TOGY talks to
SME development efforts in GhanaNovember 7, 2018
Barbara Gbologah-Quaye, the Ghana country director for Pyxera Global, talks to TOGY about increasing the role of SMEs in the local economy, local content development, and the balance between investors and local communities. Pyxera Global engages in multi-sector partnerships on complex social and economic issues.
• On local content: “The local content legislation spurred attention to the issue, but local companies needed support to seize the opportunities. Industry standards are high and suppliers need to understand and meet these standards in order to win and deliver on contracts in the industry.”
• On the services sector: “As a new oil and gas producing country, it was important to empower local businesses to effectively participate in the sector’s supply chain.”
• On growth: “The industry needs more investment in training, capacity building, facilitation of joint ventures, and access to opportunity to continue to grow local capacity.”
• On local development: “Foreign investments are very important, but the local business are our engine of growth – they need support, access and protection.”
Most TOGY interviews are published exclusively on our business intelligence platform, TOGYiN, but you can find an abridged version of our interview with Barbara Gbologah-Quaye below.
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How are you supporting oil and gas companies in Ghana?
We are doing this through targeted support to local suppliers active in the sector. In Ghana we implemented and just concluded the Ghana Supply Chain Development programme, a USAID-funded programme. The programme was designed to improve competitiveness of small and medium-sized enterprises (SMEs) in the oil and gas sector. The programme launched when the country started oil production and there were new government requirements for IOCs to meet local content targets. As a new oil and gas producing country, it was important to empower local businesses to effectively participate in the sector’s supply chain.
The local content legislation spurred attention to the issue, but local companies needed support to seize the opportunities. Industry standards are high and suppliers need to understand and meet these standards in order to win and deliver on contracts in the industry. Over five years, our programme identified SMEs through a rigorous competitive process, identified gaps within their respective operations that required specific interventions and designed individual and cluster interventions that closed or eliminated these gaps to position them as potential and preferred suppliers to the industry.
Through our constant monitoring and improving of our interventions we have recorded some tremendous improvements and successes in the number of contracts won, business skills and industry certifications acquired, and overall growth in confidence of these SMEs who are not afraid to compete, if given the opportunity. The USAID-funded programme proved that when given targeted technical assistance, local businesses are capable of acquiring the necessary skills, processes, and systems required to become competitive suppliers and meet the high standards of companies in the oil and gas sector.
How can Ghana avoid the resource curse and social problems that entails?
It is important to continue to increase capacity of SMEs through multiple interventions to ensure that they feel part of the development in the industry. It is important for these SMEs to be given the opportunity to supply, through unbundling large contracts to make the process inclusive for smaller companies, giving them the opportunity to grow. Some local SMEs are already handling large contracts, and this should be continued. Beyond this, government should continue to explore ways to develop an integrated economy that allows the oil and gas sector to support development and growth in other sectors in order to create even more opportunities for the SMEs.
I think Ghana received lot of advice from other oil producing countries such as Trinidad and Tobago, Nigeria, and Norway, among others, about how to avoid the resource curse after it found oil, and I think as a country we are very conscious of that. It will be a huge loss to us and disappointment to many if we miss the opportunity to use this to transform the country. I do have a lot of faith that Ghana will continue to work its way towards ensuring that this does not happen.
Is there a conflict between a country wanting to grow and industrialise versus the need to protect and communicate with communities?
A lot of countries would like to achieve that balance, especially in Africa, to avoid that conflict. It is a challenge for leaders to hear their citizens express concern about the perceived threat or undue attention given to foreign investors. However, we all know that we need both foreign as well as domestic investors for the country to grow. There are some sectors that are capital and technology-intensive, like the oil and gas sector. A country with about an eight-year history in the industry will not necessarily have all the resources to effectively exploit this on their own.
SMEs that have gone through our programme understand the need to have foreign investors in this sector. They understand that as a country we cannot do this alone and need to build partnerships with experienced companies who have expertise from elsewhere to deliver in the sector.
Yes, some locals complain that the fortunes of their communities have not improved as expected due to the discovery of oil. This is why investing in capacity building so that business and communities can play a key role in the value chain of any sector is important. Beyond that we need to take a chance on our SMEs and give them opportunities to supply in the sector. Yes, foreign investments are very important, but the local business are our engine of growth – they need support, access and protection. As a country, it is important for us to strike that balance. It’s a fine dance at which everyone is trying to be successful.
How would you describe the quality of services in the country in terms of SMEs?
It is difficult to give a percentage across all SMEs, because it depends on the industry and maturity of the SMEs in those sectors. However, although the oil and gas sector is new, some SMEs have grown quickly and have become really great local suppliers who are leading the way. Suppliers such as Wayoe Engineering, Run on Time, Danest Engineering, Conship, Stresster Engineering & Construction, and Qualms Consult Group offer very good quality services and products, rivalling global offerings. IOCs working with these companies (and more) are happy with the services.
Where local suppliers have challenges, some international oil companies are willing to work with them to bring them up to the standards. This is what we want to see more of. Unless they are given a chance, their quality cannot get better. This is what these foreign companies learned in other jurisdictions, and today they are considered experts here. Someone took a chance on them, and they have gone on to improve their expertise. Are there still complaints about services and quality in the industry? Yes, the feedback has been that there is a need to see improvement in capacity and an increase in capacity at a higher level of the value chain. Our response to this: The industry needs more investment in training, capacity building, facilitation of joint ventures, and access to opportunity to continue to grow local capacity.
How successful have local content requirements been?
Internally, IOCs have tried to create their preferred suppliers list and continue to run in-house programmes for their suppliers. However when you speak to the SMEs, the general complaints are that there is still a lack of transparency in the sector regarding contracts – prior to award and post-award – and performance which has limited their participation. Oil companies still have challenges finding local business as suppliers as they go further up the value chain.
Perhaps it has not been as successful as everyone had hoped for, however, it is a journey well started, it takes intentional effort and time to see results. As the industry matures, we will hopefully see even greater co-ordination and partnership across government ministries, donor organisations, IOCs and associated service providers, local industry associations, and motivated local SMEs to enhance the role of Ghanaian companies in the industry.
For more information on Ghanaian SMEs and local content regulations, see our business intelligence platform, TOGYiN.
TOGYiN features profiles on companies and institutions active in Ghana’s oil and gas industry, and provides access to all our coverage and content, including our interviews with key players and industry leaders.
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