Ghana’s entrepreneurs have had to learn fast to navigate the country’s economic roller-coaster ride. Sena Kpodo reports from Accra, Ghana’s startup capital.
In 2009, Ghana was on the cusp of a boom. Oil, found offshore in 2008, was about to come onstream; output was expanding rapidly; and fuelled by its status as the poster child of West Africa’s economic resurgence, international investors were circling.
With money flowing in, it was fertile ground for entrepreneurs like Nii Shippi Quaynor, who left his job on Wall Street, split up his savings and raised some investment capital from friends to start out in Ghana. Quaynor relocated to Ghana in 2010 with the aim of setting up a taxi company.
“For us there was a lot of growth, we were seeing the promise and it was a way for us to work our way back home,” he recalls.
Today, however, the shine has come off the Ghanaian economy. With twin current account and fiscal deficits, the government has had to dramatically cut back spending. Many investors have bailed out. The cedi has fallen dramatically against the dollar, euro and sterling, pushing up prices of imported goods, while prices for oil and gold have fallen away. The country has had to return to the International Monetary Fund for a $940m bailout.
It is a long way from 2011, when Ghana’s macroeconomic environment was strong. Growth that year was 15%, and, carried on a wave of ‘Africa Rising’ euphoria, many Ghanaians – including those in public office – bought into the narrative, increasing spending and taking on debt.
After five years of boom and bust, the startups that launched on the crest of the wave have had to learn fast to navigate the interlocking challenges of currency fluctuations, fuel price increases and an ongoing energy crisis.
Some businesses that started out in the boom, though, continue to thrive, part of a still-growing ecosystem of young, innovative, startups. For some, work is a hustle for daily bread, for others it is about creating business opportunities in the face of challenges – often it is both.
Ghanaian startup consultant Donald Ward started his digital marketing business in 2011, at a time when the country’s technology scene was booming.
Co-working spaces, the hallmarks of the digital economy, were springing up.
Four years on, his company, Era Global LLC, has expanded and he also works to support other startup entrepreneurs navigate their way through Ghana’s business environment.
“There are endless opportunities to do business,” explains Ward, “however, starting a business in Ghana is not as easy as just registering a business name, finding an office and searching for clients.”
Even with uninterrupted internet, electricity and access to capital, most startups fail, Ward says. In Ghana, those utilities are not a given, and “trying to juggle government taxation policies, the high cost of real estate and the ongoing energy crisis, can make or break a business trying to get past the five-year hump.
“When you don’t have access to lights for eight months in a year, with little access to quality internet, increasing government policy that favours multinational businesses, and the energy crisis eating into profits… the struggle is real.”
“Easy and simple” businesses are more likely to succeed in this environment, Ward says. “They have to…tone down spending as well as growth expectations in the first few years.”
The complexity of the business environment has deterred many entrepreneurs from raising capital and taking risks to grow. Many remain in the informal sector – a fluid, adaptable cohort of businesses that are able to tack into the macroeconomic headwinds.
“Due to a weak private sector and a largely subsistence economy, the informal sector is where you’ll find the majority of business takes place in Ghana,” says Joseph Annan, Ghana’s former deputy trade minister.
“Those who are in the informal sector tend not to be affected by the macro context in the same way. These companies find other ways of surviving, without the enabling environment expected from government to successfully run a business.”
This structure, though, makes those economic headwinds worse. Without the tax base provided by a large, formal and diverse economy, the government is reliant on the country’s natural resources.
“The structure of the economy leaves Ghana highly vulnerable to small shocks and international fluctuations,” Annan says.
‘Pivoting’ for success
For most successful entrepreneurs, the ability to be flexible and to adapt their models to shifting conditions is a vital skill.
Quaynor relocated to Ghana in 2010 with the aim of setting up a taxi company. There was a gap in the market for a well-organised, well-maintained fleet of vehicles, and an additional potential revenue stream from selling advertising space on top of the cars.
“The business itself started as a transport company but the cost of acquiring the cars was too high, so we carved out the advertising part of the business and then ran with that,” he says. “We built a business model of a taxi business and that was just going to be one of the revenue streams. But finding how expensive it was to raise money and later on realising the cost of depreciation, maintenance and managing the whole taxi business, we carved this out as an easier way to get into the market.”
So far, he says, small successes have come by making a number of mistakes, “We’ve experimented a lot, and through trial and error arrived at something that works.”
He took the same approach with a microfinance business, Q-Star Investments, that is now pivoting away from small loans to supporting startups with capital and advice.
“I was quite naïve when I started this, I was thinking I was going to change the world, and people just need help with every incentive to pay back, so we were giving small loans, 500-1000 cedis – it was just a way for them to build their confidence and credit with us,” he says. Repayment rates, however, were not good.
“It became essential for me to pivot the model from microfinance, to provide finance and train start ups instead… I’d rather manage five 20,000 cedi loans than 20, 1000 cedi loans.”
For some entrepreneurs it is simple passion that drives them through the difficult times.Aisha Ayensu started Christie Brown whilst in her final year at the University of Ghana.
“Back then, I was naïve to the world of entrepreneurship,” she says. “For me the brand was birthed from a love for fashion, a burning desire to make our culture and traditions relevant to the modern African woman by revolutionising how she dressed… I raked up my savings and along with support from friends and family I launched the brand with a fashion show in 2008.”
The company has grown consistently, evolving from a bespoke service to open a ready-to-wear store in 2012, which dramatically increased revenues.
Ayensu has faced day-to-day challenges – from difficulty in sourcing raw materials, the energy crisis, finding a skilled workforce, limited access to funding and the lack of adequate data on consumer behaviour to aid planning. The company’s decision to keep its production in Africa has added complexity.
“Production can be challenging especially when trying to attain certain volumes with a consistent level of quality,” she says. “We find creative ways to solve power issues, work with what is readily available to us in terms of raw material sourcing, and constantly train staff to develop innovative responses to external setbacks.”
Staying the course has been difficult as the macro environment has deteriorated, Ayensu admits, but she has held on.
“When my rent was initially quoted in [US dollars], this meant I may be paying close to three times what I paid a year ago due to the falling cedi. It could cause one to raise their arms and give up” she says. “Resilience has been key.”