What has been your career path before your nomination as Unilever Chief Executive?
I am a Ghanaian; I had all my education in this country at the University of Ghana where I studied economics. I went on to study marketing whilst with Unilever. I have done quite a number of jobs in the U.K. and Holland; I also worked in East Africa before becoming Chairman.My professional area was in marketing before I became the Corporate Executive Officer.
I was in marketing for many years before becoming Chairman and then Chief Executive of this company. I have been working for Unilever for thirty-five years in most parts of Ghana, and I have been Chairman for 14 years. Currently, I am Chairman of the Board of Unilever West Africa and, therefore, I have responsibilities transcending beyond the shores of Ghana. In a nutshell, that is what I have been doing.
How do you view the recent political transition?
I think the transition of power from the NDC government to the NPP government has been good. We are all very impressed, and I must say that both sides of the political spectrum have impressed us. I believe the maturity of both parties made the transition a very successful one. I am sure you know that we went through a bad patch last year. The economy deteriorated heavily; the Cedi suffered more than 100% depreciation, and inflation was at its highest peak.Eventually all the macro-economic indications were pointing in the wrong directions, and thus most companies suffered a lot.
Since this government came into power, there has been some stability in the macro-economic environment. The currency has virtually stabilized and inflation has decreased. At least it is evident that the government is not spending money as callously as before and this is also helping with the stability of the cedi. So from the private sector perspective, conditions are quite better than what we saw in the last few years of the last government. It is too early to say that these conditions will prevail for a long time, because 5 months into ruling this country is not enough to pass judgement. What I can say, however, is that it seems the right steps are being taken, and things are pointing in the right direction.
What impact do you foresee will have the newly appointed administration on the private sector?
I think that the private sector expects simple things. We expect a stable macro-economic environment, which will mean lower or no government deficits, which tend to crowd out the private sector from the banking sector.We will like to see low inflation and low interest rates because the prevailing interest rates are very high. For example, for an ‘A' rated borrower 40-42% interest rates are being charged. With these rates if you are competing in a global world you have no chance. Therefore, we want to encourage the currency stability that we have at the moment because, unless we have that, banks will not give long-term credits, and indeed one reason why we do not get access to long-term credit is the uncertainty that surrounds our currency. What we expect from government is a stable environment, and then of course, we will see the beginning of a government that is truly supportive public sector.
At the moment we still have a public sector which is “harsh” towards the private sector. We have a rather frustrating legal system, and we also have a tax system which is not very clear, as well as low educational standards. For example, if a company wants to recruit workers today it is very difficult because good quality labor is not readily available in the open market where well-trained graduates with skills and competence that you can take into your company and use immediately. So we want to see in place infrastructure, a legal system, an administrative system, and an educational system that support private sector growth.
In this country at the moment, we cannot boast of a good legal system that supports private sector growth. Cases in the law courts can sometimes last about 8 to 10 years without a solution at the end of it all, and I think that nobody will invest his money into a country where the administration of justice is so cumbersome, costly and frustrating.
What are the keys to Ghana's development?
The answer for Ghana is to change the structure of the economy, which is fundamental. All the development problems we have had in this country are due to the fact that this country depends on two commodities for its survival – cocoa and gold; so, when the prices of these commodities collapse, we are in trouble. So it does not matter how much money the IMF, World Bank or the donor community give to Ghana, unless the economy of Ghana structurally moves away from its commodity dependency to value-added production and services, we can forget it, because cocoa and its products are luxury products. A lot of people cannot afford to spend money on chocolate, which is not essential; everybody is becoming weary of their health and will therefore not risk it for chocolate. We need to think ahead, because a sustainable and durable development is only going to be possible in this country if we move the country away from its commodity dependency to a high-value added service-oriented economy. And we need to build the right capabilities and that will mean investing in IT infrastructure and in telecommunications, roads, transport, ports and harbors. We have to make sure that the conductivity with Ghana from outside in terms of high frequency telephones and airlines are sorted out. It has to be at the core of the development strategy.
It is very worrisome when the IMF and World Bank talk about poverty alleviation as if it is an end in itself. In fact such initiatives are good but poverty is caused, it is not inherited; people do not just become poor. We suffered 100% devaluation of our currency last year, but wages have not been increased to that level and this has made people even poorer than last year. You can only change that if this economy becomes sustainable. Even as individual human beings, if we do not have sustainable incomes, we cannot plan our individual lives, let alone a whole nation – so yes, we have to move to value-added strategy; i.e., we have to add more value to our commodities. It is only when governments and people really begin to think along these lines that poverty becomes a meaningful issue i.e. fighting poverty through the creation of a durable and sustainable economy. For instance, if the government decides to put up a health post, it can do so easily, but it is then left with the question of maintaining it. Two years down the road such a facility has no doctor, the beds are broken down, and the bulbs are blown out due to lack of maintenance because there are no funds to maintain the facility and because donor support would have dried up. We need to seriously sort out the issue of the structure of the economy before we begin to think about other things.
Is the current dispensation aware of these elements?
I think they are aware of these things but have not come out with a clear decision yet. If you take the HIPC initiative, it is focused on poverty alleviation and, for me, poverty alleviation is like cutting down the branches of a tree with the hope of killing the tree, but with its roots still firmly in place. Basically, we should tackle the root of the matter first, which is creating a sustainable economy. If we have to do anything, then let us bear in mind that 10 years down the road, we should create a sustainable economy. It is through creating a sustainable economy that we can solve our poverty issue and not the reverse.
How do you envision your working relationship with the Government?
Let me say that again it is too early to say and I believe there have been far too many pressing issues about which I have not had the opportunity to speak directly to the Finance Minister or the President. I know with time I will, but I have not had the opportunity.
There was a dialogue that was held recently, in which I participated, and I presented quite a number of views, but I think we still need a structured system through which the private sector will sit with government regularly. We need to have dialogue especially with policy makers in the government to sort out some of these policy issues.
We are all aware that they need time to work on an economy, which is almost dead, or at least on its knees. They are pressed for time to try and resolve today's issues, issues that, if not tackled, can result in something very critical happening, and I think that is what has engaged Government attention and quite rightly so. I believe that from the second half of the year we should have the opportunity to speak more with the government or President and other members of the cabinet.
Can you give us a brief overview of Unilever's historical background in Ghana?
We have been here for quite some time. We started as a trading company, but now we are basically a manufacturing company.We are a prototype Unilever company. We have a Foods business, Home Care business i.e. soaps and detergents and a Personal Care business, i.e. body care, haircare, oral care, etc. It is a mini Unilever company with all the three different types of Unilever represented here. We do about 100,000 tones of business a year. We are basically a consumer-product business, and we are quite big for Ghanaian standards. I think as a manufacturing company, we are the biggest. We also have an oil palm estate, which produces palm oil to feed the factory, so we have a backward-integrated operation. We export most of our products mainly to West Africa.
What do you consider as your greatest achievement as Chairman/CEO of Unilever Ghana?
I think it is the fact that I have succeeded in building a very significant manufacturing business in this country despite the odds. Unilever Ghana is one company in Ghana which has grown very rapidly in the last few years. Last year we were one out of the eleven fastest growing companies Unilever world wide - a clear demonstration of what we have been able to achieve here.
Personally though, one thing that has satisfied me most is that I have been able to build very strong private sector government partnership. It was not like that before; it was very difficult because we had very long periods where past governments had been very hostile towards the private sector, but 6 to 7 years ago, through my initiative, we founded the Private Enterprise Foundation (PEF). Now the private sector and the government have regular dialogue. | How many employees are currently with Unilever?
Directly in the factory we employ about 800 people.In our plantations in total, we have about 1,700 people – that makes it about 2,500 people in the company. We also have a lot of third-party people who work for us; for instance, all our transporters are third-party, and we also do third-party manufacturing and distribution. Our security, our canteen and housekeeping services are third party. In the plantations all our harvesting is done by third-party staff so is all fruit transportation. What we have is a very simple business principle; we focus on our core areas of activity in manufacturing; everything else is done bythird parties.Indirectly our operations affect the lives of 42,000 families.That way we promote the push-pull concept.
How significant has been the investment put into Unilever Ghana?
This factory was built in 1963, but over the last five years we have invested almost US $20 million into building a new refinery, (so now we can refine up to 50,000 tones of crude oil locally) in a new soap line and in a new plant to manufacture ‘cubes' – (spices) Royco cubes.We have also invested a lot into information technology in the factory. The last investment we have is in a tomato processing plant. This country produces sizeable quantity of fresh tomatoes, yet half of it goes to waste, so we launched a new product, and we are going to process Ghanaian local tomatoes. We produce our own oil, and now we will process our own tomatoes. So, we are making sure that we add value to our Ghanaian commodities. We also launched an iodized salt last year. A third party produces the salt, we do the iodination, brand, package and market.It is quite a simple principle but I like it very much.
How have these new ventures fared into the economy so far?
We have done well. We have third party salt producers, we bring the technology, and we do the branding, distribution and marketing - we have a joint operation. We sell all the salt that is produced. If we have any problem it is because we do not have enough salt to sell - so it is done very effectively.
When interviewing Agriculture Minister, Courage Quashigah, he mentioned to us that salt production in Ghana is very low, and that he wants to encourage this sector. What have been your experiences so far when investing in this sector?
It has been quite frustrating; Ghana can produce up to about 700,000 tones of salt. Currently we produce 30 to 100 thousand tones. There are two major producers. One of them is operating but it is very limited in terms of investment so the capacity utilization is very low. There are also legal issues because it is a family business, and dealing with them has not been easy - especially following the death of the founder. Then, there is a big one in the Eastern coast where there have been community disputes, which have crippled the company. Government has, set up a commission to resolve the issue. We need to resolve those issues, because right now we are only dealing with small to medium enterprises who can only produce 20,000 to 40,000 tones a year which is not enough. This will not satisfy the needs of the West African sub-region, which requires about a million tones of salt. So, we are nowhere near what we are capable of doing as a country, and do not forget that if we add value to the salt, it will enhance Ghana's foreign exchange earning capacity. In fact, I recently had a discussion with the Minister of Agriculture, Major. Quashigah, and previously with the Minister of Lands and Forestry and I repeatedly said to them that they have to get these issues resolved, so that as private investors who are prepared to invest, we can put in the money and generate value and export. Salt can easily generate about the same amount of foreign exchange that we generate from cocoa.
It seems that you are strongly targeting the West African sub-region on a mid-to-long term view. What are currently the results of the group in the sub-region?
Unilever is organized on a West African basis, even though we have three businesses in Ghana, Nigeria and Cote d‘Ivoire. We have the West African Board made up of three Chairmen of the Companies, which I chair. We manage the business on regional basis. Among the three companies we trade actively. The idea is for the companies to specialize and not to attempt to do everything even if there is no competitive advantage. We have already started using our companies as the catalyst for expanding West African trade, and I think it is a role model that other multinational companies must actively pursue to help grow intra-African trade. Rather than wanting to trade immediately with Europe, we should begin to trade amongst ourselves. We have very highexpectations expanding our tradingoperations in West Africa.
We have also been taking advantage of the Ghana-Nigeria fast track arrangement, where customs duties are zero-rated between the two countries – and are working very well. We import from Nigeria at zero duty and vice versa. The politicians have good ideas, the businessmen want to trade, but we have not sorted out our customs and immigration policies and, therefore, we have enormous problems trying to export to Nigeria. We are very keen on promoting West African trade and exports, but Governments have to take a holistic approach. The Governments should bring everybody on board, the private sector, the government, the police, the customs, immigration and all organizations involved one way or the other to a roundtable discussion.
What has happened is that the politicians signed the agreement and they believed that everybody will comply with it, but that has never happened. What we need between Ghana and Nigeria is to have a forum where all the partners and the people involved can meet to resolve the issues; the immigration, the customers, the police, the governments and the private sector to determine how to move this forward. These are things that you need to think about with people with open minds and who are willing.
What is today the capital structure of the company?
Unilever has a 66% shareholding and the other 34% remaining is partly owned by Ghanaians. I think Ghanaians own 18%, and 16% is owned by fund managers, basically American fund managers and a few European managers. Ex-employees largely own the 18%, but there are also a number of non-employees who own shares. As you know the Ghana Stock Exchange has suffered because of the way the economy has gone. People no longer see it as a viable investment option investing money on the Ghana Stock exchange, because the returns are low compared to what they will get putting money into government bonds. Last year the Stock Exchange really suffered, but it is beginning to shape up a bit but I think though that it will take time. If you are a company listed on the stock exchange, it can be frustrating because your assets are under-valued. It is a small market and it is not very liquid.
You managed last year to increase dividends by 30%. How did you achieve such impressive results?
We have in the past had a very aggressive dividend policy.Therefore last year in spite of the high dividend our shareholders were unhappy. We were not happy ourselves, because we suffered a lot from exchange losses and high interest rate charges. Yet we did not want to say to our shareholders that we could not pay good dividend because then the argument would be you have surpluses in your income surplus account.
If you look at the accounts, you will also see other incomes, which enable us to pay the good dividend. In fact the dividend we paid was 100% of income from the underlying business and yet the shareholders were not satisfied, because they said the cedi had devalued by 100%, so a 30% increase in dividend was not adequate. They expected 100% dividend increase, and, therefore, we had a very lively discussion at the Annual General Meeting.
What are your future prospects?
I think we have a very bright future. I think this year will be strong and the subsequent years will be stronger. I say this because I think we are prepared for the future. We have very strong brands. We have succeeded in establishing in this country high market shares. We have very high quality standards, our products can compete anywhere; and we pay very close attention to our customers. We have an excellent consumer understanding, although I would not say it is the best, but we listen to the consumer and are prepared to make any changes that are to be made to make sure that we meet the consumer's expectations. We also have invested over the last three years to increase capacity and quality. With the combination of capability in terms of manufacturing, brands strength and quality, I can say that we will do well.
We have a saying in our company that difficulties in the economy must never be an excuse for poor performance because one has to take whatever is available and make it work.
What final message would you address to the international business community?
I would very much encourage people who are out there to come and invest in this country, and I think if there is any time to invest, it is now.I say this because I travel a lot, and I can tell you that in terms of governance we have a very good government and I also believe that the Government has started well. My perception of Government today is that they are prepared to take hard decisions that will turn this economy round. Therefore, for an investor I believe this is the time to come in and establish. The people of this country are determined to make it a comfortable place for us all. The fact that the government has declared a zero tolerance for corruption is a major statement, because they will be judged by it. I know the President personally and I know he means it when he says zero tolerance for corruption. Definitely, he does not have angels around him and some may fall by the way, but he will deal with it. I am absolutely sure and that gives me confidence, because the biggest problem in Africa is corruption.If you take the huge sums of money we have wasted in Africa and money stolen from government coffers, a lot could have done for Africa. I know, however, that even though there have been failed promises in this country, it will be hard for the President to fail on this one and that gives me great confidence and hope for the future. |
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