I recently had the opportunity to travel to Ghana to visit with some of the
leading publicly traded companies and to take the pulse of the local
economy. Though Ghana’s economy is relatively small, it holds great
promise despite current struggles with inflation and unemployment. In a
sense the country is somewhat isolated in West Africa, being surrounded
by French speaking countries and in the shadow of Nigeria, the biggest economy in Africa. However, it is
one of the more politically stable countries in Africa, is friendly to foreign investors and has an
expanding and entrepreneurial middle class. My trip reaffirmed why Ghana is a target market for us and
an attractive investment destination in West Africa.
Company Visits
First company on the list was Unilever Ghana. The drive out to Unilever represents a microcosm of the
challenges, character and potential of the Ghanaian economy. Unilever is located in the port city of
Tema, about 20 miles outside of the city but an hour to two hours’ drive, depending on traffic. The
challenges of driving in Ghana go beyond the common issues of “no traffic rules” and a distaste for “lane
driving”: there are no street signs. Now in Accra that may be ok for locals, or even some weathered
foreigners, as there are landmarks to navigate by. In Tema, however, it is a little more challenging to find
your way.
Unilever would certainly benefit from better infrastructure around the port and between Tema and
Accra. To the extent that the government, foreign investors, NGOs, and private companies can get their
act together, this could one day present nice upside for Unilever in terms of cost structure and
productivity. We met with Mike Tyson, Controller of Unilever Ghana. He cuts a more modest figure than
“our” Mike Tyson, but an impressive man nonetheless. What was an interesting takeaway for me was
that despite Unilever’s massive stable of global brands, there are only a select number of brands
available in the local market. Soap is the largest slice, and other products include Lipton Tea, Blue Band
margarine and Omo detergent.
On a global level, Unilever is rationalizing its supply chain and focused on producing more products
locally. Lipton is a good example of that, and as we walked the premises we viewed the facilities where
the tea is stored and prepared for distribution. The tea and other products are sold through distributors
and ultimately end up in the small stores that comprise “Ghana Retail.” The supermarket concept is still
in its infancy. Shoprite, the South African retailer, has made some inroads into Ghana with 3 stores: 2 in
Accra, 1 in Tema. Shoprite is still very much an upper class experience in Ghana and until that changes,
Unilever will continue to benefit from its complex, hard-to-duplicate, distribution system vis-à-vis other
global brands that are vying for a share of the Ghanaian wallet.
Perhaps the most attractive investment opportunities in Ghana, or any other African market for that
matter, are companies that fall outside of the top 5 to 10 stocks in terms of market cap and liquidity.
Our larger, less-nimble competitors just cannot pick up shares in these smaller companies without running into capacity problems. We can buy these companies at attractive prices and as they grow and
become palatable to our brethren, we can realize our liquidity premium.
SIC Insurance is an example of one such company. Partially owned by a government entity, it has a
reputation for being bureaucratic and inefficient. However, looks may be deceiving. The insurance
regulator is rationalizing the market by getting away from allowing the purchase of insurance on credit.
Selling insurance on credit is really bad business. What invariably happens is people switch insurance
companies rather than pay in arrears for insurance that was not needed in hindsight. Under the
influence of the government, SIC had no choice but to participate in the credit policies, but now there is
a pathway to more rational pricing. Moreover, only a few percent of the population have insurance of
any kind, so the market penetration is next to nothing. As people become more educated about the
benefits of car and fire insurance, the addressable market will grow substantially.
Other interesting companies I met with included Ecobank Ghana, Ghana Commercial Bank, IC Securities
(stockbroker), and PBC. As the attractiveness of the banking sector in Africa is well understood, I will
reserve my comments for PBC, which is the cocoa trading company, and thus closely linked to the
national pride of Ghana.
PBC – which stands for Produce Buying Company – controls about 36% of the national cocoa trade of
830,000 to 850,000 metric tons. Its debt financing costs crowd out the pre-interest earnings, leaving the
company with a loss in 2013. The problem is a working capital problem, with PBC having to borrow to
buy the crop as it waits to collect payment from the Cocoa Board. The company is in discussions with an
international investor to access cheaper debt, which could dramatically improve its profitability and
reduce the volatility of future earnings.
At the Ghana Stock Exchange, I had the pleasure of attending the earnings presentation of PBC in a
room full of eager analysts. PBC kicked off the earnings season, and afterwards they served chocolate
milk in the hallway. Unfortunately I didn’t get to taste any, because I first took the opportunity to speak
with management and by the time our conversation finished they had run out of milk. I am hopeful that
their stock will prove as popular, once the cheaper capital is in place.
Cape Coast
During my spare time, I had the opportunity to visit Elmina Castle, one of the slave forts and the oldest
European building on the Gulf of Guinea, or below the Sahara for that matter. It was built by the
Portuguese in 1482 and seized by the Dutch in 1637, who continued to use it in the slave trade until
1814 and sold it to the English in 1872 when the Gold Coast became part of the British Empire. A very
sobering history. The inhumanity of it all was accentuated for me by the pious inscriptions on the walls
and archways of the castle. It certainly was not a pious place during those dark pages of European
history, a fact obviously lost on the Governor Generals who ran the fort for nearly a quarter millennium.
On a more uplifting note, the trip to and from Cape Coast was quite the entertainment. I boarded a
shiny red coach bus with air-conditioning and comfortable seats. A wonderful reprieve from the heat
and hustle & bustle of the bus station, I settled in for a relaxing trip down the coast. However, as soon as
the wheels were in motion, a preacher jumped up with his Bible and turned my ride on a public bus into religious service. Everyone seemed into it. The crowd energized the preacher and the preacher
energized the crowd. Right before the collection part the sermon reached a crescendo. When the
money was collected, the bus stopped and the preacher was off. On the way back, I never was able to
find the red bus again; nobody had ever heard of it. When I did make it to a bus station, I boarded a
mini bus crammed with people returning to Accra for the work week. No shocks, no air-conditioning, a
fearless driver, no limit on the number of passengers. That’s African travel!
Ghana in a Nutshell
The country holds great promise as several of its sectors are rapidly growing off a low base and
companies are working to improve efficiency, which has often lacked under a system of cozy
relationships between company management teams and the government. Inflation is a problem, as
elections are contested by the incumbent political power with printed money, but the Ghanaian
entrepreneurial spirit is strong and can withstand this and other headwinds. For example, in 2013 the
stock market was up 45% in dollar terms and GDP expanded by 7.1%, despite 20% inflation. The
research trip unearthed some interesting companies, affirming our position that Ghana offers attractive
long-term growth potential.

Jan Schalkwijk, CFA ,Portfolio Manager, Africa Capital Group LLC