DevelopmentARENA: October 2011

Monday, October 31, 2011

Thursday, October 27, 2011

Petroleum retailing booms in Ghana

Ghana’s emerging oil industry is creating, as anticipated, new economic opportunities.

More vehicles are expected to be imported into the country, which reasonably means increased demand for petroleum products.

This, perhaps, informs the growing investment in fuel retail stations. The upstream oil industry is barely ten months old, but there is a proliferation of petroleum retail outlets and fuel service stations across the country.

Downstream market activities of supplying products, including bitumen and lubricants, have over the years been handled by the oil marketing companies.

The deregulation policy of the petroleum sector has however attracted indigenous entrepreneurs and other individual entrants.

With increasing interest in storage, distribution and sales, there appears to be good prospects for investors; fuel distribution has become an attraction for many people.

For instance, not less than 15 fuel stations are sited on the 27 km Kumasi-Offinso Road in the Ashanti region. New stations are also being established in the city centers.

This is exciting development, that’s according to Nana Yaw Owusu, who chairs the Ghana National Chamber of Commerce and Industry in the Ashanti Region.

“It’s going to increase our economy so much, giving employment to a whole lot of people and even the areas where these stations are being located it opens up businesses and so on. So there are a whole lot of benefits that we’re going to derive”, he observed.

Some industry players, however, caution the rush into this area of investment.

“The springing up of these petroleum stations has been too phenomenal and doesn’t augur well for the industry, says Daniel Owusu-Appiah, who has 25 years experience in petroleum retail, and he has researched into franchising in the business in Ghana.

According to him, there is a high correlation between economic growth and growth for petroleum and gas. But he observes that failure of local investors to engage competent hands to undertake effective cost-benefit analysis could be costly.

“At every point just about 1km you find a filling station springing up and you know this industry basically is based on location; where you don’t have a very good location and you’re not able to make sales up to about a minimum of ¢100,000.00, you’ll lose because the margins are very little”, Mr. Owusu-Appiah stated, taking into cognizance the cost of utilities, staff salaries and other incidentals.

The National Petroleum Authority (NPA) encourages the establishment of fuel outlets to ease distribution of products. The authority guides prospective investors to set up and operate fuel outlets.

Northern Zonal Manager, Samuel Asare Bediako, says more people are applying to set up such stations.

He says over 60 applications have been received from people who want to “set up filling stations or service stations or LPG filling plants. So yes we expect more of such investments to come in.”

Despite his fears, Mr. Appiah shares the view of Nana Yaw Owusu that the Ghanaian economy will eventually benefit from the fuel retail business.

He acknowledged that “where there is competition, it’s good for the consumer. So right now we have what we call price differentials – some of the oil marketing companies have gone to the extent of reducing the prices which is good for the consumer.”

Mr. Appiah believes the rise in fuel consumption pattern is an “added advantage for people to engage themselves in this business [of petroleum retailing]”.

Demand for petroleum products in Ghana is expected to continue to grow due mainly to the surge in fuel for transportation, households, manufacturing, primary processing and the service industries.

As the vehicular population in Ghana grows, nothing would perhaps stop the investing public from venturing into petroleum retailing.

Story by Kofi Adu Domfeh

Friday, October 21, 2011

What is the economic future of Kumasi?

Kumasi, the Ashanti regional capital of Ghana, is a beehive of commerce – a melting point for trading in the West African sub-region.

It is therefore not surprising that businesses hoping to reach out to customers in most parts of the country would make the city their first point of call.

Over the past few years, a good number of institutions and firms have established branches in Kumasi – with financial service providers and dealers in consumer products leading the pack.

However, the economic future of Kumasi looks uncertain because growth-oriented and job-creation ventures are amiss in the region.

Available figures indicate over 80 percent of foreign direct investments into the country are skewed towards Accra and Tema. The attraction includes ease in accessing air and sea ports, proximity to policy makers and favorable business climate.

Takoradi is expected to get a fair share of the investment drive as a result of the oil and gas exploration in the area.

In places like Kumasi however, economic opportunities in the mining and timber industries are shadows of their past. The collapse of the Shoe, Leather and Tanning and Jute factories have also contributed to the dwindled fortunes of the region.

Suame Magazine, the amiable indigenous automobile and light industrial hub, is currently under threat of modern technologies in vehicular servicing and maintenance.

The service industry and merchandising of foreign produce seem to be the best thriving businesses.

But how sustainable is it when real investments in tourism, agro-processing, commercial real estate and infrastructure remain unattractive?

This situation may not be different from most other regional capitals of Ghana and it is a worry to investment promoters.

Abenaa Akuamoah-Boateng, a Coordinator of the Millennium Cities Initiative, is uncomfortable with the centering economic development in the Greater Accra Region, saying this is a huge disservice to other regions of the country.

“What we forget is that Accra and Tema can only expand to a point, beyond that it’s chaos and disaster”, she observed. “Investors tend to stop there because all what they need to make their investments a reality are also centred in Accra.

“Even when you talk about areas like the Registrar General now being in the regions, what happens is more often than not their offices are like post offices, where you have to drop it and it still has to come to Accra”.

Mrs. Akuamoah-Boateng believes the country’s sustainable growth will mostly depend on an investment model which hinges on the strength of regional development.

Potential foreign and domestic investors should be attracted to commercially viable ventures in the regions as well as help improve the competitiveness of local enterprises.

The investment promoter stated that the Boankra Inland Port, for instance, would have served as a growth point to change the face of business in Ashanti.

“There are some industries that if we are really to look at them properly, site them properly and give them what they need to grow, it will add on – it will not take anything away from Accra and Tema – it will rather add on”, Mrs. Akuamoah-Boateng suggested.

Story by Kofi Adu Domfeh

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Petroleum retailing booms in Ghana

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What is the economic future of Kumasi?

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