Should Ghana's Pension Age be increased from 60 to 65?

Earlier this month the Omanhene of the New Juaben Traditional area, Daasebre Oti Boateng suggested at his 75th birthday celebration that Ghana's pension age should be increased from 60 to 65 years.

Daasebre's reason for advocating the increase is that there are many experts and professionals with valuable skills and experience who are strong and can continue to work longer and share their experiences with the young generation. Ghana continues to lose expertise in critical sectors of the economy because they must necessarily retire at a certain age, Daasebre laments.
Currently Ghana has 2 public pension schemes: the main one administered by SSNIT and a second called Cap 30 (due to be phased out by December 2013) and other private schemes.

Daasebre Oti Boateng is not alone in making this call. In May 2010, Joseph Amenowode then Volta Regional minister also called for the pension to be increased to 65 when he realised an energetic headmistress of a secondary school had to go on compulsory retirement although she loved her job and was desirous of continuing.

Why Should Pension Age Be Increased?

Daasebre and others say that more older employees have acquired a lot of useful experience that are still needed and can be passed down to younger employees. They also believe that the skills and experience of older professionals help an organisation to stay competitive.

Some also advise that Ghana as a developing does not have many professionals in certain critical sectors. These sectors include teachers, university lecturers and researchers, health professionals, engineers and so on. So instead of asking an experienced electrical engineer or surgeon with over 30 years experience to retire, allowing them to stay on for a further 5 years will not hurt and can only benefit the country.

This line of thinking is supported by the fact that the Life Expectancy (the average number of years a person can expect to live up to) in Ghana has increased. In 1980 the Life Expectancy (LE) in the country was 51 for men and 53 for women. As at 2012 the LE is now 62 for men and 64 for women. So the average LE has gone up by 11 years. That is the average Ghanaian now lives longer by 11 years. This means that if the pension age is static pension payments will become expensive for SSNIT as retirees will live longer years and claim pension for more years.

Another reason advanced by those asking for increase in pension age is that some older people enjoy their jobs and want to stay active by continuing to work. The changing nature of work means that a lot of jobs are now less physically strenuous so many people are still strong and energetic when approaching retirement.

Some firms have difficulty retaining younger talent so keeping older workers for long is good for those organisations.
 

Reasons Against Increasing Retirement Age?

Many other people especially the young generation oppose increasing the pension age for many reasons. In Ghana and Africa young people make up majority of their populations.

In many of these African countries including Ghana, the government is the largest employer. Every year many young people are employed to work in the public and civil service. So increasing the pension age from 60 to 65 will limit the prospect of many younger people to be employed. In addition youth umemployment in Ghana and many other Africsn countries is about 20% or more. This high unemployment rate breeds social problems like unrest, crime and other social vices so a rise in retirement age will just compound this unemployment problem.

The argument is also made that young people bring fresh ideas and new thinking to the workplace so instead of increasing the pension age, more younger persons must rather be hired to bring innovation and vibrancy to the workplace.

Another point is that many people in employment now (especially in public sector) actually reduced their official ages before entering employment. They did so to delay their retirement so that they could draw salaries for longer. In short they are working with 'reduced' or 'football' ages so allowing them to hang onto their jobs will delay the entry of youths into the workforce.
      
The last but equally important point is that many young people constantly complain about is that when the join the workforce, they encounter a lot of experienced and older staff who see younger staff as a threat to their positions. If the younger staff are more qualified or show more potential than them, the older staff put impediments in their way and refuse to share their experiences with the young ones. This attitude is meant to frustrate and demoralise the younger staff. So if there are older and more experienced staff with this attitude and mindset at the workplace, giving them more years to hang onto their jobs will hinder productivity and stifle the careers of younger staff.  
     
Pension Age Situation Worldwide

It will be more enriching to examine the pension age debate in other countries. Next door in Nigeria, the Federal Government last year increased the retirement age of university professors from 65 to 70. In announcing the increase, Federal education minister said the move is to "encourage more people to go into lecturing and to aspire to the peak of their careers". In Nigeria again in October last year the government announced it was considering increasing the retirement age of junior and secondary school teachers from 60 to 65.

In South Africa the ANC government last year also said it was considering raising the pension age of university professors from 60 to 80. The reason being that the country desperately needed to train more young people as many youths were not interested in academia. They rather preferred to work in the private sector.     

So in both Nigeria and South Africa, there was an increase (or consideration to do so) in a specific sector only-education. It was not across board in all sectors.

Over in Europe the scenario is quite different. Life expectancy in many European countries has shot up due to better health care and healthy lifestyles. Research data shows that LE at birth in OECD countries is expected to increase by 7 years in the next 50 years.

A high LE has allowed many countries to raise the age at which citizen's retire. The government normally is the main payer of pensions and because many people now live longer, pension payments have become very expensive and led to government borrowing and public deficits.

In the United Kingdom (UK) men currently retire at 65 and women at 60. But the government has agreed to raise it to 66 for both gender in 2018-2020 and it shall be progressively reviewed every 5 years in tandem with life expectancy. Significantly though the UK law las made retiring at the legal age to be VOLUNTARY. Meaning it is no longer compulsory to go on pension when your age is due. This flexibility allows older workers to stay on and work longer if the employer agrees. However the law also allows the employer to force an employee to retire even if that employee voluntarily decides to stay on. In this case the employer needs to prove that it has good public interest reasons for forcing that worker to retire.

With a UK life expectancy of 86 for men and 89 for women it means that if a citizen retires at say 65, that person can expect to live almost a third of their lives on pension and welfare benefits. But making retirement voluntary and increasing it to 66 shall save the UK government £60 billion in benefits and £8.1 billion in tax and National Insurance, according to the Office of National Statistics.

In France the pension age was increased from 60 to 62 in 2010 for both gender in order to pension costs. In Spain  in 2011 the retirement age was increased from 65 to 67 to cut public spending. Similarly in Poland the government increased the retiring age from 65 to 67 for men and from 60 to 62 for women to reduce public spending and due to higher LE.

From the foregoing, it shows in Europe the trend is to increase the pension age upwards in response to high LE and to reduce public debt. Whereas in the African countries of Nigeria and South Africa, the pension age was increased for higher education workers only.

I believe Ghana's pension age must be increased just as Daasebre Oti Boateng suggests. However ti should not be increased across board for all sectors like is done in Europe. It must be for only critical sectors where skills are in short such as education, health, engineering, science and technology and agriculture. "Africa has the lowest share of engineering graduates in the world", according to the IMF.  So why would the few engineers be forced to retire at 60 when we do not already have enough and they are still active?

What Ghanaian and African governments can do to help the situation of yet-to-retire workers is to give them pre-retirement training so they can gain new skills to make transition into retirement easier. Other experienced people could also be engaged on contract basis or enlisted on to a 'reserve skills bank' to be called upon by both public and private sectors when needed. Lastly pension payments should be increased and also paid on time so that older workers will be motivated to retire. 

Smartphones and Internet in Ghana

Smartphones and Internet in Ghana

A few years ago, if someone in Ghana asked you to buy them a mobile phone, they specified that they preferred one with a radio or camera. Times and tastes have changed. These days people will ask for phones with internet capabilities. There is a silent revolution in the use of internet on phones especially on smartphones never seen before.

The telecom sector in Ghana is very competitive with 6 mobile operators-MTN, Vodafone,Tigo, Airtel, Glo and Expresso. As the telecom sector has grown with 99% mobile penetration rate, so has the market for mobile phones.

A growing middle class, cheaper and easily available handsets, and popularity in social media has seen an explosion in the use of phones especially smart phones.

What is a Smartphone?

There are different cell phones available on the market. The majority are the ordinary basic or feature phones which allow you to call, text and perform other basic functions. A smartphone however is a phone that offers more advanced computing ability than an ordinary phone.

Smart phones are built on a mobile operating system that allow the user to perform functions like browse the internet, send and receive emails, download music and other applications, read and edit documents, use maps and satellite navigation and so on.

They have faster browsing and download speeds. In simple words they are a pocket version of a computer. Smartphones have also come to make redundant a host of devices like alarm clocks, dictionaries, cameras, CD players and radios! 

Ghana's Smartphone Players

Statistics are hard to come by in this sector but Samsung with its 'Built for Africa Initiative' (adapting global products to suit African conditions) leads the smartphone market with its user-friendly and affordable handsets. According to the German-based research firm GFK and quoted by adomfmonline.com, Samsung leads with about 43% share and 68% of revenues.

Another serious contender is local company Tecno which arguably follows Samsung with its cheaper handsets and aggressive marketing. The company launched the first dual sim smartphone in the country with a promise of becoming the market leader in the future.

Blackberry is equally popular especially with business people, middle class and students. Nokia and local Ghanaian firm RLG Communications all have their share of the market.

Chinese telecom giant Huawei entered the Ghanaian market in October with 3 smartphones, promising to be among the top 3 in three years. It is looking to replicate its success in Kenya where it holds 30% share of the smartphone market. 

A host of other cheaper brands from China are also available on the market.

Internet Uptake

Young consumers are especially interested in phones integrated with social media and download capabilities.
Currently Facebook, Twitter, Whatsapp and Google are some of the most popular tabs most people expect their phones to have.

According to the African Business Magazine, there were only 30,000 internet users in Ghana in the year 2000. As at last year there were over 2 million users. An increase of over 6,800%. Out of this number, there are 1.28 million Facebook users.  Despite this, the internet penetration rate relative to the population in the country is still low and way behind Senegal, Cape Verde and Tanzania. 

Apart from the communication and entertainment benefits of the smartphone internet, there are many other uses. Videos and pictures can be taken and shared on the internet for instant reactions. The much-publicised Arab Spring started after someone used his smartphone to record and post online the self-emolation of a Tunisian unemployed graduate.

Mobile banking and mobile e-commerce are been gradually patronised by customers using their cell phones. Especially smartphones. Many businesses have social media pages where customers can ask questions and post complaints. Media organisations like FM stations and Television stations read comments and feedback from followers live-on-air in real-time to make their programs interesting.  

Looking for Waakye to buy? There's an App for it!

Increase in smartphone internet usage has raised the need for local content applications that are specific to the country and address local problems. Tecno phones has teamed up with indigenous firm SMSGH to launch a digital payment platform where its customers can download music and other applications at a fee. Samsung Ghana says it is working with local regulators to enable users of its 'Galaxy Pocket' smartphone to download Ghanaian music from the Samsung website to the phones.

There are many other local computer application developers busy writing applications to solve local issues. They need support and coordinated effort from stakeholders to market their creativity.

Africa Wide Phenomena

Revenues from an impending data uptake in Africa is huge. According to analysts Informa Telecoms and Media, dramatic increase in smartphones and data usage will increase revenues from non-voice by 20%. They further project that there will be up to 265 million data subscribers in Africa by 2015.

On affordability mobile devices like smartphones are set to enter the African market 4 times faster than desktop computers and laptops.

Indeed for Blackberry maker RIM, Africa is the only region where the firm is experiencing growth in its sales and market share. In all other markets outside Africa the firm is seeing declining sales and lost of market to rivals Apple and Samsung. Blackberry is the market leader in smartphones in Nigeria, the continent's biggest mobile phone market and growing. Blackberry is popular so much so that there's a well-received Nollywood movie called 'Blackberry babes'.  

Smartphones have come to stay and will keep growing as internet use also grows. It is up to governments to open up their broadband spectrum to reap the benefits it brings to the economy.

Domestic Airlines: Competition Heats Up!

Ghanaians will vote in general elections this coming December. Politicians are criss-crossing the country to woo voters and the campaigns show that this is going to be one of the tightest and most competitive elections in recent times.

Up in the skies, a different kind of battle has been been waging. Ghana’s domestic airline industry is seeing a competition never seen before. There was oly one domestic carrier in 2003 with a monopoly over the market. Almost a decade later there are 5 domestic airline operators competing for customers:

§         Citylink (Egypt-Ghanaian owned)

§         Antrak Air (Ghanaian-owned)

§         Fly540 (-owned)

§         Starbow Airlines (Privately-owned,)

§         Africa World Airlines (Ghana-Chinese joint venture)

According to the local regulator the Ghana Civil Aviation Authorithy (GCAA), many more airlines have applied and going through the process to be licensed. 

The main routes plied by these domestic carriers are Accra-Kumasi, Accra-Takoradi, and Accra-Tamale. Only Antrak Air flies to Accra-Sunyani. These are only four regional capitals out of a possible  nine cities theycould fly to.

Prices used to range from GHC 100 upwards $ one-way  on the Accra-Kumasi route and GHC 200 for a return ticket.  But with increased competition, presently one way on the same route starts from GHC 49 and a return ticket starts from GHC 99. This means prices have tumbled down by 50%.

There are many reasons which explain why Ghanaias are taking to the skies.

An improving economy means many Ghanaian consumers having incomes to afford to pay extra to fly instead of using the road. Ghana became a lower middle income country last year and the middle class is growing. Ghana’s economy is also doing well with Foreign Direct Investment (FDI) inflows of $3.2 billion last year been the the tird higgest in Africa after Nigeria and South Africa. Business activities have thus picked up and these activities are not concentrated in the capital of Accra alone. The need for business trips to other regional capitals have seen a demand for quicker travel hence the growth in patronage of domestic airline business. 

A lot of this FDI inflows has to do with Ghana’s oil and gas industry which is situated in the third largest city of Takoradi. The demand on this route is very high too.

The country’s roads are notorious for their accidents and traffic jams. An estimated 2,000 die annually from road accidents. For those who can afford it, the safety and speed of air travel is worth the expense. 

Last but not least, the African Business Magazine estimates that “74% of intra-African routes have only one daily flight while around half of the continents cities are underserved”. In short the demand exists and if served the routes will be patronised. 

This past week the major topic of newsis not about election campaigning but the sudden closure of the Kumasi Airport (Kumasi is Ghana’s second largest city and the most popular domestic route). According to the domestic carrierd they were not given prior notice before the airport was closed. The GCAA said that the runway had developed potholes (yes huge potholes) and the closure was to enable repair works to be undertaken on the runway.

Led by Antrak Air the domestic carriers claim they had sold tickets to customers in advance and the continuous closure was causing loss of profits. Antrak made allegations in the media that the Kumasi airport was not made to for very large aircraft but the regulator had allowed a rival carrier to be landing larger aircrafts at the airport and contributing to the damage to the runway. They also claimed that this is the third time in 12 months that the airport was being shut down. Antrak has threatened to suee the GCAA for a compensation of $300,000.

Although the airport has reportedly been opened as at press time, it has raised a few issues I want to point out in this keen competitive industry.

The domestic airlinesector in the country grows at an annual rate of 15% and with its bound to grow. In other identical industries like the telecommunications and financial services sectors where competition has slashed prices by 50%, it led to expontial growth and patronage by consumers.

I think the carriers must come together and form an association so they can fight together on issues of concern. TheKumasi airport closure looked like a fight between GCAA and Antrak air just because the carriers domestically do not speak with one voice. There are other significant issues on the domstic airline front such as cost of aviation fuel, airline taxes, landing rights and so on that an umbrella body can pursue and find solutions to.

This issue is significant because growth in the airline industry can lead to growth in the tourism industry. Some of Ghana’s major tourist sites are located outside Accra-Mole National Park (Northern region), Kakum National Park (Central Region), Elmina/Cape Coast castles (Central region), Paga Crocodile Pond (Northern region), Boti Water Falls (Volta Region) and others. A well developed domestic airline route will mean tourists can easily access these venues with ease and bring increased revenue.

This brings me to the sector ministry overseeing affairs of the airline industry-the Ministry of Transport. I believe its remit is too large as it overses road transport, rail transport and the harbours. I hereby propose for the re-introduction of the ‘Ministry of Aviation’. We had a Ministry of Aviation under the former government but it was scrapped when this current administration made it the ministry of transport.

An aviation ministry will be solely focused on the aviation industry and will better tackle the specific issues mentioned above.

There is the urgent need for various airports in the country’s underserved regions to be upgraded so that domestic carriers can fly there to oene up economic activies in those regions.  I am talking about Cape Coast, Bolga, Navrongo, Koforidua, Sunyani and Ho. Flight services to these cities will be a lot of much-needed employment.

Starbow currently has started flights outside the shores of Ghana by flying to Benin in West Africa and looking to add 12 new routes in West Africa in the next 12 months. New entrant Africa World Airlines also has plans to fly to West Africa after it starts domestic operations. All these future new routes pre-supposes that the future is sub-regional hence the call to upgrade our airports is important.

It is refreshing to note that the GCAA with a Brazilian company to upgrade the TAMALE Airport into an international one at a cost of $174 million. The airport will be intregrated with a perishable cargo center, airport city,  Hajj Pilgrimage center and others. This has been long overdue. Ghana’s neigbour Ivory Coast has two international airports (Abidjan and Yamousoukro). Nigeria has many international airports and Ghana is now playing catch up. 

Ghana’s economy is growing and expanding and the more serious attention is paid to the airline industry, the more it will enable its population to take to the skies.

Comparative Advertising and MTN's GAVET Advertisement

Not many analysts will dispute it if I say the Telecommunications sector is the most competitive industry in Ghana now. Not a day passes without a new product being introduced or a promotion of some sort been introduced by Ghana's mobile phone operators. Just last week alone, Airtel introduced on the market an innovative 2 sim cards with consecutive phone numbers. MTN launched ''MTN Business'', an advisory service for corporate clients. Not to be outdone, Vodafone introduced ''Webbox', where customers can connect and browse the internet on their television sets (TV). All these were launched aside ongoing promotions been run by the operators. Such is the stiffness of the competition. 

Advertising is one communicative tool the operators use to reach their target market. Advertising is generally defined by marketers as ''any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor''. Advertising can take place within many mediums- TV, radio, print, online or direct physical contact. Comparative advertising is defined by online resource wikipaedia as ''an advertisement in which a particular product, or service, specifically mentions a competitor by name for the express purpose of showing why the competitor is inferior to the product naming it''. Yet another text defines it as "an advertisement in which there is a specific mention or presentation of competing brands and a comparison is made or implied". 

One such advert sponsored by MTN currently running on tv is called ''GAVET''. In this advert where the main character is called GAVET, the learned mind can deduce that each letter in the name GAVET is an acronym of the first letters in the name of the six telecom operators-Glo, Airtel, Vodafone, Expresso and Tigo. In addition the main character purports to give a telecom report of the mobile industry in Ghana. To begin with the main character comes dressed in a multi-coloured shirt with the colours of the other five networks. Then armed with five coloured phones to appropriately depict the colours of each telecom operator, the advert attempts to show that the network coverage of the 5 operators is limited and does not cover the entire country. Then a second person appears in a yellow shirt (the brand colour of MTN is yellow) seeking to confirm that MTN network coverage is nationwide and better than all the other networks. A second complementary advert to the first GAVET one is also running on TV but this time, it carries the message that MTN has a better video streaming capability than the other networks.

The GAVET advert belongs to a category of advertisements called 'comparative advertising'. In comparative advertising, the sponsoring company compares its product or service to that of rivals to show weaknesses in the rivals product and confirm theirs as the best. In Ghana, there are many comparative adverts on our TV screens, newsprint and on radio. It is especially popular among detergent makers where the sponsoring company uses say their detergent powder to wash a dirty shirt and it comes out sparkling white. They then use 'other' brands (referring to their rivals) to wash the same dirty shirt but the dirt does not entirely go away. The sponsoring company will then conclude that their detergent is the best. Some comparative adverts do not directly mention their rivals name. They only make inferences to the rivals trademarks or signs. The GAVET advert in my opinion is the most daring one in Ghana's vibrant telecommunications sector. The advert itself is very catchy, innovative and amusing to the neutral mind. 

Many advertisers find it irresistible to say their products are cheaper than their competitors. This is because of its effectiveness and ability to win over customers. But how far will advertisers go whilst risking litigation and the unhappy prospect of having to scrap an expensive advertising campaign? On Metro TVs 'Good Evening' programme last month, the Chief Executive Officer of the National Communication Authority (NCA), the body responsible for regulating the telecom sector, Mr. Paarock Van Percy did reveal and confirm that one of the telecom operators has filed a complaint with the National Media Commission against the GAVET advert. The question that arises therefore is is the GAVET advert unethical? Does it break any fair competition laws? Has it raised the bar of advertising creativity to another level? In order to attempt answering these questions, it will be good to examine comparative advertising experiences from other parts of the world. 

The UK had a set of rules called the Comparative Advertising Directive (CAD) which although did not ban comparative advertising entirely, frowned upon it. However in 2003, the classic case of O2 v. Hutchison 3G UK clarified the rules. In the case itself O2, a mobile phone operator owned the rights to a well-known trademark image of blue bubbles in water which was used to identify its products. Then Hutchison UK, a rival mobile phone operator run a TV advertising campaign which compared the price of its mobile telephone services with those of O2.  The Hutchison advert used the name 'O2' and images of black-and-white water bubbles which although not identical to O2's blue bubbles, was a clear reference to it. The image of O2 and bubbles was followed by Hutchison-related brand signs and the message that certain Hutchison services were cheaper than O2's. O2 did not dispute the accuracy of the price comparison, but it took offence with the use of water bubbles in the advert. O2 argued that it infringed on its trademark and Hutchison need not have used the bubbles to make the comparison in the first place.

The High court referred the matter to the European Court of Justice (ECJ), the highest decision making body in Europe. The ECJ ruled that so far as the advert did not break any of the directives of the UK's CAD, then no fair competition rules were broken. It further explained that individual European countries should deal with future issues by following their respective country's advertising guidelines. So effectively Hutchison won. 

The UK CAD gave four conditions that had to be met before an advert was considered fair:

       •        the advert should not be misleading;

       •        it should not create confusion in the minds of consumers;

       •        it should not take unfair advantage of the reputation of a trademark;

       •        it should not present goods/services as imitations or replicas of goods/services bearing a protected trademark or trade name. 

With us in Ghana and been a British colony, we follow the Common Law system where rules and precedents are set by court rulings. The laws in Ghana on comparative advertising are not clear. My interest in the above case is that comparative adverts are permitted if they are not misleading. Is the GAVET advert misleading? So as catchy and innovative as the GAVET advert is, does it take unfair advantage of the reputation of its competitors?

The thrust of the advert is that MTN is the only network with nationwide coverage in Ghana. The other mobile networks do not have nationwide coverage. The GAVET advert pre-supposes that all other networks can at best cover up to the middle of Ghana. If any mobile network (Vodafone, Tigo, Airtel and Kasapa) can prove that they cover all the ten regions of Ghana, then the GAVET advert is misleading consumers and thus inappropriate.  Indeed, currently Airtel have been running a TV advertising campaign showing the geographical map of Ghana and re-assuring the public that its network reaches all across Ghana. So I am sure this new Airtel advert may be a response to the catchy GAVET claims. 

In the O2 vrs Hutchison case cited above, the complainant, O2 accepted that the facts in the advert were true. That the prices mentioned in the said advert were correct. It only took issue with the use of its trademark-the water bubbles. Thus it seems comparative adverts do not irk so much if the facts presented in the advert are correct. Thus if indeed only MTN covered the ten regions of Ghana, then not much fuss should be made of the advert. If not then complaints and counter adverts are welcome. Many enlightened onlookers will watch the GAVET advert and appreciate its ingenuity and homourous side. However, the many other folks not so enlightened stand to be misled by the message the advert conveys, that is if the claims in the advert are not factual. 

Still in the UK, supermarket giants Tesco and Morrisons filed a complaint with the Advertising Standards Authority (ASA) a few years ago about a comparative advertising campaign run by their competitor Asda. In the said advert, Asda offered 'price guarantees' to consumers promising to pay back the difference in the price of Asda's shopping items if the item was cheaper elsewhere (elsewhere been its competitors). The adverts contained slogans like ''If your grocery shopping could have cost less elsewhere we'll give you the difference-Guaranteed'', ''Buy all of this for less at Asda or we'll give you the difference'' and ''Don't waste money this Bank Holiday. The Asda Price Guarantee means your shopping will cost less than Tesco, Morrison's or Sainsbury's''. 

The ASA ruled that for some adverts Asda clearly showed items that were not included in the price guarantee. But those items were shown alongside the slogan ''Guaranteed'', giving the general impression of a supermarket which included items that were not part of the guarantee, such as non-grocery items. The ASA explained also that the small print in the adverts warning ''exclusions apply'' was not enough to warn consumers about the exclusions so the adverts were held to be misleading. Secondly, the ASA also decided that for some adverts, Asda's price guarantee referred to shopping generally, rather than to specific items. This sought to imply that Asda's items were generally cheaper than its competitors. The ASA held these adverts to be equally misleading. 

 In the United States (US) things are quite different. Under US Law, comparative adverts are permitted. Although assertions made in the adverts have to be truthful, non-deceptive and should be reliably substantiated when demanded. In fact comparative adverts are encouraged by the US regulator as a means of stimulating competition and as an important source of purchase information for the consumer. Some marketers in the US label comparative advertising as ''brand smackdown''. The law even allows you to distinctively use a competitor's trademark and be rude about them. In an old advert for computer chipmaker Intel, an actor compared the power of Intel's machines with those of rival Apple, and then drove home his point by snatching a real apple from a tree and taking a bite out of it (an obvious reference to the famous AppleMac trademark).

Unlike the free reign enjoyed by advertisers in the US, comparative adverts are not welcomed in some other countries. Argentina, Italy, Switzerland, Philippines and Australia have strong restrictions against comparative advertising. They are entirely banned in Japan, China and South Africa.

Coming closer to home, South Africa (SA) provides an interesting scenario. A comparative advertising tussle ensued between mobile phone rivals ''Vodacom'' and ''Cell C'' this year. Vodacom (owned by Vodafone UK) is the market leader in the country whose brand colours were blue and green. In April this year, Vodacom decided to re-brand from its blue and green colours to the red teardrop logo that is identical to its parent company Vodafone UK. The re-branding was launched with an advertising campaign in the media. Then rival Cell C also launched a comparative advertising campaign poking fun at the Vodacom re-brand, saying that it took more than ''a lick of paint to be SA's number one''.

In the Cell C advert itself, South African comedian Trevor Noah walked alongside an old sports car that was half-painted in red and declared "recently, a 17 year old cell network changes their colours. Nice, but what's actually under the hood? He then walks up to a new, black Ferrari saying it took more than a lick of paint to be the number one network in SA. In another advert, Cell C made claims that they were now the leading mobile operator and possessed the most superior broadband network in the country. Vodacom is the market leader by subscriber numbers.

Angered by the Cell C advertising campaign, Vodacom filed a comparative advertising complaint with the Advertising Standards Authorithy of South Africa (ASA). In the complaint, not only did Vodacom accuse Cell C of ''disparaging'' Vodacom's brand and its products, but also said the adverts were dishonest as Cell C was not the market leader and did not have a superior network. The ASA after investigations, gave a ruling a week later in favour of Vodacom and ordered Cell C to cease its comparative advertising campaign with immediate effect. The ASA said the Cell C adverts were misleading.

So comparative advertising has always proved to be a thorny issue in country's with competitive industries. 

The fascinating aspect in all this to me is that Vodacom filed the complaint against its rival on 8th April 2011, and the ASA issued its ruling on 15th April 2011 (exactly within a week). I doubt if a similar complaint was filed on any telecom-related issue in Ghana, the relevant regulatory body in charge can investigate and deliver a ruling in such a quick manner? If indeed any cellphone provider has filed a complaint about GAVET or any such grievance before a regulating authority, can we be hopeful it will be resolved quickly enough? Currently, the Advertisers Association of Ghana are engaged in a legal tussle with the Accra Metropolitan Authorithy (AMA) over the hike in prices of erecting advertising billboards in Accra. It has dragged on for months. I think Ghana needs an Advertising Standards Association just like other countries to resolve advertising disputes arising from the business sector. This body can handle advertising issues from companies, consumers and the general public.

It was heart-warming when a new Ghana Chamber of Telecommunications was established last month. Its Chief Executive Kwaku Sakyi-Addo in an interview with 'Joy Fm' revealed that the chamber "will be a platform for the industry to address disputes. This will be a forum for resolving internal issues''. This is a right step and I hope it is replicated in other sectors too. As various sectors of Ghana's economy grow including the telecoms sector, we will need specific vibrant institutions to regulate them and help them grow.

Competition in the mobile phone sector will increase and comparative advertising am sure will continue to be used by rivals as an effective marketing weapon.  Perhaps GAVET just opened the door to a more colourful telecommunications future!

Non-Performing Loans in Ghana's Banking Industry

 The banking industry in Ghana has seen very strong competition in the last decade. This competition is mainly as a result of the entry of banks from the sub-region particularly Nigeria who brought very innovative ways of banking never experienced before on our shores.

There has been an intense scramble to attract the large number of the unbanked population. This has seen banks deploying direct sales people to go out to prospect for customers, expansion in bank branch network, the opening of ''cashless'' bank accounts, mobile phone banking and so on. As bank customers and deposits grew, so did the need to give loans to firms and individuals. In order to make profit and outdo each other, many banks have given out loans and advances to customers and not all these loans get re-paid. This has introduced the incidence of Non-Performing Loans (NPLs) onto banks' books and this is gradually becoming a major concern to banks and regulators alike.

A non-performing loan is a loan given by a bank or finance company on which interest and principal repayments are not made on time. According to the International Monetary Fund (IMF), a loan is non-performing if it is 90 days (3 months) overdue. A loan can also be classified as non-performing if it is less than 90 days overdue but repayments are no longer anticipated. Repayment of principal and interest on loans create a stream of cash flows for the bank. It is from these interest repayments that banks make profits. Therefore a high NPL portfolio reduces banks profits and their ability to further lend to borrowers. This ultimately has a negative effect on the economy.

According to a Ghana Banking Survey Report released in 2010 and authored by PricewaterhouseCoopers, between the years 2007 to 2009, the total income of the banking industry more than doubled from GHC 793 million in 2007 to GHC 1.5 billion in 2009. Over the same period however, the rapid deterioration of the industry's loan portfolio negatively affected profit margins. Impairment charges for non-performing loans over the three year period increased from GHC 60 million in 2007 to GHC 266 million in 2009. The Central Bank of Ghana also revealed that the NPL ratio, which measures the ratio of loan losses to gross loan advances, worsened from 16.2% in December 2009 to 17.6% as at December 2010. This high NPL ratio has contributed to reduce the market share of the country's top five banks from 49.5% in 2009 to 45% in 2010 (Bank of Ghana report 2010).

Shifting focus from the traditional banking sector, the non-banking institution Micro-finance and Small Loans Center (MASLOC) has dragged many of its defaulting customers in different parts of the county to court. Meaning the issue of NPLs is widespread across the general financial industry. Across the border in Nigeria, the country's Central Bank in a bid to save the Nigerian banking sector from collapse created the Asset Management Corporation of Nigeria (AMCON) to buy all non-performing loans on the books of the banks that were at risk. Similarly, at the height of the credit crunch in America, the Obama Administration set up the Toxic Assets Recovery Program (TARP) to buy all NPLs or ''toxic assets'' as it was called so that the banks could resume lending.

Ghana's situation has not reached such crisis levels as experienced in Nigeria and America but an NPL ratio of 17.6% in the Ghanaian banking industry is still a cause for concern. Dan Mensah, the Executive Director of the Association of Ghanaian Bankers this year complained that the high rate of NPLs on the books of commercial banks is sparking worries among bankers and industry watchers.

So what factors account for this high default rates on loans in the Ghanaian banking industry?

The harsh economic environment affecting some small and medium scale enterprises (SMEs) and individuals was a factor.  According to the 2010 Budget Statement, The services sector which contributes about 31.8% to the country's GDP, saw a sharp fall from its growth rate of 9.3% in 2008 to about 4.6% in 2009, the lowest growth rate for the past five years. This downward fall according to the 2010 Budget came from the ''Wholesale and Retail, Restaurants and Hotels sub-sector''.  In the same 2010 Budget statement, growth in Industry fell from 8.1% in 2008 to 3.8% in 2009. Wholesale and Retail trade, and Industry mainly rely on loans from banks for their business activities so if both sectors saw sharp falls in growth over the period, then it could explain why default rates on loans increased over the same period. At a news conference recently, Ghana's Central Bank Governor Kwesi Amissah-Arthur observed that the share of NPLs were higher in commerce, finance, manufacturing, services and construction sectors.

Government's indebtedness to the construction sector and others is linked to loan default rates. Dan Mensah, the Executive Director of the Association of Ghanaian Bankers has blamed the government for 20% of bad loans at the country's banks because of arrears to contractors, suppliers and municipal assemblies. According to Mr. Mensah ''the government's failure to repay its loans has led to road projects being halted and has left schools and clinics struggling to pay for supplies''. Dr. Joe Abbey of the Centre for Policy Analysis agreed when he recently revealed ''it is a big factor in the stock of non-performing loans in the banking sector''. Mr. Amissah-Arthur does agree that government must take a chunk of the blame when he revealed that '' ...after long discussions with the banks, we realised that the government has a role in this (NPLs) because a lot of borrowers are those who have done work for the government''. Government indebtedness has also been blamed for high interest rates on loans as a result.

Thirdly, poor credit profiling of borrowers by banks lead to bad loans. A good risk management system will screen potential borrowers to ensure that unsecured loans (loans without collateral) are redeemable. Many banks because of competition for borrowers and pressure from governments to lend more, do not undertake enough due-diligence on the background of borrowers before granting loans.  Competition for customers has also led to Know-Your-Customer (KYC) requirements been relaxed for new customers. All these contribute to loan defaults in the long run.

The lack of a central database system from which credit profiles of potential borrowers can be easily obtained to know their credit worthiness does not help banks. In Europe and North America, it is difficult to obtain a loan or credit card from the banking system if one does not have a good credit history. Every borrowers credit profile is easily searchable in a centralised system and this is strictly adhered to and cannot be manipulated. This acts as a check and balance against loan defaults. In Ghana, the lack of a good address and house numbering system also compounds the problem as it is difficult to trace people to their residences. The managing director of UT bank, Prince Kofi Amoabeng, has been waging a crusade for a better house numbering and address system in Ghana that will enable easy tracking of loan defaulters.

Wrong attitudes on the part of SMEs and small entrepreneurs in particular contribute to non-performing loans. Many SMEs after securing loans use the funds in extravagant ways not stipulated in their loan agreements. Many expend their funds on funerals and other social activities that do not enhance their businesses. This problem is worsened by SMEs lack of basic business skills like book-keeping, working capital management, marketing skills and good customer service, which are ingredients for business growth and profitability.

The problem of non-performing loans cannot be completely solved however there are some solutions. If the finance ministry is able to ensure a continuous trend of  favourable macro economic policies are adopted to keep down inflation; if the government invests in growth-enhancing sectors of the economy; if the the private sector is supported to create jobs; if the central bank continues to enact growth-enhancing policies that will bring down interest rates, most sectors of the economy will do well and repay their loans to financial institutions.

Since government alone accounts for a fifth of all NPLs in the banking sector,  the Ministry of Finance should work closely with their Works and Housing counterpart to ensure jobs undertaken for government are paid on time. In this regard, the Accountant-Generals department (governments pay agency) should be automated as a matter of urgency to reduce bureaucracy and ensure speedy payments of contractors and other suppliers.

In my opinion, banks should strengthen their risk management departments, recruit better risk expertise and tighten credit control policies. This will ensure robust credit profiling of borrowers and screening new customers without driving them away. Indeed in the 2010 Banking Survey quoted above, 64% of directors and bank executives identified risk management as their highest priority after their core missions of profitability and shareholder value. Two-thirds agreed to devote more time to risk management in the coming years.

Ghana enacted a Credit Reporting Act in 2007 to regulate the operations of credit reference bureaus. These bureaus are agencies who will collate credit information on bank customers and would-be borrowers to determine their credit-worthiness. The information can also be used by banks for debt collection purposes. To date only one company, XDS Data Ghana Limited has been licensed to operate and the company and has signed on many Ghanaian banks. It is a good start and its usefulness in reducing bank loan default rates is yet to be known. Additionally, more debt collection agencies should also be licensed to track and collect debts from defaulters. The work of very good debt collection agencies will complement bank efforts and helps banks to concentrate on their core mission.

Lastly, apart from giving loans, banks should complement this by giving advisory services on basic working capital management, book-keeping, marketing and so on to SMEs especially. This will help them to manage their businesses well so they will be able to repay loans they contracted.

The banking industry is getting ever more competitive and although the industry is fairly well regulated, it is still prone to risks. Non-performing loans is one such risk. Thus banks that will take risk management practices seriously will reduce their losses leading to high returns to shareholders. This will also benefit the economy in the long run.

ACT LOCAL, GO GLOBAL

“The crawling traffic from the airport down Accra’s Liberation Avenue gives you plenty of time to admire the sprouting skyscrapers ascending alongside. One is decorated with the decal of Standard Bank’s Stanbic Bank, just one of its 23 shiny branches across Ghana. Across the road the $56 million Icon House is taking shape, financed in part by Rand Merchant Bank, Stanbic will be using it for its new head office in Ghana.

A few blocks away the sprawling Accra Mall boasts a Shoprite, a Game and a Mr. Price. On the way you will pass Woolworths, while street vendors push MTN pay-as-you-go cards at you through the taxi window”.

This lengthy quote above by financial analyst and columnist Stuart Theobold appropriately sums up the foothold South African businesses have in Ghana.

Apart from the companies mentioned above several others are also active including SABMiller, Multichoice, Goldfields Ghana, Nandos restaurants, Izwe loans and South African airways. These companies are profitable and present in other African countries too.

Not to be outdone, the next most noticeable African firms operating in Ghana are from Nigeria. In the financial sector as many as 5 banks and insurance companies are active. Others are Glo mobile, Oando, Sahara Energy, Afren, Main One, Chicken Republic and Dangote Cement.

Several North African companies are also present like Libya’s Sahel Sahara bank and Afriqiyah Airways.
Many of these companies were successful in their respective countries before they decided to expand and seek bigger opportunities abroad as many African countries became stable and business-friendly.

These are companies who have physical presence here. This article will only be concerned with companies having physical presence. Other companies export their products here using local agents.

The balance sheets and assets of these foreign-owned firms have grown in size and they have become profitable after they ventured abroad. I am thus quite surprised by how few indigenous Ghanaian companies that are doing well have dared to set up operations in fellow West African countries and into Africa at large.

On the African scene the few Ghanaian firms I know who have set up operations in African countries include RLG Communications (present in Nigeria and Gambia and hoping to set up in Guinea and Sierra Leone). Waste management firm Zoomlion also has branches in Togo, Liberia, Angola and Zambia and still growing. Investment firm Databank has a branch in Gambia whiles mining equipment supplier Equipment and Planners also has operations in Liberia.

Other indigenous companies like Kasapreko, Danadams, Interplast and others export their products to other African countries.

Whereas South African and Nigerian companies make their onward match into Ghana, Ghanaian companies are not eager to do the same. I have struggled to find any indigenous Ghanaian firm that has a thriving operation in South Africa or Nigeria like the way their companies are entrenched in our business landscape. It could be that our investment climate is friendlier but I do not want to believe so.

So is it that Ghanaian firms are risk-averse or they do not have the motivation or financial capacity to venture abroad. Or is it the culture of ‘mempe meho asem’ (translated as ‘I do not want trouble’) nature of our beloved people that also plays out in the corporate world? It will be good to have an empirical study to uncover some of these reasons.

Arguably Ghanaians are the second commonest Africans you will bump into after Nigerians when one travels to Europe, North America and Asia. If we could be that adventurous to travel and seek better opportunities for education and work, why is it that these same traits be seen in the corporate world?

East Africa is a region where many firms set up branches in each others countries easily. Profitable Kenyan firms have operations in their neighbouring countries and beyond. Well-known Kenyan firms like Kenya Commercial Bank (KCB), Equity bank, Safaricom, Nakumatt, Kenya Airways and others have strong operations in Tanzania, Uganda, Rwanda, Burundi, South Sudan and beyond.

Trading with fellow African countries is also called Intra-African trade and this trade has been low compared Afro-Asian and Afro-Western trade. According to Ernst & Young, in 2011 intra-African investment accounted for 17% of all Foreign Direct Investment (FDI) on the continent. Since 2002, it has trebled to reach a $103.9 bn in 2010 and still growing.

Setting up operations in the sub-region and on the continent has many advantages.
It increases production, growth and employment at a faster rate than focusing only on local markets. Since opening up operations in Gambia and Nigeria, tremendous opportunities have opened for RLG. The firm is now constructing an ultra-modern technology hub in Accra and thinking of entering other countries in Africa. The firm’s success at home and abroad has not gone unnoticed. Microsoft has signed a partnership with RLG.

Having operations abroad helps to offset losses that may occur in a particular firm’s home country. During the height of the global credit crunch in 2008, lots of financial institutions in Europe and North America lost billions, collapsed or were bailed out by their governments. Spanish bank Santander had losses in its primary market in Spain but because it had branches in many other countries in South America, the strong profits from its South American arm made it fair far better than its counterparts. It was no surprise that Santander was able to buy two troubled British banks-Allied & Lester and Bradford and Bingley.

Barriers of entry into African countries could be lower than global markets. This is because neigbouring countries have similarities in consumer taste, standards and local culture. Going abroad also helps firms to specialise and become more competitive.

Thankfully in West African we have an economic grouping called ECOWAS that’s to integrate member countries economically. Ecowas Trade Liberalisation scheme (ETLS) is a mandate meant to remove trade barriers like customs bottlenecks, taxes, market access and so on. It was the ETLS that made some nationals of West African countries to vehemently complain a few months ago when Ghana’s Trade Ministry sought to close down foreign-owned firms operating in Ghana’s retail sector.

Many Ghanaian firms can go abroad and grow if the necessary technical help is given to them. Pharmaceutical company Danadams produces Anti-Retroviral (ARV) drugs and exports to 4 West African countries. According to the Managing Director Dr. Yaw Adu-Gyamfi ,the company now operates only 20% of its ARV production capacity.

If they could secure a World Health Organisation pre-qualification certificate through the help of the government, they can export to many more African countries and increase employment from the current 208 to 500 staff.

I will like to see indigenous Ghanaian banks and micro finance institutions go abroad like the Nigerian banks are doing. Ghana’s biggest bank the Ghana Commercial Bank (GCB), Agric Development Bank, UT Bank, First National Bank and others that are doing well locally should try setting up in Liberia, Ivory Coast and Gambia for a start. They can then venture abroad.

GCBs counterpart in Kenya the KCB has 19 branches in South Sudan, 14 in Uganda, 11 in Tanzania 9 in Rwanda and 169 at home in Kenya. The KCB made a profit of $60 million in the first half of 2011, an increase of 30% over the previous year thanks largely to its foreign branches.

Lastly, Kenyans largest media company the Nation Media Group which has newspapers, radio stations, Television stations and websites has operations throughout East Africa. Here in Ghana, Multi-media Group (Joy fm, Multi TV etc) and Despite Group (Peace fm, UTV etc) are our media empires. If they could be ambitious and look beyond our shores like the East Africans are doing, they could grow and be really profitable in my opinion.

At a forum organized by the US embassy in Ghana for entrepreneurs from northern Ghana, RLG Chief Executive Roland Agambire said “I have never been shy to fail. After all, entrepreneurship is about perseverance, trust and honesty”.

He could not be more right.