The Ghana National Chamber of Commerce & Industry (GNCCI)
in collaboration with the BUSAC Fund has organised a 3-day residential retreat with stakeholders at the Eastern Premier Hotel, Koforidua from Wednesday, 2nd December to Friday, 4th December, 2020. The rationale for the retreat (dialogue and post-dialogue meetings) was aimed at reaching consensus and building synergies among stakeholders, via the GNCCI Business Pulse, to provide continuous business diagnostics data for policy innovation as well as monitor business performance.
In his opening remarks, Mr. Clement Osei-Amoako (President of GNCCI) expressed his appreciation to the stakeholders for honouring the invitation which emphasises the “importance that stakeholders attach to the mobilisation of business diagnostics data to inform policy design and implementation”. He noted that the GNCCI has developed a robust analytical framework that adopts evidence-based approach to index and track business value and growth metrics, risk exposures and mitigating strategies, and impact of industrial and trade related policies on businesses in Ghana.
Mr. Osei-Amoako was of the firm conviction that the business diagnostics report presents the country with a huge opportunity to assess the readiness of MSMES as well as corporates and large enterprises in the participation of the AfCFTA. He assured the stakeholders of the GNCCI’s commitment in using business data analytics to provide targeted business-support services to its members and the wider business community.
The Fund Manager of BUSAC Fund, Mr. Nicolas Gebara, commended the GNCCI for the bold initiative, through the business performance indexes and SME Policy Index, to support government’s policies and programmes for a conducive environment. He noted this is “a real approach of having a constructive means to dialogue and to help the growth of SMEs in terms of job creation, which is a key locomotive of the economy”. Mr. Gebara affirmed that the GNCCI is in a better position as a dialogue partner with government on the basis of business diagnostic data. He urged the GNCCI and stakeholders to ensure continuity of the data inputs as well as interpret the data accordingly to inform policy design and implementation.
IIn his presentation, Mr. Julius Bradford Lamptey (Head of Research & Advocacy) underscored the GNCCI’s legislative mandate of promoting and protecting commercial and industrial interests in the country. He noted that one of the legislative functions of the GNCCI is the “collection and circulation of statistics relating to trade, commerce, industry and manufactures”. Thus, the GNCCI Business Pulse serves as one of the avenues adopted by the Chamber to mobilise business diagnostics data to serve the interest of the private sector of Ghana.
As a trailblazing initiative in Ghana and West Africa, Mr. Lamptey reiterated that the GNCCI Business Pulse would seek to build synergistic relationships with stakeholders in mobilising the requisite data to inform policy innovation and design. In this regard, Mr. Lamptey informed participants that the GNCCI would be requesting institutional representation on the GNCCI SME Index Committee and Governance Board.
Dr. Samuel Frimpong Boateng, the Lead Consultant and CEO of Africa Investments and Development Group (Afrideg), delivered the research methodology and key findings. Dr. Boateng outlined the selection criteria for the methodology which included minimum of three years reporting of financials, evidence of business operation, and satisfactory data for the index construction. In all, 61 variables (as captured in the financial statements) were used to construct eight (8) indexes to track and predict business growth and performance across 17 industries:
- Business Growth Index
- Business Value Index
- Business Resilience Index
- Business Dynamic Index
- Business Risk Index
- Business Sustainability Index
- The Quality Composite Score
- Industry Profiles
Dr. Boateng explained that a non-linear probability style was used to designate companies to the growth and value form valuation indexes as well as resilient and dynamic indexes. He emphasised that three main valuation approaches were considered which included Comparable Company Analysis Approach; Discounted Cash Flow (Deterministic) Method; and Discounted Cash Flow (Probabilistic, Simulation) method. Nonetheless, the probabilistic approach was used due to its power in allowing range of expected forecast values rather than the easy to miss single point deterministic predictions.
Nine variables were used in designing the growth and value forms of the index. The value form of the index used various weightings around business operating variables that drive value: DCF value of constituent company; total turnover of member companies; and company’s total assets. The growth form utilised six variables which included:
- 12-months forward sales growth;
- 5-years historical sales growth;
- One-year EBITDA growth;
- 12-months earnings growth;
- 3-year forecast of company’s return on equity; and
- Current internal growth rate of the company (return on assets)
Dr. Boateng maintained that to meet international standards, the GNCCI Business Pulse adopted various technical consideration such as: Standardisation; Winsorisation; Ring-Fencing; Value Inclusion Factor (VIF); Inclusion Factors; Growth Inclusion Factor (GIF); Distancing; and Missing, Negative values and low coverage.
The key findings showed that corporates and large enterprises were generally value-driven but not growing. Nonetheless, these enterprises tend to be mostly sustainable, resilient, and stable given their value-orientation. On the other hand, MSMEs were generally growth-driven with little or no value-orientation. In addition, their growth was not resilient, sustainable, innovative, and stable. The overall analysis suggested that the business growth of enterprises was relatively less stable and more sensitive to economic cycles. The study also revealed that most of the growth-resilient industries were in the manufacturing sector, followed by professional services, and education.
The industry profiling captured certain key metrics in assessing their respective performance. The Construction, Banking, Mining & Quarry, Transport, and Agro Processing industries demonstrated more stable and rising EBITDA numbers, reflecting operational efficiency. Further, the Construction, Professional Services, Human Health, and Wholesale & Retail industries generated at least GH¢1 in sales with every Ghana Cedi of assets invested over three consecutive years. Although the Banking and Mining & Quarry industries generated less than GH¢1 in sales, they consistently generated positive asset turnover ratio over the period.
Dr. Boateng also delivered a presentation on the SME Policy Index which offers a model that assesses and monitors progress in public policies designed to support and promote the development of SMEs in Ghana. Specifically, the SME Policy Index will aim at identifying the strengths, value points, tipping points, and gaps in outlining and implementing policies for Ghana’s SMEs. The GNCCI SME Policy Index has 14 dimensions, 44 sub-dimensions, and 144 indicators needed to facilitate the development and collective efficiencies of SMEs in Ghana. The 14 dimensions are listed below:
- Entrepreneurial Education;
- Training and Capacity Building;
- Better Business Environment;
- Better Legislation and Regulation;
- Availability of Skills;
- Better Collective Efficiency Programmes;
- Improving Online Access;
- Readiness to Participate in ETLS and AfCFTA Single Market;
- Access to Finance;
- Innovation and Technological Readiness;
- More Resilient Industrial Value Chains;
- Better Business Development and Support Services;
- Business Networks and Productivity;
- Stronger Risk Management Capabilities;
The focus group discussion on the key findings (business performance metrics) with stakeholders addressed policy response to large and corporate enterprises on the one hand, and MSMEs on the other hand. Policy response to corporate and large enterprises should address, among others, access to wider markets, standardization of products, subsidise domestic production, and national re-orientation to fully utilise local market. The stakeholders agreed that the Ministry of Trade & Industry should be tasked with policy ownership and work with other ministries, agencies, departments as well as private institutions in implementing the policy response.
Focusing on the MSMEs, policy response should aim at encouraging re-investment of retained earnings, ensuring access to cheaper cost of capital, encouraging business advisory services, expanding production capacity, and investing in innovation capacity. The policy response should nurture the growth-potential of SMEs and transition them into value-driven ones to ensure sustainability. Given its unique mandate to support the growth of start-ups and SMEs, the Ministry for Business Development was tasked with policy ownership and work with related ministries, agencies, departments as well as private institutions in implementing the policy response.
In concluding the policy discussion and ensuring project sustainability, Mr. Lamptey enquired from the invited stakeholders the type and kind of collaboration critical for mutual interest and benefit. The key areas of collaboration focused on: data mobilisation; sensitisation and training based on the business diagnostics report; inclusion of key findings in the design and implementation of national policies, programmes and activities; support for business advocacy; policy dialogues with stakeholders; and annual index reconstruction with performance tracking per assigned-institutions. It was also agreed that the composition of SME Index Committees should comprise institutions that are influential in policy formulation as well as those who will track the implementation thereof. In all cases, there is need to have both government representatives, private practitioners, as well as academics.
In his closing remarks, the President of GNCCI, Mr. Osei-Amoako expressed his appreciation to the stakeholder representatives and urged them to communicate the outcome of the dialogue and post-dialogue meetings for institutional support. He noted that the GNCCI would continue engaging the stakeholders at different levels to formalise the discussion and to inaugurate the GNCCI SME Index Committee and Governance Board.
Invitation was sent to 19 stakeholder institutions; however, 11 institutions had representatives present for the event: Bank of Ghana; National Development Planning Commission; Ghana Statistical Service; Ministry of Trade & Industry; Ministry for Business Development; Ghana Investment Promotion Centre; Registrar-General’s Department; Private Enterprise Federation; Ghana Association of Bankers; Ghana Association of Savings & Loans Companies; and the ARB Apex Bank.
Source: Julius Bradford Lamptey
Date: 8th December, 2020