Managing Environment - A report on investing in Ghana.

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MILPARK BUSINESS SCHOOL

Managing Environment (MEN)

Individual Assignment

A report on investing in Ghana.

By Craig Rosewarne - (MBA Part-time 2003)

SYNOPSIS

The Managing Director of Gateway Communications, Mr Mike van den Bergh, requested the Author to investigate setting up an operation outside of South Africa. A detailed report covering the following points was required:

  1. Firstly, a possible country that promised a favourable return on investment was to be selected. The Author was to provide sufficient evidence to support his decision.

  1. An analysis of the key international management environment factors, relevant to the Author’s decision. A PESTLE analysis was conducted on the selected country.

  1. An explanation of globalisation, regionalism, e-commerce and “international terrorism”.  Discuss how these trends are likely to promote, or undermine the new business operation in the country selected.

 

The Author firstly decided on Africa as a continent and then narrowed the options down to three countries: Mozambique, Nigeria and Ghana. Various factors such as stability, competition, market potential, country incentives, neighbouring country penetration, existing relationship with South Africa, language, infrastructure etc. were considered and compared.

Ghana, in West Africa, was selected as the country best suited for Gateway’s expansion into Africa. After an in-depth analysis on Ghana, the Author finally submitted a recommended strategy to begin operations in that country.

TABLE OF CONTENTS

1. Introduction        4

2. Company Background        7

3.  Selecting an Africa country        8

4. Ghana Analysis        10

Introduction        0

5. PESTLE analysis        11

  • Political        12
  • Economic        13
  • Social        16
  • Technological        18
  • Legal        19
  • Environmental        19

6. Globalisation        20

7. Regionalism        21

8. E-Commerce        22

9. International Terrorism        23

10. Conclusion and recommendations        25

11. References        26

12. Appendices        27

INTRODUCTION

A key challenge for Africa in the 21st century is to develop an enabling business environment. This is a clear objective of the New Partnership for Africa’s Development (Nepad). Business, it is presumed, can provide the necessary impetus to unlock Africa’s vast economic potential, allowing it to successfully engage with its many developmental challenges.

The experience of South African (SA) companies in the rest of Africa provides an important focus to highlight both the problems and challenges of these markets as well as the potential solutions. SA business and investment on the continent is growing apace, diversifying from the traditional business of contracts in construction, mining, vehicle components, timber, and steel, into a variety of

businesses including skills training, education, IT and telecommunications, clinics and healthcare, franchising, advertising, property development and waste management. (SA Department of Trade & Industry - 2002)

In less than a decade, South Africa has become one of the top 10 investors in, and trading partners of many African countries, displacing European and American companies which traditionally held the high ground, particularly former colonial powers. The push north has been fuelled by stagnation in the local market, curiosity about the opportunities in Africa, the fact that so many South African products are tailor-made for the African market, and regional integration. In addition, many international companies either re-opened their offices in South Africa or opened new ones after the end of apartheid, and are using South Africa as a springboard for their operations into the continent. Nepad will play a role in future in encouraging business in Africa.

 These investments however, are not made without risks. According to Games (2003), there are still many overarching problems and trends that apply to the continent. These include:

  • Low levels of development and insufficient investment in people;
  • Political and fiscal risk;
  • A weak private sector coupled with a strong government presence in the economy;
  • High donor dependency for aid and other financial mechanisms as well as projects;
  • The high cost of doing business due to the lack of basic services, facilities, infrastructure,
  • Development, competition and resources;
  • Insufficient air and road links;
  • Poor leadership and bad governance;
  • Pervasive corruption at all levels of government;
  • High costs of finance due to high risk and weak economies; and
  • Currency fluctuations.

Figure 1: Multinational company’s reasons for not investing in Africa. Source: UNCTAD World Investment Report 2000. New York: UN, July 2000

Despite the problems and risks, South Africans continue to flock into the continent. Investment by South African companies in the rest of the continent has a long history, particularly in the mining and construction sectors. It has risen significantly since the ANC came to power in 1994, across a range of sectors and disciplines, including many non-traditional exports. In 2001, South Africa was listed as the second biggest investor in the SADC region with investment of R14.8 billion,  and exports of approximately R34 billion into the continent.

Figure 2: SA exports to Africa. Source: Martin Creamer’s Engineering News 24-30 January 2003

COMPANY BACKGROUND

Gateway Communications has positioned itself as the leading provider of electronic communication services to enterprises, multinationals and carriers throughout Africa and the Middle East. Born from the 2002 merger of South Africa's FirstNet and Pan-African communications services provider Gateway IP, Gateway Communications today represents one of the most established multi-service communications companies in Africa. The company offers the following services within Southern Africa:

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Electronic Commerce

Gateway is the leading provider of Business-to-Business (B2B) Electronic Commerce services, allowing numerous industries within South Africa to transact together electronically. The company’s local service is based on the very successful EDI-Switch system, which has been implemented similarly in over fifty countries worldwide.

Managed Networks

GC has a large data network running across South Africa and into neighbouring countries. A number of major corporations have outsourced their networks to Gateway to manage.  GC furthermore provides their customers with Internet connectivity as well as links into other value-added financial institutions.

There are currently 41 full-time employees ...

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