Professional Documents
Culture Documents
Business
Competitiveness
and Increasing
Economic Growth
in Ghana: The
Role of ICT-ITES
“DRAFT” Executive
Summary
May, 2006
About This Material
• A roadmap for the future of developing ITES-BPO industry in Ghana, including a skills
development component, policy framework, and measurement matrix
• A monitoring and evaluation framework for the ITES-BPO sector in Ghana, providing
baselines and targets
Kindly note that the analysis presented in this report is based on information and findings as of
April 2006 and may not reflect the impact of subsequent changes and developments.
A separate report has been created with recommendations on the Investment Promotion Strategy
for the ITES-BPO sector in Ghana.
1.1 Introduction
The Government of Ghana (GoG) has identified Information technology-enabled services (ITES)
as one of the sectors along with agri-processing and tourism value-added as key to enhance
economic growth. In order for Ghana to understand capability and realise its potential in ITES,
which is currently a small segment today, the Ministry of Communications (MoC), Government
of Ghana in partnership with the Information for Development Program (infoDev), the World
Bank and MIGA commissioned “Hewitt Associates (India) Private Limited”, in November 2005,
to conduct a study on “Improving Competitiveness and Increasing Economic Growth in
Ghana: The Role of ICT-ITES”.
Within services, the IT-enabled services segment is beginning to be perceived as the new growth
frontier. The rise of this segment is being driven by the rapid growth of Global Outsourcing/
Offshoring, defined as the delegation of one or more IT-intensive business processes to an
external provider that in turn, owns, administers and manages selected processes, based on
defined and measurable performance metrics. Countries such as India, Philippines, the Czech
Republic, and Ireland have completely transformed their economies by adopting IT and ITES-
BPO segments as the engine that propels their economies in an accelerated mode in relatively
short periods of time.
Only 10% of the addressable market for global offshoring is estimated to be realized so far and
the size of the addressable market itself is expanding as organizations continually expand what
can be further outsourced and offshored. Given below are the global forecasts for the ITES-BPO
sector by industry researcher Gartner-Dataquest.
From the above projections, it is evident that the ITES-BPO phenomenon can therefore translate
into a very large opportunity for countries such as Ghana which have some of the basic building
blocks required for becoming an ITES-BPO services destination.
The Ghanaian economy remains predominately agrarian and the sector continues to dominate the
labour market as the main source of employment for the Ghanaian workforce. However,
examining the level of economic activity of the various sectors, measured in terms of percentage
of economically active population in each of these sectors, shows that percentage contribution of
2
the agriculture sector dropped drastically to 46.6 percent in 2005 from the 1988 figure of 61.1
percent. This has partly been due to the declining performance of the agricultural sector in the
eighties and nineties, in line with similar trends across the world. The decline in agriculture
employment in favor of industry and services reflects its declining share in real GDP as against
3
the increasing share of services and industry.
The Service Sectors has hence, emerged as the second largest source of employment for Ghana
and the largest contributor to GDP with a contribution increase in overall GDP from 22.1 percent
in 1984 to 43 percent in 2004. It consists of sub-sectors such as trade-related services,
transportation, financial and banking services, public administration, and business services
(including the nascent ITES-BPO segment) and employs more than 25 percent of the work force.
The Industrial sector, on the other hand, has not really developed in Ghana, being the lowest
employer with 16.98 percent economically active population employed by this sector.
1
Source: Forecast by Gartner-Dataquest
2
Sources: Quarterly Digest of Statistics: Ghana Statistical Service, Government and World Bank Reports, Employment
figures from GLSS 3 & 4 and 2000 Population Census
3
The agricultural sector recorded an average annual growth rate of 2.3 percent between 1984 and 2004 compared with 4.7
percent and 4.8 percent in the industrial and service sectors respectively
Conclusion: Considering that Ghana has entered a phase of accelerated economic expansion over
the last three years with real GDP growth averaging 5.2 percent, compared to a twenty year
average of 4.4 percent, to maintain and enhance these growth rates it becomes imperative that
service sectors such as ITES-BPO become the new focus for Ghana due to their unique potential
as harbingers of enhanced job creation and accelerated economic growth. This sentiment has also
been expressed in the Ghana Poverty Reduction Strategy which has identified ITES-BPO as one
of the non-tradition sectors with the potential to accelerate economic growth in Ghana.
Some key benefits that this industry can be expected to bring to Ghana are summarized below:
• In the ITES-BPO sector, as Ghana attains greater development and maturity, it will lead to
enhanced job creation, as it is a people-based industry. Here scale is achieved by high
deployment of people unlike traditional sectors where growth and development does not
imply an increase in the number of jobs
• Unlike traditional sectors of economy, the ITES-BPO sector requires relatively smaller
investments in both time and funds to set-up and start generating revenues. Other sectors
are structurally slow to establish, requiring large capital and physical infrastructure with
high gestation periods. This makes it a quick-win for a developing, economically weaker
economy such as Ghana
• ITES-BPO are primarily export-oriented services; focusing on these can enhance FDI
inflow into Ghana leading to various economic development advantages related with
increased export earnings and an impact on the labour force: job creation, higher wages and
upgrading of skills
• One of the most salient features and persistent trends in the services industry is the
increased feminisation of the labour force and this is evidenced in the ITES-BPO sector
also. Hence, female participation in the workforce can be expected to increase with
development of ITES-BPO in Ghana
• The growth of the ITES- BPO industry in Ghana will also create demand for ancillary and
support services and industries, such as housekeeping, security, catering, transport,
language and domain training, telecom and computer equipment provision and
maintenance, and real estate. It is estimated that for every direct employment created in the
ITES-BPO sector, four indirect jobs are created in other aspects of the economy. Hence, the
industry will be able to create large scale indirect employment opportunities for the less
skilled and less educated
Based on our findings and interactions with stakeholders, including incumbent organizations,
during the course of the study, we have identified the overall Strengths, Weaknesses,
Opportunities and Threats for Ghana in the context of the ITES-BPO industry.
Thereafter we have studied Ghana’s current positioning under each of the classifications of the
4
Hewitt Five Driver Model , namely People, Infrastructure, Environment, Incumbents and
Clusters and made recommendations for Ghana which will help facilitate the development of its
ITES-BPO sector.
Strengths Weaknesses
• Large pool of potentially good English • Employability of large talent pool is
speaking population proportionately low
• Competitive labour differential to US and • Inadequate education infrastructure and
UK companies training facilities
• Stable geo-political environment in • Low levels of IT literacy and PC
comparison to neighbouring countries proliferation at educational and business-
• ITES-BPO sector identified as a focus commercial levels
areas for economic development by the • Though costs of infrastructure may be
Government lower in comparison to some countries,
• Availability and penetration of telecom and there is a current lack of suitable
internet services is rising telecommunications and quality real estate
4
Refer to Annexure I
Human resources are a key differentiator of the capability of a location to attract and sustain a
particular industry. The ITES-BPO sector is especially, highly people intensive and dependent on
talent. In order to succeed in this sector, Ghana would require availability of an abundant, low
cost, efficient and suitable talent pool. The following table addresses the strengths and
weaknesses of Ghana under the People Driver and provides recommendations for developing the
same with regards to the ITES-BPO industry.
Strengths Weaknesses
• As mentioned earlier Ghana possesses a • Despite a large talent pool, employable
large pool of workers with English proportion is low on account of high drop-
language skills - the largest in the West out rates from primary to secondary to
5 tertiary levels as well as lack of IT skills
African region
• English is the official language • There are capacity constraints for provision
• There is high availability of mature of education at the Senior Secondary
workers even at entry level School and College levels
• The country offers competitive labour cost • There is also an absence of market/ demand
differential to US and UK investors as well led curriculum; course curriculum has not
as the regional competitor, South Africa evolved with the changes in the economic
• There is strong cultural affinity with the US structure and composition of the country
and UK cultures • Whilst talent pool availability is substantial
• Current ITES-BPO staff attrition rates are at entry level, it is not so at middle
low at about 5 percent as compared to 35– management and senior levels
5
http://www.oasisint.net/about.php
6
Quality of Math and Science Education score: Ghana- 3.51, South Africa – 2.82, Nigeria-2.72, Philippines- 2.78
Quality of Management Schools score: Ghana-4.01, Nigeria – 3.51, Botswana-3.27,China-3.56; Source: The Global
Information Technology Report 2003–2004
Availability of reliable infrastructure is another critical aspect for ITES-BPO establishments. The
industry is heavily dependent on real time connectivity, with high demand for a robust telecom
and power infrastructure. Civic amenities such as good roads, transportation systems, etc make it
easier for companies to do business out of a particular location. The following table includes
strengths and weaknesses of Ghana under the Infrastructure Driver and provides
recommendations for developing the same with regards to the ITES-BPO industry.
External environment refers to the Legal and Regulatory set-up. The attitude and support of
government and other related administrative bodies in terms of policies, procedures, ease of
getting approvals, incentives, exemptions, special benefits, ease of handling, etc is relevant in
reducing the ‘pain-points’ of doing business in a particular location. The following table
addresses the strengths and weaknesses of Ghana in the Environment Driver and includes
recommendations for developing a facilitative environment for the ITES-BPO industry.
Strengths Weaknesses
• Financial structure in Ghana is healthy and • Ghana has high inflation and interest rates
investor friendly and an artificially strong cedi
• Several incentives are in place to benefit • As a result the financial environment is not
foreign ITES-BPO investors including conducive for domestic entrepreneurs
Income tax holiday for a period of ten years • Though Ghana is relatively low on geo-
from start of operations (if registered under political risk, the perception is otherwise
GFZB) and Double Taxation Agreements because of the overall image of the region
9
(DTA) signed with France and the UK • There are no special provisions for the
• Government of Ghana is taking steps to ITES-BPO industry. The GIPC Act (1994),
develop through World Bank sponsored the Ghana Free Zone Act (1995) and
studies on developmental steps for the IT/ ICT4AD policy do not include any
ITES-BPO sector, required in line with provisions or incentives for the
requirements from investors development or promotion of ITES-BPO
• Ghana can also leverage its favourable time • There is absence of a common framework
zone. It follows the GMT standard or strategy linking all of the Government’s
providing `real-time’ offshoring capability efforts for developing and promoting the
to companies in UK. It offers US a good ITES-BPO industry despite best intentions
“time fit” with a four-seven hour difference • Unionism is perceived to be active and
depending on the time zone, and a five- present by foreign investors
seven hour difference with Asian countries • There are currently no cyber security laws
• Ghana has high political stability and in place
internal security is not a concern for
investors
Recommendations
• Reposition ITES-BPO /Services vis-à-vis Agriculture and Manufacturing Sectors
• Simplify set-up procedures and related regulations; provide single window clearance and
support for ITES-BPO investors even established in areas outside the Free Zones
• Develop a comprehensive economic and policy package for facilitating growth of ITES-
BPO
• Setup an ITES-BPO Secretariat under the aegis of the Ministry of Communications to
facilitate investment, promotion, infrastructure and policy development for ITES-BPO
• Develop and implement an integrated and effective ITES-BPO investment promotion
strategy - marketing Ghana as an ITES- BPO destination
• While Ghana has already developed cyber laws and e-crime legislation for data protection
8
GISPA reduced full circuit E1 costs for its members from $10,000 to $7,000 per month in February 2006 (Source: Interview
with Eric Osiakwan, GISPA)
9
Double Taxation implies that an investor residing in one country and doing business in another country is taxed by both
countries on income earned by him/ her. Hence a Double Taxation Agreement implies that the foreign investor will be only
taxed in the country of residence and not in the country of operation
Strengths Weaknesses
• All factors of production (for setting up an • Private training institutions in Ghana are
ITES-BPO facility) are available locally in mainly providing training related to IT and
Ghana Networking and not ITES-BPO skills
• Some prominent training institutions, • As a result, incumbents have to invest
providing programs for the IT/ ITES-BPO heavily into in-house training leading to
sectors have developed including NIIT, high costs, bench as well as lack of talent
Aptech and Kofi Annan Center of pool creation
Excellence in ICT • Absence of an organized recruitment sector
• There are increasing opportunities available in Ghana impedes efficient, timely and
for financing from international sources cost-effective hiring, a critical requirement
including venture capital firms, bilateral of the people-intensive ITES-BPO industry
and multilateral donor agencies • Real estate consultants, developers,
architects need to up-skill to meet
international standards
• There is an inactive trade association
resulting in lack of a concerted effort
towards knowledge exchange and strategy
formulation
Recommendations
• Create a nationwide training infrastructure incorporating public and private educational
and commercial and educational institutions
• Publish a set of well laid down criteria in terms of academic curriculum (as per
curriculum guidelines for ITES-BPO vocational/supplemental training), infrastructure,
teaching faculty and methodology for Training institutions in the private and public sector
that wish to provide ITES-BPO training to prevent mushrooming of ill-equipped training
institutes which do not impart quality education
• Inventorize and rationalize sources of capital and financing
• Develop potential ITES-BPO destinations other than Accra, such as Cape Coast, Winneba
and Kumasi
Incumbents refer to businesses in the relevant industry sectors that are already established and
operating in the country. Established businesses can provide immense insight about what works
and what doesn’t. The following table addresses the strengths and weaknesses of Ghana in the
Incumbents Driver and the recommendations for developing incumbents in Ghana.
Based on our experience and understanding of ITES-BPO market at large, its dynamics and
potential, we have defined three possible `value disciplines 10 ’ that we believe a country could
adopt to build its unique positioning and strategy in the ITES-BPO market. These are:
• Scale/Volume play
• Niche/Product leadership
• Operational excellence
Ghana’s current capabilities, its latent strengths, hindering weakness and market perception are
the crux to our determining “Niche/ Product leadership” as Ghana’s "National ITES-BPO Offer"
based on the concept of sustainable competitive advantage. Developing a Niche/ Product
Leadership involves:
• Operating in a particular niche and developing ‘product leadership’
10
Adapted from the `Treacy and Wieserma Model of Value discipline’
In the dynamic world of ITES-BPO, prevailing concepts and definitions are continually being
challenged as market players redefine the boundaries of ITES-BPO and therefore there are
various evolving and latent opportunities that late entrants such as Ghana can adopt and exploit.
Based on the value proposition that we have defined for Ghana, we have identified the following
market opportunities or niches for the country as an ITES-BPO destination:
Based on our study of Ghana, the suggested value proposition and the niches identified, we have
identified the following ITES-BPO segments for Ghana to target. The following illustration
depicts the service sectors and functions within each sector that Ghana should focus on in the
short and the medium term:
Finance& Human
Banking Insurance Health care Telecom
accounts Resources
Short Term
• Check • Claims processing • Translation
processing payable Processing • Employee Data
• Application • Invoice processing
Data Entry
Inbound/outbound customer services, help desk, Product inquiries , (Sale, services &
Medium Term
Services (Voice/
11
Source: SA Institute of International Affairs (SAIIA) survey. This includes AngloGold, whose merger with Ghana's
Ashanti created the world's second-largest gold mining company, food retailer Shoprite, brewer SABMiller, and a number of
smaller companies involved mostly in the supply of goods
Taking into consideration both the parameters of expected government initiative and current stage
of development of the ITES-BPO industry, we have provided projections on the impact of the
ITES-BPO industry on job creation in Ghana.
As per the diagram above, the employment generation in the ITES-BPO sector over the next five
years assuming a realistic growth rate is projected to be 24,727, assuming an optimistic growth
rate it is 36,910 and in a conservative growth scenario this will be 16,565.
The ITES-BPO industry is also a high employer of women. Currently the female to male ratio in
Ghana’s ITES-BPO industry is 70:30. This is expected to rationalize to international standards of
1.6 Conclusion
With one of the most competitive demographics in the ITES-BPO world, Ghana has the potential
of developing itself as the preferred ITES-BPO destination in the region. The country benefits
from a stable and supportive political scenario as well as a latent talent pool which, if trained can
provide the necessary scale for growth of the industry.
Ghana can develop itself as a niche player developing product leadership in specific ITES-BPO
verticals and processes. Moreover, the country can exploit collaboration opportunities with
relatively more established destinations such as India and South Africa in order towards sub-
contracting or providing complementary services.
However, in order to achieve the desired success, Ghana will need to work towards ensuring the
development of cost-effective and suitable infrastructure. Moreover, the country will need to
ensure that initiatives are undertaken in order to develop the talent pool, as well as introduce the
necessary policy and regulatory framework. Therefore, high growth aspirations will demand that
adequate actions be taken to ensure that supply-side constraints do not prevent it from realizing
the potential of the opportunity.
In the scenario that Ghana is able to successfully distinguish itself as an ITES-BPO destination
amongst other emerging locations the sector will lead to an employment of 36,910 and a revenue
creation of around USD 738 million over the next five years.