Ghana has set its sights on becoming an economic powerhouse by diversifying its export product portfolio and moving up the value chain from commodities such as raw cocoa beans to higher-value processed goods. This transformation involves bringing in more factories, investment and capital. This change will not happen overnight, it will take time, investment, policy changes and deep commitment. With regard to policy changes, the Government of Ghana (GoG) has been able to introduce certain policies that will aid in making Ghana an attractive proposition for companies with manufacturing functions looking to set up. In this article, we will
Ghana Free Zones Programme (Export Processing Zones)
The Ghana Free Zones Programme is overseen by the Ghana Free Zone Authority (GFZA) , and it is meant to promote export oriented investments within Ghana by setting up free zones. The GFZA was established on the 31st of August in 1995 by an Act of Parliament that was meant to enable the establishment of free zones in Ghana. These free zones are seen as strategies for improving economic development. The GFZA has a committed focus on making Ghana a gateway to West Africa, such that investors can build a solid foundation in Ghana while also positioning themselves to grow and expand their business to new and emerging locations.
There are currently four Export Processing Zones (EPZ’s) in Ghana; the most popular and functional zone is in Tema. The zones were designed explicitly to promote processing and manufacturing of goods and services for export. They serve as the foundation for attracting FDI (foreign direct investments) into Ghana, more favorable foreign exchange mix, local employment opportunities and export diversification. All of this shows that the GoG is focused on partnering with entrepreneurial and pioneering firms, by helping them bring their organisations to the country because it realises that it will be a win-win for all parties involved.
The Importance of Localisation
After making a decision to enter the Ghanaian market, the next logical step is thinking through localisation as an important lever for business success. Localisation involves setting up your organisation within a local context, or in some cases joint ventures, in order to execute an on-the-ground go-to market function. By setting up the Export Processing Zones, and essentially enabling global companies to import capital, machinery and other inputs virtually duty free, the GFZA is setting the stage for global companies to help teach Ghanaian employees how to operate certain machines and ultimately become better at processing goods.
Pioneering firms can start developing an edge by building learning and development plans, and recruiting or outsourcing systems that are deeply embedded into the local context. By showing the GFZA the strides you are making in helping transfer knowledge and technical skills to the existing populations in Ghana, your company can stand out which will lead to easier benefits, terms and a strong competitive advantage.
A focus on building up local capacity through clear processes, benchmarks and goals is necessary for your organisation. Great companies view competent and capable employees as a competitive asset whose value only compounds over time. At CarvinClay, we have seen, first-hand, how having a strong local talent base can lead to increased quality and market share of your goods and services. Investments in localisation should be seen as a necessary cost for greater profits and success. Additionally, great localisation practices help with the social cost of operating within a country. What many firms seem to forget is that they do not operate within a vacuum. The reputation of your firm within the local context matters a lot. If your company has an image and of maltreating the local workers; then you will be put under increased scrutiny from both the public and private sector. Additionally, your company will find the social cost of operating within a particular country too big, and will choose to opt out of that country.
Avoid Common Pitfalls
Moving to a new market is a costly endeavour. If it is not executed correctly, it could spell disaster from a financial standpoint. Having engaged in multiple localisation strategies for firms looking to come to Ghana, we have identified some common pitfalls and misconceptions that firms have when considering a move:
We hope that this article has shed some light on how localisation is necessary for optimal success for your manufacturing business.