7 Principles of Success and wealth Creation in Africa

Michael Agyekum Addo

Ghanaian entrepreneur and founder and CEO of the Kama Group Michael Agyekum Addo came from a poor family. He opened his first pharmacy in 1986 with no capital and today he owns 11 wholesale and retail outlets across Ghana, two pharmaceutical factories, a micro-finance firm, real estate business and a multi-purpose conference centre.
 
Addo is the council chairman of Ghana’s Pentecost University College, hosts a TV programme that educates viewers on entrepreneurship and oversees the Kama Education Project which trains teachers to make entrepreneurs out of students.

Addo has written a book, The Seven Principles of Success and Wealth Creation, in which he details his advice to entrepreneurs. He shares these ideas with How we made it in Africa.

1. Reliability
“We profess to be honest people but are we reliable? Are we reliable with our time?” asks Addo. “Time is money and we have no value for time. We call it ‘African time’ meanwhile we don’t have an African watch.”
Addo’s first principle to creating wealth and achieving success is reliability. He says people have got to be responsible for their actions. “We must show credibility. We must be a reliable group of people. After all, there is an adage that [says] ‘a good name is better than riches’. A good name means you fulfil all your promises.”

2. Hard work
Addo’s second principle to success is hard work, which means much more than being at work from 8am-5pm.
In his book he writes: “The extra mile you go each day plays a significant role in climbing the mountain of success. Hard work makes mastery. Working hard requires love for whatever you do.”
He says a hard worker is selfless, has discipline, maintains focus, does not complain and is a happy worker.

3. Savings culture
Addo recommends that people create a culture of saving, rather than living from paycheck to paycheck and using up all their monthly earnings.
“We should have something to set aside that will be for us, that will grow us, that will be our roots.” He likens people to trees: without strong roots they cannot reap the benefits of fruit.

4. Remember your background
To begin saving and to break the pattern of borrowing, Addo says people should remember where they come from – “a poor continent, a poor country, a poor family”. Rather than continuing the trend of borrowing and getting into debt, he advises readers to start saving to become richer people.

5. Investment
Another of Addo’s principles to creating wealth is investment, which leads on from saving.
In his books he advises people to use about 50% of their savings for investments in the first year, and then build on this with time and experience. In his book he writes: “When deciding to invest, try to do some research on the investment, invest no matter how small the amount, get some experience before making a high-risk investment, and seek advice when in doubt.”

6. God-fearing
A deeply religious person, Addo places power in faith, an idea he adds to his book: “If you fear God, you should display the 3Fs: be fair; be friendly and be firm to all people at all times.”

7. Patience
Lastly, Addo lists patience as a way of achieving success. “Be patient in whatever you are doing. Rome was not built in a day, even though a thousand miles start with one step.”

He expands on this notion in his book. “Don’t allow anybody to ‘rush’ you through life by forcing you to cut corners and take short cuts. Take your time and do things right. Most of the wealthy and successful people you see around are where they are today as a result of years of hard work, patiently working towards the goals they have set for themselves.”

Source: How We Made It in Africa

MTN looks to a cashless society in Ghana

MTN has launched a mobile money campaign in hopes of driving home the benefits of a cashless society. The electronic service enables users to transact business without carrying physical cash. This campaign MTN says is targeted at rural Ghana many of whom are unbanked.

The telecom giant by this initiative wants to capitalize on the over 20million mobile users to increase its subscriber base. The Mobile Money service is no different from the e-zwich or other electronic payment systems. One is able through technology to move money around without physically carrying it. Speaking on pm:EXPRESS Wednesday, the head of the commercial mobile money unit Eli Hini explained that “targeting rural Ghana is strategic to MTN especially in flood prone areas where lots of properties are lost after heavy downpours. Keeping your money on the mobile wallet would safeguard you against some of these looses. The service allows you to shop with your phone, pay schools fees, and other services requiring money transactions”.

Mr. Hini disclosed that the mobile money subscriber base is growing but more education is needed.
For now, a subscriber is charged 50pesewas for transferring up to 50 Cedis on the service. “With a wallet, the receiver could cash it easily but without that, a code is needed to cash from any merchant”, he explained.

An Economic Consultant, John Gatsi explaining the benefits of a cashless society also on pm:EXPRESS mentioned the elimination of corruption and the lack of transparency in revenue collection which would inadvertently help government to realize higher revenue. “with a cashless economy, the interface between the revenue officer and taxpayers would be elated and government can generate more tax revenue. Also the incidence of bribery and evasion would be reduced.

However he raised issues with the disjointed approach currently operational. Several corporate entities have tried working in silos to achieve a cashless society but John Gatsi said a national approach would be more efficient. He said countries that have seen an efficient cashless society employed a national approach and Ghana would be best served if a bill is introduced to complete the infrastructure that already exists through the Ghana Interbank Payment and Settlement System (GhiPPS)

With the expectation for the Central Bank to build credibility around the electronic system, MTN on Friday would hold a stakeholder roundtable discussion to involve the Bank of Ghana in its educational campaign to drum home the need for a cashless economy.

Source: myjoyonline

UT Bank, Airtel team up to launch Fonbank

UT Bank in partnership with Airtel Ghana is to launch a new and unique savings account product known as the UT FONBank.

The product allows subscribers of Airtel services to transact banking business on the mobile platform.

UT FONBANK Account is a mobile banking service powered by Airtel Money which allows subscribers to conduct monetary transactions using their mobile handset.

It serves as a normal traditional bank account giving the client the opportunity and convenience to do banking anywhere and at any time with the help of their mobile device.

The product enables customers to open bank accounts, save money and earn interest just as they will on traditional bank account without physically going to any bank outlet and at their convenience using the Airtel money platform.

According to Mr Nelson Korshi Da Seglah, Head of E-Business at UT Bank, the development of the FONBank product was necessitated by the desire of the bank to give customers safe and secure means of saving that fits into their lifestyle.

“What we seek to do is to have the FONBank product as a means of reaching to the chunk of our population who are not using traditional banking services.

"UT Bank has always positioned itself as a bank committed to developing products which will not only revolutionize the banking industry, but will also be found to be convenient to our customers,” Mr. Da Seglah said.

The UT FONBank also allows customers to pay utility bills, pay for goods and services, make direct payments on savings and loans contributions, buy airtime and withdraw cash among other benefits and it is opened to all mobile subscribers above 18 years.

The product described by both UT Bank and Airtel as one of a kind comes with high security features which make it safe and secure adhering to the highest banking security standards.

Mr Kola Sonola, Director of Mobile Commerce at Airtel Ghana, said the Airtel Money platform is very safe adding that customers using the FONBank Account would realise that their monies are safe.

“Your money is safe since every transaction uses a very high encryption standard that adheres to highest banking security standards and your password; we have invested in the Airtel Money platform and we believe that this partnership with UT Bank amply demonstrates the faith in the system,” Mr. Sonola added

Inefficiencies in Banking sector holding back Africa’s Growth

In its report entitled “Challenges of African Growth, opportunities, constraints and strategic direction”, the World Bank clearly points out that a key constraint to growth in Africa is indeed the structure of African financial sectors as this generally influences private sector activity, economic growth and poverty alleviation. 

We would also concur with the World Bank that a vibrant, competitive and efficient financial sector that reaches the majority of an economy’s population is a cornerstone of sustained high levels of economic growth and development. In this note, we have taken a broad look at financial sector developments across sub-Saharan Africa. However, we have also centred our arguments on Zimbabwe; a country that we believe is currently facing serious liquidity constraints. The main constraints are outlined below:

Inefficiencies in the banking sector

It still remains a fact that African financial sectors, especially in low-income countries, are among the least developed in the world. We note that interest rate spreads throughout the region have largely remained high, with little indication of converging with global levels at a median of around 13% (Latin America 7%, South Asia 5%, South East Asia 6%).

We opine that the main factors causing high spreads include high operating costs (including energy), perceived risk from policy frameworks and lending environments, lack of competition, and high concentration.

In the case of Zimbabwe, the use of multiple currencies in the economy (USD/ZAR/BWP) has simply meant a limited supply of liquidity in the market and therefore high minimum lending rates (MLRs) of around 15% per year. We also highlight that some banks remain largely under-capitalised, thereby limiting lending activity. In addition, the prevalence of non-performing loans in banks’ portfolios also adds to costs as banks compensate for the cost of foregone interest income by charging higher lending rates to performing loans.

Poor credit culture

The lending environment across Africa is also characterised by a poor credit culture, poor contract enforcement, and lack of protection of creditor rights.

Coupled with a lack of collateral and inability to prove creditworthiness on the part of potential borrowers, these have resulted in a higher perception of risk and higher external finance premiums. In Zimbabwe, for example, good information is scarce in the absence of a national credit bureau.

Furthermore, the value of the collateral, which is real estate in most cases, tends to be overstated and inevitably harder to realise if the need arise. Given the fact that the lender of last resort lacks adequate funding capacity, default risk and more importantly, counter party risk remain elevated.

Low levels of savings

Saving rates in Africa have remained far below that of other developing regions. In the early 1970s, for example, the average savings rate in sub-Saharan Africa was higher than in South Asia. However, while the savings rate in Africa has trended downward, South Asia has experienced a sustained upward trend so that by 2003, the average savings rate had exceeded 20%, compared to a mere 9% for Africa. Even though the saving rates for most countries bounced back in the following decade, for some countries the falls were sustained. In Zimbabwe, for example, as at 3 February 2012, total banking sector deposits were US$3.5 billion (including inter bank deposits).

Low levels of banking penetration

It still remains a key feature that a disproportionately small fraction of the population across the region is served by formal financial institutions. Data on access to financial services is scarce, and most conclusions reached are from anecdotal but compelling evidence. Low penetration is partly a result of income levels, although an increasingly affluent urban middle class is now emerging. The low proportion of people with bank accounts also reflects infrastructure problems that have resulted in the limited development of branch networks, especially within remote rural areas. Few countries are served by more than two branches per 100,000 people.

Despite the above-mentioned constraints related to banking in Africa, we have begun to see some pockets of success across the African continent, suggesting some improvements in a number of fronts. We highlight our key findings as follows:

E-banking slowly driving financial inclusion

One of the biggest success stories with regards to financial inclusion in sub-Saharan Africa is M-Pesa’s mobile wallet in Kenya. This has successfully penetrated some of the most deprived economies and simultaneously spurred unprecedented demand in a very short amount of time. M-Pesa now provides international money transfers between Kenya and other African countries and even the UK. Countries such as Kenya, South Africa and much of the North African region are now facing 100% m-banking penetration. However, in countries such as Burundi, the Central African Republic, Eritrea, and Rwanda the penetration is far less, standing at roughly 35%.

China-Africa partnerships yielding some rewards

We have also seen Chinese-African partnerships being extended to banking activities. A good example is the US$5.5 billion acquisition of a 20% stake in Standard Bank by the Industrial and Commercial Bank of China (ICBC). Along with other players like Stanchart, it is our view that such partnerships are broadly cementing a financial services gateway between Africa and China.

Regulation and liberalisation more developed

Some banking sectors, such as Nigeria, are benefiting from market reform. Nigeria’s banking sector has gone through consolidations over the years, leading to the emergence of streamlined, better capitalised banks that have been able to enhance their services and are in a better position to compete and meet customer demands, while seeking to develop their international presence, both within the region and overseas.

In conclusion, we believe that the various constraints highlighted in this note need to be addressed in order to reinvigorate economic growth in sub-Saharan Africa. Nonetheless, banks in Africa are evolving and we continue to see vast opportunities for emerging market investors.

 Imara is an investment banking and asset management group renowned for its knowledge of African markets.

Source: How We Made In Africa