What it takes to be a Successful Industrialist in Africa

Proponents of manufacturing say the sector is a great opportunity for Africa to industrialise and provide jobs to millions of unemployed. Value-added manufacturing currently accounts for only a small proportion of GDP in most sub-Saharan African countries, where resources are often exported in raw form for further processing abroad.
Some economists argue that Africa could become the world’s next manufacturing hub as rising labour costs push producers out of Asia. However, the continent’s manufacturing sector faces a myriad of challenges that need to be addressed, ranging from inadequateinfrastructure to corruption.
African industrialists such as Aliko Dangote (Nigeria) and Manu Chandaria (Kenya), who opted to stay the course despite these challenges, have built successful multi-million dollar businesses.
To discover what it takes to succeed in manufacturing, How we made it in Africa speaks to Salim Anjarwalla, managing director of Kenyan-based African Cotton Industries, a manufacturer of products such as ear buds, sanitary towels, toilet paper and cotton wool. Anjarwalla joined the family business in 1981 and has spearheaded its expansion.

Variety of skill sets required
Running a manufacturing company requires a variety of skills, including actual production, distribution, sales and marketing, and human resources management, to name a few.
Anjarwalla warns that aspiring industrialists should not start a manufacturing business just because they have one of the skill sets required to run such a company. They should do proper research and gain a thorough understanding of the business, and hire good talent.
“I find that many people don’t make enough effort in the beginning to understand the business and what it requires,” says Anjarwalla. “Most of the time entrepreneurs don’t have the knowledge in other fields [other than their own profession] and are unprepared to take care of all the other elements of running a manufacturing business. You have to study your business idea and the industry to understand what it would involve in totality.”
He adds that business people should understand what their strengths and goals are.
“You really need to be focused on what you want to achieve and how you will achieve it.”

Prepare for uncertainties
“In this part of the world you have to take into account that things can go wrong,” says Anjarwalla.
He notes that in many African countries one has to be flexible and prepared for uncertainties including sudden political instability, currency fluctuations and the introduction of prohibitive taxes and regulations.
Anjarwalla cites the case of Kenya in 2011 when the local currency went on a downward spiral to trade at Ksh. 106/US$1 from Ksh. 86/$1 in just three months, leaving many businesses exposed.
“In your business model you have to factor in the uncertainties because here the waves are [bigger],” he says. “We have seen such swings a hell of a lot in the last 50 years.”

Expect tough competition
Not only do companies face competition from other local players, they also have to fight for market share against foreign firms operating in countries where the cost of manufacturing is much lower.
“This is a very competitive environment… [and] today competition is global. We have challenges here with high costs like electricity that are much higher than in other countries such as in the Far East,” explains Anjarwalla.
He says aspiring manufacturers need to ensure they have a competitive advantage.
“Just because… you can import a cheap machine from China, does not mean you should also make toilet tissue. That is not enough because there are so many other people making toilet tissue.”
Companies should either “have a big price advantage or specialise in a niche market”.

It is all about the consumer
When a finished product finally hits the shelves it is the consumers who decide the winners and losers. Whether for quality or price, consumers will always pick what they feel best addresses their needs.
Anjarwalla therefore advises entrepreneurs to conduct thorough research, interact with consumers and be innovative to ensure that their products are up to expectations.
“You have got to be very focused on your customer. Who are you targeting?” says Anjarwalla.

Source: How We Made It on Africa

How to Build a Company That Lasts Forever

 BY Leigh Buchanan 

1. Narrow your horizons.
Sometimes it is good if you stick to your core competence, and then one day, if you have the patience, there is a topic where you can suddenly jump on," says Christopher Mennekes, CEO of Mennekes. That word, patience, rarely comes up when you talk to American business owners. Granted, waiting 80 years before testing new waters may sound unacceptably passive to CEOs wired for action. But at a time when technological change mercilessly strikes down first movers, patience is an appealingly simple risk-mitigation strategy.

2. Go global fast. Go global hard.
Globalization is the future. It is also a skill that requires development. German mid-size companies have had a lot of practice and  are very good at it. This is less common  in US, where more than half of small to midsize companies have no sales or operations outside North America, according to a study by the National Center for the Middle Market.

3. Innovate incrementally and internally.
"Often, innovation is defined as something that changes a market," says Klais. "But to me, it is where you individually develop something for your customer. It may be a very, very small detail. But it shows understanding and respect."
 Competitors find it harder to copy your thing if they must also copy the thing that makes your thing. At the same time, it's easier to maintain equipment you've designed yourself and to ensure quality when you make your own materials. Vertical integration is all about control.
 
4. Go the extra mile for customers.
Be generous with pre- and post-sales consultations and services. It will cheerfully customize and ship a single tiny part or manufacture discontinued items for customers with aging machinery. 

5. Run your business as if you expect it to live forever.
The lure of entrepreneurship may ultimately benefit succession. It is  imperative for the potential family or community business. young successors to launch start-ups after university, then return after a few years to run them.  

Responsibility.That word came up again and again. Leadership, by contrast, they largely dismissed as an abstraction. "I think leadership is a very, very, very strong word," says Klais,  Mittelstand CEOs "I see it more as a responsibility issue.

Africa Economic Growth is an Opportunity for SMEs

The World Economic Forum, recently held in Cape Town, highlighted the substantial economic growth that is expected to occur on the African continent over the next five years. It is predicted that Africa will have six or seven of the fastest-growing economies in the world, as well as the largest overall growth of any continent within the next five years. 

According to Mark Paper of Business Partners International, speaking in light of Africa Day, celebrated annually on 25 May, this economic growth presents a significant opportunity for small and medium enterprises (SMEs) which are looking to expand in the region. “Africa has been touted as the next growth region, and should therefore present value to SMEs…”

He says that while large businesses and corporates have the ability and resources to expand into Africa, this move may be more challenging for SMEs. “There are still some obstacles for SMEs to overcome should they wish to expand successfully into the region.

“The infrastructure in many parts of Africa is far less conducive for creating an entrepreneurial environment and entrepreneurs often struggle with electricity and transport challenges, which all hinder growth.

“In addition, entrepreneurs in some parts of Africa have considerably less access to funding… African entrepreneurs also face significant challenges when it comes to human resources, as they do not have an abundance of skilled workers in the region.”

However, Paper says that despite the many challenges that African entrepreneurs face, they often manage to overcome these and succeed in various industries, which contributes positively to the economy of their respective countries.

“African governments are increasing their investment into infrastructural development projects on the continent, which will assist entrepreneurs overcome some of their challenges. Billions of dollars have been earmarked to be spent on 40 major infrastructure projects over the next three years in South Africa, and Kenya is reportedly building the multi-billion dollar Lamu Port-South Sudan-Ethiopia transport project, which will connect the country’s Lamu port with South Sudan and Ethiopia via road, railway and oil pipeline network.”

Paper says that it is also a risk for SMEs to expand too quickly, or in an uncontrolled manner, as when this happens cash flow and customer satisfaction are usually the first casualties. “The trick is to carefully manage the expansion process, so that business owners reap the medium and long-term benefits.”

Paper predicts that SMEs will play a crucial role in the economic growth that is expected on the African continent. “Latest research by Menon Business Economics shows that gradually, SMEs will play an integral role in industrial development and restructuring, satisfying rising local demand for services, which will allow for increased specialisation and supporting larger firms with inputs and services.”

He says that African entrepreneurs definitely operate in a more challenging environment and thus need to be more creative and resilient in order to make their businesses succeed. “However, if they are able to operate and succeed despite their numerous challenges, they will have the potential to thrive,” concludes Paper.

Source: How We Made It in Africa

Ghana Venture Capital to invest US$20m in SMEs

The Venture Capital Trust Fund will invest US$20million in small and medium enterprises (SMEs) in different sectors of the economy this year, building on a portfolio of investments currently valued at close to US$60million.

The Fund invested US$8 million in 2012, and a total of US$16 million has been invested in 46 SMEs since its creation in 2004. It is increasingly a key investor in the local agricultural sector through its agricultural value-chain financing of cereals and grains, to provide feedstock for the poultry and brewery industries.

Chief Executive Daniel Duku, speaking to the B&FT after signing a memorandum of understanding (MoU) with the Ghana Institute of Management and Public Administration (GIMPA) to lay the ground for impact investing in Ghana, said the Fund will leverage new partnerships to provide additional support to businesses.

He said the Fund is now turning its attention to impact-investing as investors are no longer considering just financial returns, but also having a positive social and environmental impact in areas where they channel their investments.

The MoU will, therefore, establish a collaborative framework for promoting impact investing as a means of developing a business community of social enterprises to tackle the social and environmental challenges confronting the nation.

“The Trust Fund desires to attract additional private capital to support businesses while providing innovative and effective solutions to social and environmental challenges in the country.

“We hope the pioneering steps we are taking today will catalyse a positive transformation of Ghana’s entrepreneurial ecosystem, where business owners and managers look beyond financial returns to deliver solutions that reflect positively on the communities and societies within which they operate,” he said.

The agreement with GIMPA is expected to culminate in the establishment of a GIMPA Centre for Impact Investing (GCII), which will receive seed-funding from the Fund using a grant from the Rockefeller Foundation.

Mr. Duku said the Fund with support from the Rockefeller Foundation commissioned a comprehensive study of the impact-investing policy environment in Ghana. The outcome of the report will serve as a useful guide for the new centre -- expected to be launched with the full report by the end of next month.

In a world where Government resources and charitable donations are insufficient to address the world’s social problems, impact investing -- that is, investments made into companies, organisations, and funds with the intention to generate measurable social and environmental impacts alongside a financial return -- offers a new alternative for channelling large-scale private capital for social benefits.

With increasing numbers of investors rejecting the notion that they face a binary choice between investing for maximum risk-adjusted returns or donating for social purposes, the global impact-investment market is now at a significant turning point as it enters the mainstream.

Impact-investing occurs across asset classes including private equity, venture capital, debt and fixed income. It is estimated that the impact investment market holds about US$400billion to US$1trillion in investment potential over the next 10 years.

“I think Ghana stands to benefit from about US$10billion to US$20billion of this amount. If you look at the amount of money coming through impact investment, private equity and venture capital, we expect this trend to grow.

“It is this potential that informs and motivates the introduction of impact investing in Ghana as a means to complement Government efforts to address major social challenges by engaging private capital,” Mr. Duku said.

Rector of GIMPA Professor Franklyn Kwabena Manu said the time is past due for academia to step out of the classroom and use its knowledge and expertise to help in development of the national economy.

“The GIMPA Centre for Impact Investing (GCII) is the beginning of one of many active channels that will serve as a beam of light to assist the business community, Government and individuals in identifying projects that can provide measurable social, as well as financial returns,” he said.

Source: B&FT 

Inventory Management is Critical for SMEs

Purchasing & Inventory Management Hook Up!

By Charles Dominick, SPSM

A big trend is for organizations to blend their operational functions under the umbrella known as supply chain management. Often, the first two functions to merge are purchasing and inventory management.

So, as a purchasing professional, you must understand inventory management principles to remain valuable.

First, you must know how much inventory to have on hand to ensure continuity of supply in the event of an uncharacteristic increase in either demand and/or lead time. This quantity of inventory is called the safety stock. There is no universally used formula for determining safety stock quantity, but PurchTips Edition 86 suggested a risk averse calculation.

Second, you must know when to reorder materials for inventory. Generally, this point in time is determined when the quantity of materials in stock decreases to a certain level, called the reorder point. The reorder point is determined by the formula:

ROP = SSQ + (QUD x ALT)

Where,

ROP = Reorder Point

SSQ = Safety Stock Quantity

QUD = Quantity Used Daily

ALT = Average Lead Time (in days)

Third, you must know how much to order. A complex mathematical equation determines the Economic Order Quantity, or EOQ. The equation recognizes the tug of war between acquisition costs and inventory carrying costs: when you order bigger quantities less frequently, your aggregate acquisition costs are low but your inventory costs are high due to higher inventory levels. Conversely, when you order smaller quantities more often, your inventory costs are low but your acquisition costs are higher because you are expending more resources on ordering. The EOQ is the order quantity that minimizes the sum of these two costs.

Fortunately, inventory management systems calculate the EOQ for you. But if you want to see the EOQ equation, check out my blog post entitled Purchasing and Inventory Management.

(keep reading for a FREE Offer)

Spotlight On Professional Development Opportunities

Are you setting yourself up for failure in inventory management? Bad inventory decisions can kill an organization's profitability, whittle away at its market share, and generally wreak havoc on the supply chain, but it doesn't have to be that way.

The course "Profitable Inventory Management and Control" will give you the skills you need to use inventory as a strategic weapon for boosting profitability and giving your organization a competitive advantage. You'll become an inventory management and control expert, you'll have fun doing so, and your organization's financial and operational performance will improve as you implement the easy-to-apply best practices taught in this course.

Learn more about Profitable Inventory Management And Control at:

www.NextLevelPurchasing.com/inventory

African gov'ts should enhance Entrepreneurial Capacity of their Citizens

Former President of Ghana, J.A. Kufuor

Former President, John Agyekum Kufuor has commended the African Development Bank (AfDB) for diversifying its base to cater for the private sector in Africa and enhance their capacities.

He said by opening up to the private sector, the bank, which dealt almost exclusively with governments and the public sector in the past, was laying the foundation for building a strong and competitive entrepreneurial class worthy of competing evenly on the international stage.

Former President Kufuor was speaking on: "Challenges and Opportunities of Entrepreneurship and Capacity Development in Africa," at the Eminent Speaker's Forum of the AfDB at its headquarters in Tunis, Tunisia on Friday, a statement signed by Mr Frank Agyekum, Spokesperson to the former President said.

The function was chaired by Dr Donald Kaberuka, President of AfDB and attended by the bank's top hierarchy, financial experts, the banking community and diplomats.

Former President Kufuor said although Africa abounds in entrepreneurial talents, the continent lacks the technical know-how and informative knowledge of the market to take advantage of the benefits of globalization.

"The indigenous entrepreneur by himself is so seriously handicapped by history and lack of practice. But his failure, automatically, is also the failure of his nation which becomes the dumping ground for imports which could otherwise have been produced competitively locally and which would have enhanced job-creation and employment.

"Therefore, it behoves the public sectors of the economy to join forces to strengthen and deepen entrepreneurial capacity as the main agency for a nation venturing into the international market successfully," he said.

The former President said for Africa to get and secure its fair share of the market, it may be necessary to enter into partnerships that ensured know-how, capital and market for competitive advantage.

He said: "The critical mechanism to enlist such partnership is efficient and effective negotiating skills, which governments within their regulatory authorities should assist their private sectors with as they enter into partnerships with their foreign counterparts.

"The opportunities that would issue from the institutionalization and practice of the concept of Public-Private Partnerships as the cornerstone of Africa's development will be legendary.

"The continent abounds in practically all the raw materials requisite for sustained industrial, agrarian and economic transformation for its people's.

"It has the potential to become the single biggest market in the world in the foreseeable future. This is why it is being courted from the East and West. Now more than ever, it requires leadership of insight both in its political as well as its financial and intellectual institutions to guide and mainstream itself into globalization."

Former President Kufuor earlier on Thursday had separate meetings with Dr Ben Jafaar, President of the Constituent Assembly, which is drawing up a new constitution for Tunisia, and Mr Beji Caid Essebsi, who became Prime Minister in the wake of the Tunisian crisis that precipitated the Arab Spring and helped to bring the country back to normalcy.

Former President Kufuor will arrive in Shanghai, China Sunday for the second China-Africa Forum.

Source: Ghana News Agency

Ghana Venture Capital Trust to increase Fund size

The Venture Capital Trust Fund is working to increase its fund size to 250 million dollars by August this year.

This was after the fund secured a 150 million dollar facility from the China Exim bank last week. The facility is expected to help the Trust promote private equity funding in the country.

Government, which is the majority shareholder in the fund, however has to provide the necessary guarantee before the funds come in.

Chief Executive of the Venture Capital, Daniel Doku told JOYBUSINESS this will help improve its dealings with small businesses.

The Venture Capital Trust currently has a fund size of 100 million dollars.

The roadmap to establish a technologically-advanced industrial estate for artisans at Suame Magazine in Kumasi has received the support of the Manhyia Palace.

The Asantehene, Otumfuo Osei II has rooted for shared equity in project implementation on the proposed one thousand acre plot of land at Atwima Nwabiagya, 7 kilometers outside Kumasi.

Suame Magazine is a typical indigenous industrial cluster that has emerged to be the largest SME cluster and employment village in Ghana.

The cluster is estimated to have a working population of over 200,000 artisans and 12,000 enterprises – made up of auto repair shops, spare part shops, scrap dealers, metal fabricators, manufacturers of car components and engineering products, and host of related businesses within the metal industry.

Customers come from across West Africa to patronize their services and products. Like all indigenous cluster villages, Suame Magazine is unplanned, heavily congested and saddled with numerous environmental problems including waste management issues, air and noise pollution and bad water management practices.

Invariably, the population of Suame Magazine is faced with environmental hazards resulting from implications of their daily activities causing significant health and safety problems to the entire populace.

Besides, the possibility of expanding business within the present location does not exist.

The DANISH Development Agency (DANIDA) has adopted the industrial village project under the Support to Private Sector Development - Phase II (SPSD II), following an advocacy embarked upon by the Suame Magazine Industrial Development Organization (SMIDO).

The SPSD II is considering the possibility of applying part of the unallocated fund of DKK 60 million to design a programme aiming at transforming the Suame Magazine into a technological advanced industrial estate.

The multi-million dollar project will serve as a flagship model for Cluster Industrial Development in Sub-Saharan Africa.

The project is scheduled to commence in June 2012 but on condition that Asanteman releases the proposed 1000 acre land.

SMIDO presented the project inception paper to the Otumfuo at the Manhyia Palace, with the expressed hope of an intervention to obtain a lease on the land from the traditional authority for project takeoff.

“The Otumfuo says yes, he is going to use his land as equity. So hopefully the stakeholders within his camp will do the necessary particulars for us to get the lease and then start the business”, SMIDO President, George Asamoah Amankwah told Luv Fm.

In February this year, the project was presented to Vice-President John Mahama who assured of government’s support to get the project off the ground.

Project Consultant, Nyaaba Aweeba-Azongo says the 6 years of advocacy to resettle the artisans could soon pay off.

According to him, “DANIDA is going to support the feasibility studies and come out with the industrial model for implementation and will also garner support from other donor partners as a multi-donor arrangement to support the implementation of the industrial village project”.

The initial project Action Plan presented by SMIDO in October 2011, titled “the Blueprint for industrialization of Suame Magazine”, provides a three year roadmap from land acquisition, adoption of funding modalities, design and implementation of the whole programme. 

Source: JoyOnline

Ghana Gov't Spends GHC 84m Under LESDEP

Government is spending 84 million Ghana Cedis under the Local Enterprises and Skills Development Programme (LESDEP) to alleviate poverty especially, among the youth, Dr Kwabena Duffour, Minister of Finance, has disclosed. This was because the youth constituted a strategic human resource of the nation whose contributions to socio-economic development could not be underestimated. Dr Duffour, who was speaking at the passing out ceremony for some 94 trainees of the LESDEP at Kumawu, in the Sekyere Afram Plains of Ashanti Region, said the empowerment of the youth would continually feature prominently in the development agenda of the Mills’ Administration. The trainees who underwent two weeks training in hairdressing, mobile phone repairing, barbering, catering, as well as fashion and dressmaking were drawn from the Sekyere Afram Plains and Sekyere-East Districts. They received start-up kits including gas cylinders, beauty care machines, motor bikes, barbering kits, mobile phone repairing kits, sewing machines and six trucks to enhance their livelihood. The ceremony marked the first in the series of training programmes lined up by LESDEP for beneficiaries in the Ashanti Region. Dr Duffour said the LESDEP, registered under the auspices of the Ministry of Local Government and Rural Development, is being implemented in collaboration with the Ministry of Employment and Social Welfare and other agencies. It has so far opened offices in all the 170 metropolitan, municipal and district assemblies across the nation.

Source: Ghana News Agency

Ghanaian businesses to be showcased at the 2012 Olympics

The African and Caribbean Chamber of Commerce and Enterprise (ACCCE) based in London is to showcase some Ghanaian businesses and industries at the 2012 Olympics Games.

The programme, dubbed “The African and Caribbean Business Experience” would be organized in collaboration with the Ghana Chamber of Commerce and Industries.

Speaking at the programmes on Wednesday, Madam Em Ekong, who is the Company’s Secretary, said the Olympics would present a great opportunity for businesses because it is regarded as the world’s single largest networking experience.

“Timed to coincide with and capitalize on the Olympics, the African and Caribbean 2012 Business Expo would present a once in a lifetime opportunity to showcase African and Caribbean business opportunities”.

She said the programme would also help connect Africans, Caribbean, and United Kingdom and Diaspora businesses to collaborate in London.

Madam Kong said the London Olympics would serve as a great platform for business networking since it would attract an estimated 280 million TV viewers, over 250 global Chief Executive Officers, 160 Heads of States and over 35,000 journalists.

“This programme would change the perception people have about Africa and help us tell the true story of Africa and its businesses,” she said and added the programme would be a mixture of seminars, fairs, workshops, networking and meetings with business tycoons.

She said only businesses which are duly registered and are members of the Ghana Chamber of Commerce and Industries would be selected to participate.

“We should all join to show the world that African businesses have come of ages,” she said.

Source: Ghana News Agency

IFC injects capital into UT Bank in Ghana

CEO of UT Bank, Prince Kofi Amoabeng

UT Bank Limited Ghana has signed a $15 million joint equity investment with the International Finance Corporation (IFC), a member of the World Bank Group, and the Africa Capitalisation Fund Ltd, which is managed by the IFC Asset Management Company Ltd.

The investment will help UT Bank expand lending to small and medium-scale enterprises (SMEs) in the country. The IFC equity investment will also enable the bank to meet the GH¢60 million minimum capitalisation of the Bank of Ghana.

Since UT Bank is a listed company, the deal must receive the approval of the Securities and Exchange Commission, the Bank of Ghana and the Ghana Stock Exchange.

The IFC will also extend an advisory services programme to strengthen UT Bank's risk management and corporate governance practices. The combination of additional capital from the IFC and world-class expertise through its advisory services programme will support UT Bank as it continues to implement its strategy for the expansion of its SME and consumer lending business.

“Small and medium-scale businesses are powerful drivers of growth in African economies, but they often face challenges in getting appropriate finance,” the IFC Country Manager for Ghana, Ms Mary-Jean Moyo said.

She added that the IFC's partnership with UT Bank would provide banking services to underserved entrepreneurs and help build businesses and create jobs in Ghana.

UT Bank is Ghana's leading SME and consumer lending bank and was last year voted as the 'Best Bank in Short term finance.'

UT Bank, which is currently listed on the Ghana Stock Exchange, was founded in 1997 as a non-bank financial services company by Ghanaian entrepreneurs Prince Kofi Amoabeng and Joseph Nsonamoah. It has grown rapidly to become one of Ghana's most respected companies.

Shareholders of UT Bank at their last annual general meeting passed a resolution to raise additional capital to meet the BoG's new capital requirement.

The Chief Executive Officer of UT Bank, Capt Prince Kofi Amoabeng (retd), said: “The IFC is the world's largest development institution focused on the private sector, and its investment constitutes a welcome affirmation of the commercial success of the "UT Way," as well as the positive social and developmental impact UT has made in Ghana."

The CEO added that IFC's investment would help spur the development of Ghana's SME and mid-market companies and prepare the bank for future growth opportunities in the economy. 

Source: Daily Graphic