OBG talks to Manoj Lakhiani, Chairman, Blow Group

Interview: Manoj Lakhiani

In terms of a regional comparison, how competitive is Ghana as a manufacturing destination?

MANOJ LAKHIANI: By African standards, manufacturers in Ghana compare well for a variety of reasons. Despite recent electricity price hikes, actual electricity supply is still relatively stable and we expect the current price spike to be only short term. In neighbouring countries like Nigeria, working conditions are far worse since you cannot rely on power coming from the grid and producers must install in-house generator systems, which adds significantly to set-up and operating costs.

In contrast to other countries in Africa, Ghana does do not have governmental incentives to set up manufacturing plants as such, but other incentives exist, such as exemption for all industries from any sort of import tax and duties on needed machinery.

What factors support Ghana’s attractiveness for industrial exports to neighbouring countries?

LAKHIANI: We get a lot of requests for our products from neighbouring countries like Nigeria and Burkina Faso, so the correct implementation of the existing export framework within the ECOWAS region is of great importance. For many industrial producers interested in exporting, it makes sense to open another company in a free zones enclave, where the firm must export 70% of production and receives an eight-year tax rebate in return. In our case, should export demand pick up, we would think of declaring a certain portion of the company as a free zone company. The ECOWAS framework itself cannot be seen as a free trade zone since informal border payments still present a problem for local manufacturers on a daily basis. We therefore actually sell a lot of plastics to Nigeria on a free-on-board basis, but clients still complain about the port being congested. If the legal ECOWAS framework were enforced, Ghana would be in a much better position to serve as a manufacturing centre for West Africa.

Apart from this, Ghanaian companies focus more on quality than neighbouring countries, so the label “made in Ghana” creates a value on its own. Thanks to political stability and its geographical location, Ghana should be an obvious choice as a production centre. All neighbouring countries and beyond have significant potential as export destinations for Ghanaian products.

How would you rate the quality of distribution networks and how does this affect the market?

LAKHIANI: Distribution channels in Ghana still have a long way to go. There is a clear lack of infrastructure in terms of roads and the use of more sophisticated communication technology. The existing retail market also influences the landscape. Small corner shops continue to dominate the market since the majority of customers prefer to go to the tiny shop next door. Bigger supermarkets are growing, but they mostly serve the upper segments of Ghana’s population that have higher disposable incomes. It depends on the product, but if the mass market is the target, and you are dealing in the fast-moving consumer goods segment, you cannot solely rely on bigger supermarket chains.

To what extent does the depreciation and volatility of the cedi pose a concern to producers?

LAKHIANI: For the past couple of months, the cedi has been quite stable and we expect that trend to continue due to the fiscal and monetary measures taken by the Bank of Ghana. If the currency depreciates again, like it did last year, we would have to increase our prices, and it would be the end consumers who suffer most.

It also depends if the producing company is importing their raw materials in dollars, which would require a company to then have to balance out to remain profitable.

Currency volatility is especially a problem for the end consumer when the product is a necessity, like water, which further stresses the importance of having responsible and active regulation. A different challenge to producers that want to expand production capacity with local capital is the very high local interest rates we are seeing, which are unlikely to change any time soon.