wide recognition that the evolution and growth of the automotive industry is essential to overall economic growth.

For example, in Korea, arguably the most successful emerging market auto producer, the government began partnering with local entrepreneurs as far back as the 1960s, investing in research and development for product development and assisting in acquisition of product design capabilities and exportation.

In India, government restricted imports, collaborations and equity ventures in the automobile industry during its infancy in order to allow the indigenous carmakers opportunity to grow and flourish. In 1981, the government set up one of India’s first auto companies, Maruti Udyog, in collaboration with Suzuki Motor Co., to mass produce the “people’s car,” a small and affordable vehicle. By 1995, Maruti controlled 70% share of India’s auto market.

‘Slow but Sure’ Progress
So far, the journey has not been easy for Kantanka. It has taken many years but the company has made incredible strikes. Earlier this month, Kantanka, founded by genius entrepreneur Kwadwo Safo Kantanka, announced the launch of its flagship vehicles and the commencement of commercial production. The company said it plans to produce 70 cars by January.

Car manufacturing is a difficult business. Margins are low, operating costs are high and it takes years to bring a vehicle to market. The successful automakers in the world today didn’t grow overnight. For most it was a slow and painful journey.

Brazilian bus maker Marcopolo, for instance, went from an artisanal enterprise in the 1950s, when it took workers three months to make a single bus by hand, to a multinational company that exports its coaches to more than 60 countries.

Like Kantanka’s flagship models, which are built from parts imported from China, Korean automakers can trace their beginnings to a single model that initially started as a complete knock-down (CKD) manufacturing operation. CKD manufacturing involves assembling vehicles using imported parts or kits.

Today, Daewoo, Hyundai and Kia are global players in their own right. It is worth noting that although the Korean companies acquired experience by partnering with multinational companies, the government never surrendered management control. Kantanka too has received several offers from Asia and Europe but has turned them down because it wants to stay in Africa and achieve its dreams here on the ground.

Factors Favoring Kantanka
Kantanka has ambitions beyond the Ghanaian market, though it admits it must first win the trust and confidence of local consumers.

There are a number of factors that favor Kantanka. For example, more carmakers are becoming like assemblers and less like manufacturers, a trend that lends credence to the company’s current business model. This global trend is due to the fact that carmakers are increasingly outsourcing more of the manufacturing process to third parties in order to reduce costs of development and research. Notably, what separates the giants of the auto industry – Mercedes and Toyota – from the lesser known brands is their ability to manufacture their own superior engines.

Also, Kantanka has a better opportunity to lower its costs, which is essential to running a successful auto manufacturing business. Of the cost drivers in the production and sale of automobiles, the most significant, raw materials and labor, can be obtained rather cheaply in Ghana. Ghana’s metals industry, for example, can furnish the aluminum and steel needed to support auto production, an advantage lacking in other car-making nations. Unlike those nations, Ghana has been mining bauxite, the raw material of alumina, since the 1940s.

Not an Easy Road Ahead
Globally, the automobile industry is one of the most highly concentrated industries in the world, with the market dominated by a few major companies. For example, one report estimates that the top five automakers in the world – General Motors, Ford, Volkswagen and Toyota – control 49% share of the global auto market.

Vehicle manufacturing requires significant investments, and depends on economic and political stability. An unstable government and a lack of clarity in policies could hurt Kantanka’s chances of success or delay it.

Another potential hurdle is currency volatility. Since automakers in many emerging markets operate on thin margins, currency depreciation hurts earnings significantly, and this means stabilization of the cedi is crucial.

These headwinds aside, Kantanka holds great promise. If it is able to win sustained and considerable government support, in addition to cutting its cost in order to make affordable vehicles or a “people’s car”, it is conceivable that this brave new carmaker could someday dominate Ghana’s auto market.

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