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Could you give us a historical background of your company?
Our company was set up in 1990 basically to buy cashew nuts and spices. We were originally known as Cashew and Spices Products limited until June 1998 when the name was abbreviated to Cashpro because the name no longer represented what we were doing. In 1992 the government came up with a policy that it was privatizing the domestic market for cocoa. Applications were invited so we put in an application and we were granted a license. Right now we are about 20 companies who buy cocoa internally, including the leader in the industry, Produce Buying company, which is 100% owned by the government. Initially we were dealing with cashew nuts and spices. The first time we exported cashew nuts was in May, 1990. We exported over 13 tons and last year we exported 2000 tons so we are growing. The cashew production in the country is not much, but it is picking up. During the early days of our independence our first President encouraged a lot of cashew plantations but after his over throw these ideas were abandoned. Those who came after him did not believe in the centrally planned economic theories. The people who got involved in cashew nuts lost interest because no one was buying it until we came along and started buying it. Now there are about 7 companies buying cashew in this country and the cashew industry is now on the ascendancy. People have a lot of interest in it. That is how we started but with time when we got the cocoa license we moved into cocoa. But since cocoa production is a major area of Ghana’s economy we moved big into that area.
To what countries do you export your products?
The final destination for cashew nuts and spices is India but the companies which buy from us are in Britain, Singapore and in Hong Kong. They all direct us to send it to India for processing because we export cashew nut in shells. The medicinal seeds like griffonia simplicifoca is sent to the US.
In 1996/7 you were listed as the number one trading company in Ghana and you are the market leader. Who are you main competitors and what strategy do you put in place to maintain this position in the market place?
Our main competitors are those companies who are in the cocoa industry because in the cocoa industry the volumes and the monies are big. The strategy which we use to keep ourselves in place is to try as much as possible to meet the aspiration of the farmers. We buy the cocoa directly from the farmers and therefore we find ways and means of sending some of the profit back to them. We do this by meeting both their communal and personal needs. We buy cocoa from about 700 villages so every year we look at the top 10 villages which sold cocoa to us and we visit them and if they have any problems with their schools, chiefs palace, water or electricity we make a contribution. We may rebuild or re-roof the schools, with the electricity what we do is that we supply them with the poles under the government of Ghana self help electrification program. Most of these communities want the electricity but they do not have the money to buy the poles so we supply them with the poles. For a number of them too, they are provided with bore holes by these multi-national agencies as well as the government and they have to make a certain contribution and we pay that contribution on their behalf, by buying the pump heads, making monetary contributions. On a communal basis this is what we do. On a personal basis we know how much each farmer sells to us so every year in each region we give a personal award, say pieces of cloth to the farmers. By so doing they know we are keeping in touch with them and we are reinvesting the profits in those areas so they really stick to us.
About the competitors, what other companies are there?
Our major competitor is the government owned company known as the Produce Buying Company. Then we have Federated Commodities and Adwyma Pa Buyers and a couple of others.
What about your market share?
Our market share is about 18%. Until 1993 when the whole thing was liberalized, Produce Buying Company of Ghana was the only company which was allowed to buy cocoa in Ghana. Therefore we all went in there trying to chip a bit of their market share. So far we control 18% and they have about 60% and the remaining 18 companies share the rest.
How do you market yourself as a company?
The marketing in the rural areas is slightly different from the marketing in urban areas. In the urban areas you go on the TV, you use the newspapers. That is the normal form of advertisement in these areas. In the rural areas the TV might not be there because there is no electricity and the newspapers do not get there all the time so marketing in these areas is done by word of mouth and also by visibility. What happens is that if we go to a village to buy cocoa the first person we go to see is the chief who will relate everything to his elders, and depending on how well we can manage with them they will or will not accept you. If you go to a village and they accept you and you start performing well and you also show respect to them and give them back some of the profit you make, then the word goes round that this is a company that you should deal with.
How do you market yourself on the international basis?
On the international basis we have been featured in the New York Times, in the ECOWAS Magazine and other magazines. We have not got a web site yet because we are not allowed to export our major commodity. We will start exporting that from October 2000. It is just before that time that we intend having our own web site so that we can also market ourselves that way.
To what extent did the drop in cocoa prices influence your business?
So far it has not influenced it because we are not allowed to export. It would have affected us if we were exporting. The system through which we operate is that we buy the cocoa on behalf of Ghana Cocoa Board and they pay us a commission which is predetermined by all of us, the players in that industry. We meet and we agree that the farmers should be paid X percentage of the World Market FOB price. The licensed buying companies should be paid Y, the transporters should be paid Z. the percentages which we fixed last year and the quantum of monies which we paid to all the parties in the cocoa industry has not changed. Last year the cocoa farmer was paid 2.25 million cedis per ton, this year it is the same. We were paid 368,000 cedis per ton and we are still being paid that. The question you are going to ask is who takes the rap for the drop?
Last year 31% of the government’s revenue was contributed by the cocoa industry. By keeping the prices the same to all the participants in the industry this year even though the producer price has dropped by about 50%, it is estimated that cocoa contribution to government revenue will drop from 31% to about 9%.
The rest will be taken by the private companies?
The distribution will be the same but it is the government who will take the fall because the government decided that it could not and would not allow the price of the cocoa farmer to drop and it has therefore decided that it will forgo some tax revenue. What it means is that it must have other tax handles to make up for the short fall in government revenues.
Your turnover increased dramatically the last couple of years. What was your philosophy to achieve this?
The turnover increased for three reasons : one we increased our market share from where we started to18%, this year we hope to get to 20%. Two the producer price of cocoa has increased since 1990. In 1993 when we started it was at 308,000 cedis for a ton. Now it is 2.25 million cedis for a ton. It has therefore increased about 7 times and so even if we were to buy the same quantity of cocoa, by virtue of the producer price increase our turnover would go high. Thirdly, our turnover has shot up because we have moved into other fields of commodities. We started as I told you with cashew nuts and spices and we moved to cocoa and now we deal with soya beans, with griffonia which is a medicinal plant and we are one of the largest stockers of maize and legumes. We have expanded our base and moved into other areas because our philosophy is that it is a terrible thing for the farmer to produce something and not have a market, so we try to provide a market for the farmer. We are in there buying the cereals, legumes, storing them and selling them later. Our activities have expanded and therefore that accounts for the recent increase in our turnover, in addition to the increase in the price of the cocoa itself as well as our better performance in the cocoa industry.
| How much of these statistics would you say are due to the fact that you actually go to the village and encourage the farmers on a personal level?
It is significant. If you take cocoa there are 20 players in the game and if your human relations are bad they will not sell the cocoa to you. The quantum of cocoa produced in every village is the same. It has not changed over the past 3 years or more and so to be able to buy a certain amount of cocoa in a particular village you would have to have good human relations and the people would have to trust you.
Is that why you have got 18% of the market share?
We think that our profile is liked by the people. Probably the methodology we use is much preferred by the people to that of the others. I must confess that we have not conducted a survey to find an answer to the question you are raising but now that you have raised it all of us in the industry would have to conduct a survey to find out exactly how it is.
What were you doing before?
I ran a number of ministries, from Trade to Revenue then to Energy. In my time I introduced the concept of rural electrification whereby by the year 2015 every village with a population of over 500 should have electricity. So I went to almost every village and I am personally known in these villages. And my deputy was also the Minister of rural development and in that capacity he also knows the rural areas very well. With villagers, once they know you personally, once you go there and tell them I have set up a company and I have come to buy cocoa they tend to affiliate more with you than somebody they do not know at all.
In the top 100 companies you were number 17 in 1997. Where would you like to be positioned in the near future?
The top but it is going to be difficult to dislodge companies like Ashanti Goldfields and V.R.A. but we want to be as near the top as possible. It means we have to work extra, extra, extra hard. It is not impossible but it is going to be difficult. It requires a lot of hard work.
In how many years?
I do not think we can achieve that in the next 5 years because the others at the top are expanding. But we give ourselves a target of 5 years to see where we can get. We think that we should fight to be among the top 10. The problem is not in getting to the top but in maintaining your position there so once we get there we have to maintain ourselves there.
Are you also looking for direct investments or partnerships in order to grow?
Right now the need for partnership is even greater. The government policy is that from October, 2000 we would be allowed to export 30% of whatever quantity of cocoa we buy. This year we bought about 60,000 tons so 30% we are looking at 20,000 tons and on the market the price is about $1000 so to be able to buy that quantity of cocoa we would need some partner who would assist us with the financing because we have to get the money before hand to pay the farmer before we export and get our money back. Secondly we would need an export partner. The cocoa industry is like a cartel, with buyers, grinders who grind the cocoa and sell it to the chocolate manufacturers and if you do not have a partner in there you are just going to sell on the export market. Since we are new on the export market and nobody knows us, if we do not get a partner who knows the marketing in the cocoa industry we may be short changes, because nobody knows us so they will not trust us and we may be forced to sell everything on spot which is at a much lower price rather than on the futures market. So then we cannot have a long term relationship with anybody, but if we have a partner who is already known on the market then we have that long term relationship. Starting from next year we will be aggressively looking for either partners or financiers or marketing people who will like to team up with us.
You are talking about the export of cocoa, what are you plans concerning cashew nuts and spices?
With cashew nuts picking up now, our plan now is to process it. I told you we sell the raw nuts in shell and where as the raw nuts go around $700 - $900 per ton , the processed cashew goes for about $8,000 per ton on the shelves so we want to go into the processing of cashew nuts. We have been talking to some Israeli company which is linked to an Indian company and we hope to be able to process our cashew nuts within the next 18 months. With the spices we are talking with some people to find out if we cannot go into further processing. We started as a raw material trading company but now we think we should move to the next stage which is the processing.
On a more personal note, what do you think has been your greatest achievement since you have been the managing director of this company?
My biggest achievement has been to pick up the company from scratch and bring it to where it is now. We started the company in 1990 but I took over in 1993 and up to 1993 nobody knew of the company but from then till now if we are the 17th largest company in the country then it means we have really done something.
How come you moved from the civil service sector to a private sector?
When I left the university I worked with the Volta River Authority then I moved to the Aliminium industry till 1981. I went into government in 1983 and I left in 1993 so all my life I was in the civil and public sector and I decided that I was getting on in age so why do I not try my hand at the private sector. I never wanted to regret not having tried my hands at the private sector. I went into the private sector with the understanding that if I did not succeed I would go back to the public sector but I knew I would succeed. Ours used to be a command economy but as we moved away to the market economy one had to get a lot more private businessmen in the system. If you look at the Club 100 you will realize that the top 16 companies are either government or foreign owned. Cashpro is the first indigenous company among the top 20 which shows that the indigenes are not actually up to it as far as privatization is concerned. We have to get there. If you really want to move as a nation you need a lot of infusion of foreign capital, managerial expertise but it has to be done in conjunction with the indigenes otherwise things will not move properly. You need someone who knows the market in the country very well to help you out.
As you know our magazine reaches more than 4 million readers, mostly businessmen worldwide. What is your final message to them?
Your magazine should try as much as possible to look at the third world countries, especially Africa. We seem to have been forgotten in the world and I think that these International magazines should project Africa more. When I saw your write up on Ghana in your magazine two years ago I said for once the negative picture being painted about Africa is changing because you have now shown that something positive is being done by Africa. I wish that once the print media has started changing the image of Africa the electronic media will also stop showing hungry people in Africa. They should show the positive things about Africa
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© World INvestment NEws, 1999.
This is the electronic edition of the special country report on Ghana published in Forbes
December 13th 1999 Issue.
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GHANA
