OBG talks to Ashok R Mohinani, Executive Director, Mohinani Group

Interview: Ashok R Mohinani

What impact will the development of oil resources have on the petrochemicals industry?

ASHOK R MOHINANI: With current productions below estimates, the sector has been struggling to increase output. We need to reach the forecasted figures before oil becomes a player. Only after reaching higher output numbers can we start using the sector for different purposes. The main issue now is gas. There has been a slow decision process in terms of policy on how gas should be used.

The gas usage policy needs to be established so that the private sector can adapt to the governmental framework. I know a lot of multinationals have come in to propose investments on gas to use as feedstock. Just sorting out the gas and figuring out its applications for cheap electricity production would allow savings. Another issue would be to look at improving the running of the country’s refinery. I think these two elements are the first phase. Anything more elaborate than that, at this stage, is simply wishful thinking. A petrochemicals plant is, I feel, too optimistic at this point in time, though can be a game changer when achieved.

What are the challenges to doing business in Ghana, and can the operating environment be improved?

MOHINANI: The cost of doing business in Ghana is high. When you look at the hidden costs, things become less attractive. Labour component costs in Ghana might be considered a low compared to other countries, but year-on-year increases in the minimum wage have been at least 20% over several years now. That is the base all manufacturing firms use. But if official inflation is 9%, why are minimum wage increases reaching 20%? Of course, there should be a policy where the government wants to reach international standards in the minimum wage, but it has to be spelt out, so companies can plan and adapt, instead of having to face big increases every year without a clear timeline for them. In several years the country might end up out pricing itself, without seeing equivalent increases in productivity or skills. Besides labour costs, another issue is the lack of government involvement in productivity-based incentives and pay. I think that is the only way to make ourselves competitive. But it involves a complete change in mindset. The private sector can do it, but it will need a government framework.

How is cedi depreciation affecting production?

MOHINANI: It has taken a big toll. In certain areas like packaging, where you are working with multinational consumer goods companies, you cannot easily change your prices. Now what manufacturers try to do is renegotiate on the new contracts, and create a buffer to protect them against depreciation. More and more industries are trying to figure out ways to think and plan for the short-term. This is a big problem, as it is hard to make production flexible enough to adapt to this.

How can challenges to the country’s development as regional export hub in West Africa be overcome?

MOHINANI: Currency is obviously a challenge. Infrastructure development is also something that needs to be upgraded. We have railways, but none of the neighbouring countries use railway as an option. This is nevertheless a cheap way to potentially increase Ghana’s connectivity. If we build a mid- to long-term plan for transport infrastructure in the region, that would add value. Ports are also an issue, because they are congested. Our infrastructure is under serious pressure, due to economic growth. We need to figure out what the bottlenecks are and clear them for local re-exporters.

The francophone countries have their own block. So today, if we export to Burkina Faso, the tariff will be different than if Côte d’Ivoire is exporting to Burkina Faso, for the same product. So that in itself is against the Economic Community Of West African States ( ECOWAS) protocol. If enough business is happening in francophone countries, then maybe we should have a plant in Côte d’Ivoire and not here. It works on paper, but in reality; the ECOWAS protocol is inconsistently applied. If countries sign the agreement they should enforce it.