The strong appetite for outsourcingJune 25, 2020
Alvin Mingle, senior managing partner of Fitzgerald-Bassey, and Kwabena Peprah, the firm’s managing partner, talk to The Energy Year about the business impact of Covid-19 in Ghana and how local companies can cope during the crisis. Fitzgerald-Bassey is an indigenous supply chain and procurement consultancy that assists in the formation of joint ventures.
What trends have you seen emerging since the Covid-19 pandemic started to spread in Ghana?
Alvin MINGLE: Employee morale was hit quite hard when the first Covid-19 cases occurred in Ghana. However, the government did a good job of locking things down pretty quickly. A lot of companies were not as prepared as they could have been because there was always this notion that the pandemic would not reach some countries. The speed at which the pandemic escalated caught some people and institutions completely unawares.
The impact has been severe; a lot of businesses came to a complete standstill. That and the falling oil price have had an impact on everything we do. Many companies had to deal with challenges due to poor internet connectivity. We have been using online platforms to communicate, but many enterprises did not have the ability to connect with their employees like we did and that had a negative impact on their productivity and efficiency – and ultimately, on their profitability. We hope things will turn around fairly quickly and the economy will continue to progress.
This crisis has prompted all of us to think hard about how we can work smarter and more efficiently to increase our productivity. Regardless of how long the pandemic lasts, we cannot go back to doing things the way we did before; we will be living a new normal.
Kwabena PEPRAH: The pandemic was such an unexpected event. It has gotten a lot of companies, especially the operators and larger services companies, to rethink their operations. Companies are very keen on exploring new and smarter ways to manage their costs.
If you look at the procurement side, which normally makes up 60-70% of operating costs, you can see that companies are moving away from the traditional procurement practices and are looking at outsourcing areas to cut expenditures. By doing that, they hope to reduce their current spend by 40-50%. A lot of our clients are focusing on scaling down and managing their costs better.
How can local businesses access cash and learn to cope in the era of Covid-19?
AM: There are different methods available for local companies to keep their businesses afloat despite the dual shock. The government has put in place some stimulus packages that are directed towards helping SMEs survive and continue their operations. It’s key that as an SME you make yourself aware of these packages and tap into them. These packages have been instrumental for the survival of businesses such as ours.
Secondly, you need to re-evaluate your business model. We are currently looking at how we operate and how we can do things differently going forward. We must change our mindset and be able to raise finance differently. There is a new normal out there, and within that you cannot continue to operate the same way you used to prior to the crisis.
Some of the banks are being more productive than others and have decided to give SMEs moratoriums on loan repayment. These moratoriums have been very helpful. As a small company, it’s very difficult to pay back loans during this period when you already have trouble paying salaries and fixed overheads.
KP: The banks also want to have a level of assurance that they will be repaid. If a company works with banks, the level of security has to be guaranteed. The way any bank interacts with its clients should be tailored so that the best solution and payment plan can be developed for each and every client. That would help all the smaller players to increase their efficiency during these troubled times.
With offshore oil exploration on the brink of collapse, what opportunities are available for Ghana to stay in the energy game?
AM: There are certain opportunities available onshore, like intensifying efforts towards the discovery of oil and gas onshore in the Voltarian Basin. Drilling onshore requires much less investment and would also offer an important opportunity for SMEs and smaller players to participate in developments. Offshore, some operators have put their drilling campaigns on hold. Most procurement plans of the operators have also been affected by the pandemic.
There are some other opportunities that are currently available, such as mining, but it all depends on how quickly this pandemic will pass and whether the economy will feel safe enough for companies to proceed with these projects.
KP: There is also the gas sector, which we should be looking at and promoting during this period. We have been flaring a lot of gas that could otherwise be captured, utilised and turned into a value-added product. The government is looking at this now and considering infrastructure investments in the gas sector.
How relevant do you think outsourcing will become in the energy industry post-Covid 19?
AM: Outsourcing will remain key. Companies that want to be able to work efficiently will continue to require the services of players such as ourselves. We can help them consolidate their business by holding together their resources and buying more efficiently on their behalf. That is our expertise.
Once a company outsources to us, we can do their procurement much quicker and smarter, and they will be able to achieve better revenue and savings by focusing on their core business. We can add significant value to the supply chain by concentrating on procurement and outsourcing.
The appetite for outsourcing will be greater among local companies too as they do not have the expertise to do procurement on their own; they usually buy without putting the proper systems and procedures in place. On the other hand, the bigger international companies that are perfectly capable of doing procurement on their own are also keen on outsourcing this part of the business as they have their fingers in many pies. For us, this is our bread and better and we can significantly contribute to making the companies’ operations better and more productive.