The need for a new strategy

What are your key takeaways from the crisis so far?
For me, the biggest takeaway comes from seeing the impact of something unexpected that the world was completely unprepared for. In Ghana’s upstream space, the biggest impact of Covid-19 has been the postponement of the final investment decision for the country’s biggest field development: Aker Energy’s Pecan field. This is a USD 4.4-billion development. It is a blow not only for us as a service company in the upstream sector, but for the whole economy. No one knows when it is going to restart, as this is still up in the air.

What are some of the opportunities for local services players in this crisis?
The opportunities are still there, but their scale will be a bit different now. Jubilee is still an ongoing development, but Tullow has its own issues, which were present even before Covid-19. The prices are also different now. Not all the IOCs will exit the market; they may have some financial structures with investment banks or private-equity firms that are now affected as they won’t be able to deliver the numbers they promised to their financiers.
Regarding other opportunities, Eni’s Offshore Cape Three Points project is still active. Also, during this tough period, as the gold price has gone up we have tried to benefit through our mining-related services. We have a bit of diversity in our revenue stream.

Will this crisis give a push for the digitalisation of local companies?
All companies now have to be able to operate without humans being next to each other. This crisis is definitely an incentive to implement that. It also gives a way for companies to prepare for the unexpected. Whatever this means, perhaps their business model or capital outlay needs to change a bit. There might even be a second wave of Covid-19 during wintertime. No one knows for sure, but this has certainly changed the way business is conducted.

How can indigenous companies get access to finance?
Banks in Ghana are likely to report their biggest losses in 2020 since their restructuring took place a couple of years ago. There are two reasons for this. First, those who were given loans are unable to pay. On the other hand, anyone capable of taking out a loan simply won’t take it now. There is no loan activity going on. So this crisis compounds a problem which already existed here, which is access to capital – especially for the upstream space, which is highly capital intensive.
Going forward, you might see consolidation and shareholders putting more capital into driving projects and deals as opposed to external bank financing. The appetite might not be there and if you look at the interest rates, compared to the level of business you would do, it might make more sense to execute more equity transactions.

How have you mitigated supply chain issues?
Borders are closed so there is a definite boost in relying on a stronger local supply chain system as opposed to being heavily reliant on imports. This is something we are trying to manoeuvre around. Given the projects and tasks we have, we try to deliver without being overly reliant on what the market was pre-Covid-19. Before, you picked work from anywhere and supplied from anywhere, but now you really need to be strategic.

How smooth was your transition to remote working?
As far as administrative offices are concerned, the shift is easier. What’s been a bit of a challenge is the workforce that is fabricating items and delivering physical products. We had to run a shift system and engage in mass testing. You must try to be more controlled in mobility and the movement of your labour force. You don’t want to be in a situation where something needs to be delivered and then your crew is somewhere that you can’t control as far as exposure.

Are there ways in which this crisis is comparable to the 2014 one?
I think this one is very different. In other oil price crises you could always see a way out, but now it is more difficult. There might be a short-term rebound, but we don’t know whether there is going to be a lot more of a push for renewables. Or after borders open, will we still be comfortable travelling and demanding crude-related products? It is more difficult to plan.

Why does Ghana remain an attractive destination for FDI?
A couple of things are keeping Ghana attractive. In the midst of the crisis, our debt rates have not been that high, nor have our per capita infection rates. Another helping factor is that we have a young population. A potential problem is the effect of the pandemic on our trading partners. I don’t think anything substantial has changed in African countries, as the Covid-19 impact is not as strong, but our sources of investment have been affected.