Strong foundations can propel infrastructure development

Competitive among local and international players, Ghana’s logistics sector has grown in parallel with the economy and is on course to continue this trend, given rising demand and the government’s efforts to promote foreign investment. However, bureaucracy and human resource shortages remain as key challenges.

Global Index

The World Bank’s 2014 Logistics Performance Index (LPI) ranked Ghana 100th on its global league table defined by “on-the-ground efficiency of trade supply chains, or logistics performance”, with a score of 2.63 out of five, about half the score of top-performer Germany. While Ghana’s ranking is respectable for its income level, several other sub-Saharan countries performed better, including a clutch of ECOWAS states regarded as potential rivals to becoming regional transport hubs.

These include Nigeria at 75th with 2.81; Côte d’Ivoire at 79th with 2.79; and Burkina Faso at 98th with 2.64. South Africa (34), Kenya (74) and Rwanda (80) were also ranked higher than Ghana. Despite this, Ghana ranked particularly well for infrastructure (70), tracking and tracing (73), and international shipments (93). Timeliness (113); logistics quality and competence (121); and Customs (130) scored less competitively.

Potential

Logistics quality could be enhanced by greater penetration of international companies with expertise and capital-raising powers. The logistics industry in Africa is under-penetrated by international players, partly because of the perceived difficulty of doing business on the continent and the need for substantial upfront investment in countries lacking modern warehouse infrastructure, fleets and technology.

The Ghanaian logistics sector is divided between local players that service domestic firms, and international companies that service foreign investors, often in partnerships negotiated at a regional level. “Smaller logistics companies are at a disadvantage, in that they do not have the overseas network,” Mohamed Tabch, station manager for logistics company Aramex, told OBG. “Multinational companies (MNCs) generally tend to work with other MNCs, so a large MNC importer in Ghana will opt to work with a large, international logistics company.” Although Ghana does not have as big a population or rapid GDP growth rate as other African markets, it does boast a relatively favourable business environment. According to the World Bank’s 2014 “Ease of Doing Business” report, Ghana placed 67th among the 189 economies ranked in the study. Although it fell five spots on its 2013 score, it came out on top among ECOWAS members and fifth on the continent as a whole. The leading African countries were Mauritius (20), Rwanda (32) South Africa (41) and Botswana (56).

Challenges

MC Vasnani, managing-director of Consolidated Shipping Agencies (Conship), told OBG that international companies make better margins in Ghana than elsewhere, driving higher revenues than local players, and enabling them to attract experienced staff from their domestic rivals. But human capital remains a challenge. “Hiring locally makes commercial sense, given the high costs of recruiting, relocating and paying an expatriate worker, but under the local content legislation it is not always possible to find the required qualified talent in the country,” Koen Neven, CEO of NHV Aviation told OBG. At the same time, Ghana must also focus on bridging language gaps with its neighbours, in particular French, to remain competitive. According to Kader O Coulibaly, country manager for DHL, “Language ability can be a major challenge to developing Ghanaian talent within the region. At times it is difficult to send talented Ghanaian staff to higher positions in francophone markets nearby,” he told OBG.

More challenges come from rising fuel and electricity prices, and the fluctuating cedi, says Tabch. These have pushed costs up, some of which must be passed on to the customer. “In an environment of high inflation and currency depreciation, logistics companies must forecast costs and price contracts accordingly. That said, we cannot pass on all cost increases to the customer so margins are falling in the industry,” Kofi Boateng, managing director of Platinum Logistics, told OBG.