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IMPROVING BUSINESSCOMPETITIVENESS AND

INCREASING ECONOMICGROWTH IN GHANA

The Role of Information andCommunication Technologiesand ICT-Enabled Services


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IMPROVING BUSINESS

COMPETITIVENESS ANDINCREASING ECONOMIC

GROWTH IN GHANA

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The Role of Information andCommunication Technologies &ICT-Enabled Services


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To cite this publication:

Hewitt Associates. 2006. Improving Business Competitiveness and Increasing Economic Growth in Ghana: TheRole of Information and Communication Technologies & IT-Enabled Services. Washington, DC: infoDev / WorldBank. Available at: http://www.infodev.org/en/Publication.170.html

2005The International Bank for Reconstruction and Development/The World Bank1818 H Street, N.W.Washington, D.C. 20433U.S.A.

All rights reserved

Manufactured in the United States of America

The findings, interpretations and conclusions expressed herein are entirely those of the author(s) and do not necessarily refl ectthe view of infoDev, the Donors of infoDev, the International Bank for Reconstruction and Development/The World Bank andits affiliated organizations, the Board of Executive Directors of the World Bank or the governments they represent. The WorldBank cannot guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and otherinformation shown on any map in this work do not imply on the part of the World Bank any judgement of the legal status ofany territory or the endorsement or acceptance of such boundaries.

The material in this publication is copyrighted. Copying or transmitting portions of this work may be a violation of applicablelaw. The World Bank encourages dissemination of its work and normally will promptly grant permission for use. For permissionto copy or reprint any part of this work, please contact [email protected].


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Table of Contents . iii

TABLE OF CONTENTSABOUT THIS REPORT vii

ABBREVIATIONS AND ACRONYMS viii

1 EXECUTIVE SUMMARY 1

1.1 Introduction 1

1.2 ITES as a Source of Enhanced Economic Growth 11.3 Key Findings and Recommendations of our Study 3

1.4 Suggested Target Markets and Segments 8

1.5 Monitoring and Evaluation Indicators 9

1.6 Conclusion 11

2 GHANAS ATTRACTIVENESS IN THE GLOBAL ITES-BPO ARENA 13

2.1 Overall Analysis 13

2.2 Analysis on the People Driver 15

2.3 Analysis on the Infrastructure Driver 18

2.4 Analysis of the Environment Driver 21

2.5 Incumbents Driver 26

3 GHANA TODAY: KEY FINDINGS 31

3.1 People 31

3.2 Infrastructure 36

3.3 Environment 44

3.4 Clusters 48

3.5 Incumbents 51

4 SUGGESTED ROADMAP TO SUCCESS AS AN ITES-BPO DESTINATION 57

4.1 Recommended Approach for Ghana 57

4.2 Strategic Recommendations 67


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Table of Contents . v

FIGURES

Figure 1 Sector-wide employment trends in Ghana 2

Figure 1.5.1.1 ITES-BPO total employment projections for Ghana 10

Figure 2.1.1 Overall country analysis 14

Figure 2.2.2.1 Ghana compared with international destinationson the people driver 16

Figure 2.2.2.2 Ghana compared with regional destinations on the people driver 16

Figure 2.3.2.1 Ghana compared with international destinationson infrastructure driver 19

Figure 2.3.2.2 Ghana compared with regional destinationson infrastructure driver 20

Figure 2.4.2.1 Ghana compared with international destinationson the environment driver 23

Figure 2.4.2.2 Ghana compared with regional destinations on theenvironment driver 24

Figure 2.5.2.1 Ghana compared with international destinationson the incumbents driver 26

Figure 2.5.2.2 Ghana compared with regional destinations on theincumbents driver 27

Figure 3.2.1.1.1 Telecom subscriptions in Ghana 37

Figure 3.2.1.1.2 SAT 3 Landing points in Africa 38Figure 3.2.1.3.1 Country comparison of full circuit E1 costs 40

Figure 3.2.4.1.1 U.S. state department rankings on Ghanas transport system 43

Figure 4.1.1.1 Ghanas National ITES-BPO offer 57

Figure 4.1.3.1.1 ITES-BPO processes 59

Figure 4.1.3.3.1 Target ITES-BPO segments for Ghana 66

Figure 4.3.1.1 ITES-BPO secretariat structure 71

Figure 4.3.2.1 ITES-BPO association structure 73

Figure 4.4.2.1 Key ITES-BPO policy areas 74

Figure 4.5.2.1 Key components of developing IT/technology parks 76

Figure 4.7.1.1 Issues to be addressed for reaching the destination 80

Figure 5.3 Components of an investment promotion strategy 84

Figure 5.4.2 Proposed structure of IPC 85


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vi . Improving Business Competitiveness and Increasing Economic Growth in Ghana

Figure 5.5.1 Target vertical, markets and customers 86

Figure 5.6.1 Defining the message 87

Figure 6.1.1 ITES-BPO total employment projections for Ghana 94

TABLES

Table 1.2.1 Worldwide ITES-BPO market forecast1 (USD millions) 1

Table 1.4.3.1 Target ITES-BPO segments for Ghana 9

Table 1.5.1.1 ITES-BPO total employment projections for Ghana 10

Table 1.5.1.2 Projections for women in ITES-BPO in Ghana 10

Table 1.5.1.3 Projections for ITES-BPO revenue generation in Ghana 11

Table 3.1.1.1.1 Country comparison for number of tertiary enrolments 31

Table 3.1.2.1.1 Country comparison on quality of education 33

Table 3.1.2.2.1 Country comparison of English-speaking population 34

Table 3.1.3.1 Country comparison on average entry level salaries 35

Table 3.5.1.1.1 Existing ITES-BPO incumbents in Ghana 53

Table 4.1.3.2.1 ITES-BPO market segments 63

Table 6.1.1.1 Projections for ITES-BPO employmentin Ghanarealistic growth 95

Table 6.1.2.1 Projections for ITES-BPO employment

in Ghanaoptimistic growth 95Table 6.1.3.1 Projections for ITES-BPO employment

in Ghanaconservative growth 96

Table 6.2.1.1 Projections for women in ITES-BPO in Ghana 96

Table 6.2.2.1 Projections for employment by skilllevel 96

Table 6.3.1 Projections for ITES-BPO revenue generation in Ghana 96


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About This Report . vii

ABOUT THIS REPORTThis document discusses the role of information and communication technology (ICT) and informa-tion technology-enabled services (ITES) in improving business competitiveness and increasing economicgrowth in Ghana. In this context, the document includes: An analysis of Ghanas ability to compete globally as well as regionally in the information technology-

enabled services (ITES)-business process outsourcing/offshoring (BPO) sector and the primary con-straints to improving Ghanas competitiveness in the sector.

Recommendations for concrete actions for Ghana to increase its competitiveness and capability as anITES-BPO destination, and target ITES-BPO activities and market segments in which it can be com-petitive in the short and medium term.

A roadmap for developing the ITES-BPO industry in Ghana, including a skills development compo-

nent, policy framework, and measurement matrix. Recommended investment promotion strategy for developing and attracting investments in Ghanas

ITES-BPO sector. A monitoring and evaluation framework for the ITES-BPO sector in Ghana, providing baselines and

targets.

The analysis presented in this report is based on information and findings as of April 2006, and may notreflect the impact of subsequent changes and developments.

This report was commissioned by the Information for Development Program ( infoDev) in partnershipwith the Government of Ghana through the Ministry of Communications and the World Bank Group,and prepared by Hewitt Associates (India).


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viii . Improving Business Competitiveness and Increasing Economic Growth in Ghana

ABBREVIATIONS AND ACRONYMSBPO: Business Process Outsourcing/Offshoring

CAGR: Compounded Annual Growth Rate

ECOWAS: Economic Community of West African States

GDP: Gross Domestic Product

GIMPA: Ghana Institute of Management and Public Administration

GISPA: Ghana Internet Service Providers Association

GoG: Government of Ghana

GZFB: Ghana Free Zone Board

KPO: Knowledge Process Outsourcing

ICT4AD Policy: ICT for Accelerated Development Policy

ITES: Information Technology Enabled Services

MNC: Multinational Corporation

MoC: Ministry of Communications

NCA: National Communications Authority

OEM: Original Equipment Manufacturer

PC: Personal Computer

SLA: Service Level Agreement

SSS: Senior Secondary School

UK: United Kingdom

US: United States of America

USD: US Dollars

VoC: Voice of Customer

VoIP: Voice over Internet Protocol

WAMU: West African Monetary Union


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Executive Summary . 1

1 EXECUTIVESUMMARY

1.1 INTRODUCTION

The Government of Ghana has identified IT-enabled services (ITES) as one of the key sectorsfor enhancing economic growth, along with agro-processing and tourism. It is implementing severalprograms under the e-Ghana initiative to improveits skills and infrastructure.

In an effort to understand Ghanas capability and real-ize its potential in ITES, Hewitt Associates (India)Private Ltd., on behalf of the Government of Ghana,the Information for Development Program (infoDev),and the World Bank Group, conducted a study onthe role of ICTs and ITES in improving businesscompetitiveness and increasing economic growth inGhana.

1.2 ITES AS A SOURCE OFENHANCED ECONOMICGROWTH

After studying economic progress in relation to theeconomic structure of different countries over time,it is clear that a higher average level of real incomeis always associated with a high proportion of the

working population engaged in the service or publicutility sectors. In many large economies, the servicesector is the largest in terms of employment, due

mostly to a massive increase in productivity growthand the progressively higher income elasticity in theprimary and secondary sectors. More economicallyadvanced countries, such as the United States,

Germany, and the United Kingdom, have followedthe movement from agriculture as the largest sourceof employment, to industry, and finally to services.The structural transformation of employment hasoccurred even more markedly from agriculture toservices in the later developed and some of the cur-rently developing countries. The service sector isbecoming a dominant feature of the economic land-scape in these countries as its contributions towardsGDP steadily increase and the contributions of theagricultural sector to GDP decrease.

Within services, the IT-enabled service segment is

beginning to be perceived as the new growth fron-tier. The rise of this segment is driven by rapidgrowth in global outsourcing and offshoring.Outsourcing is defined as the delegation of one ormore IT-intensive business processes to an externalprovider who in turn, owns, administers, and man-ages selected processes, based on defined and meas-urable performance metrics. Offshoring refers tothe administration of these processes in a locationother than the companys home country.

Countries such as India, Philippines, the CzechRepublic, and Ireland have completely transformedtheir economies by adopting IT and ITES-BPOsegments as the engine that propels their economies inan accelerated mode in relatively short periods of time.

Only 10 percent of the addressable market forglobal offshoring is estimated to be realized so far.The size of the addressable market itself is expand-ing as organizations continually expand servicesthat can be further outsourced and offshored. The

TABLE 1.2.1: Worldwide ITES-BPO market forecast1 (USD millions)

CAGR(%)

2004 2005 2006 2007 2008 2009 20042009

ITES-BPO 14,797 125,895 137,332 150,675 164,357 179,348 9.5Total

ITES-BPO 9.8 9.7 9.1 9.7 9.1 9.1 Growth %

1 Source: Forecast by Gartner-Dataquest, 2004


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2 . Improving Business Competitiveness and Increasing Economic Growth in Ghana

2 Sources: Quarterly Digest of Statistics: Ghana Statistical Service, Government and World Bank Reports, Employment figures from GLSS 3 & 4 and 2000Population Census

3 Sources: Quarterly Digest of Statistics: Ghana Statistical Service, Government and World Bank Reports, Employment figures from GLSS 3 & 4 and 2000Population Census

4 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 theindustrial and service sectors respectively

5 Census Data

Figure 1. Sector-wide employment trends in Ghana5

global forecasts for the ITES-BPO sector are pro-vided below by industry researcher Gartner-Dataquest.

From the above projections, it is evident that theITES-BPO phenomenon can therefore translateinto a very large opportunity for countries such asGhana, which have some of the basic buildingblocks required for becoming an ITES-BPO servic-es destination.

1.2.1 Why ITES-BPO for Ghana?Ghanas economy remains predominately agrarian,and the sector continues to dominate the labormarket as the main source of employment.However the percentage contribution of the agri-culture sector dropped drastically to 46.6 percentin 2005 from the 1988 figure of 61.12 percent.This drop was determined by examining the levelof economic activity of the various sectors, meas-

ured in terms of percentage f economically activepopulations in each of these sectors.3 percent. Thedrop is partly caused by the declining performanceof the agricultural sector in the 1980s and the

1990s, in line with similar trends across the world.The decline in agriculture employment in favor ofindustry and services reflects its declining share inreal GDP as against the increasing share of servicesand industry.4

The service sector has hence emerged as the second-largest source of employment for Ghana and thelargest contributor to GDP, with a contributionincrease in overall GDP from 22.1 percent in 1984to 43 percent in 2004. It consists of sub-sectorssuch as trade-related services, transportation, finan-cial and banking services, public administration,and business services (including the nascent ITES-BPO segment) and employs more than 25 percentof the work force. The Industrial sector, on theother hand, has not really developed in Ghana, being


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the lowest employer, with 16.98 percent economi-cally active population employed by this sector.

Conclusion: Ghana has entered a phase of acceler-

ated economic expansion over the last three years,with real GDP growth averaging 5.2 percent, com-pared to a 20-year average of 4.4 percent. To main-tain and enhance these growth rates, it becomesimperative that service sectors such as ITES-BPObecome the new focus for Ghana because of theirunique potential as harbingers of enhanced job cre-ation and accelerated economic growth. This senti-ment has also been expressed in the Ghana PovertyReduction Strategy which has identified ITES-BPOas one of the non-traditional sectors with thepotential to accelerate economic growth in Ghana.

Some key benefits that this industry can be expectedto bring to Ghana are summarized below: Enhanced job creation. As Ghana attains

greater development and maturity in the ITES-BPO sector, it will lead to more jobs, as it is alabor-intensive industry. Here, scale is achievedby the high deployment of people, unlike tradi-tional sectors where growth and development donot imply an increase in jobs.

Quick source of revenue. Unlike traditionalsectors of the economy, the ITES-BPO sectorrequires relatively smaller investments in bothtime and funds to set up and start generatingrevenues. Other sectors are structurally slow toestablish, requiring large capital and physicalinfrastructure with high gestation periods. Thismakes it a quick-win for a developing, economi-cally weaker economy such as Ghana.

Enhanced foreign direct investment. TheITES-BPO sector is primarily export-oriented.Focusing on this sector can enhance foreigndirect investment into Ghana, which can boostexport earnings, jobs, wages, and skills of the

workforce. Positive spillover effects of the ITES-BPO sector.

These include improvements in the informationand communication technology (ICT) infra-structure and business services, which furtherlead to an increase in business opportunities fordomestic companies.

Increased female participation in the work-force. One of the most salient features and per-sistent trends in the services industry is theincreased feminization of the labor force andthis is also evidenced in the ITES-BPO sector.

Female participation in the workforce is around44 percent (excluding sales-related sectors) andcan be expected to increase with development ofITES-BPO in Ghana.

Improved Performance. A constant focus onperformance metrics such as quality, timeliness,and accountability is a primary characteristic ofthe ITES-BPO industry. Such attributes can, inturn, help Ghanaian firms improve organiza-tional systems and adopt more globally competi-tive and strategic management approaches.Moreover, as such generic skills are portable,they can potentially benefit other sectors of theeconomy.

Indirect Employment Impact. The growth ofthe ITES-BPO industry in Ghana will also cre-ate demand for ancillary and support services

and industries, such as housekeeping, security,catering, transport, language and domain train-ing, telecom and computer equipment provi-sion, maintenance, and real estate. It is estimat-ed that for every direct employment created inthe ITES-BPO sector, four indirect jobs arecreated in other aspects of the economy. Hence,the industry will be able to create large scaleindirect employment opportunities for the lessskilled and less educated

1.3 KEY FINDINGS ANDRECOMMENDATIONSOF OUR STUDY

1.3.1 Strengths, Weaknesses,Opportunities, and Threats (SWOT)

Analysis for Ghana as an ITES-BPODestination

We have studied Ghanas current positioningunder each of the classifications of the HewittFive Driver Model, namely People, Infrastructure,

Environment, Incumbents and Clusters. Ouranalytical framework for conducting the bench-marking aspects of this project is built upon thesefive drivers. Each of these drivers is further bro-ken down into factors, parameters, and elementsto comprehensively analyze each aspect.

Weights were assigned to each driver and parameterlevel to get the overall scores for comparator coun-tries both at regional and international levels. These


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werePeople Driver40 percent; Infrastructure30 percent; Environment20 percent andIncumbents10 percent. Overall, Ghana wasplaced in the 10th position with respect to these

countries.

Ghanas positioning across these Drivers was bench-marked with respect to that of five leading andupcoming International ITES-BPO destinations(India, China, Philippines, Romania and Mexico)as well as six regional emerging or potential ITES-BPO destinations (South Africa, Egypt, Mauritius,Botswana, Nigeria and Senegal). In addition to theabove, we had several interactions with stakeholders,including incumbent organizations during thecourse of the study.

Based on our findings from the international bench-marking and an analysis of the development ofGhanas ITES-BPO sector, we have identified theoverall SWOT for Ghana and made recommenda-tions that will help facilitate the growth of the sector.

1.3.2 People DriverHuman resources are a key differentiator of thecapability of a location to attract and sustain a par-ticular industry. The ITES-BPO sector is especiallylabor intensive and dependent on talent. To succeedin this sector, Ghana would require availability of

an abundant, low-cost, efficient, and suitable tal-ent pool. The following table addresses thestrengths and weaknesses of Ghana under thePeople Driver and provides recommendations for

developing the same with regards to the ITES-BPOindustry.

1.3.3 Infrastructure DriverAvailability of reliable infrastructure is anothercritical aspect for ITES-BPO establishments. Theindustry is heavily dependent on real time connec-tivity, with high demand for a robust telecom andpower infrastructure. Civic amenities such as goodroads, transportation systems, etc., make it easierfor companies to do business out of a particularlocation. The following table includes strengthsand weaknesses of Ghana under the Infrastructure

Driver and provides recommendations for develop-ing it with regards to the ITES-BPO industry.

1.3.4 Environment DriverExternal environment refers to the legal and regula-tory setup. The attitude and support of governmentand other related administrative bodies in terms ofpolicies, procedures, ease of getting approvals,incentives, exemptions, special benefits, ease of han-dling, etc, are relevant in reducing the pain-pointsof doing business in a particular location. The fol-lowing table addresses the strengths and weaknesses

Large pool of potentially good English speaking population. Competitive labor costs differential to U.S. and U.K. companies. Stable geo-political environment in comparison with neighbor-

ing as well as other countries worldwide. ITES-BPO sector identified as a focus areas for economic

development by the government. Availability and penetration of telecom and Internet services

are rising. Several investor-friendly policies including tax holidays, 100

percent foreign ownership are in place. Cyber laws to protect ITES-BPO investors are in the process

of being promulgated.

Employability in the context of the ITES-BPO industry of large tal-ent pool is proportionately low.

Inadequate education infrastructure and training facilities. Low levels of IT literacy and PC proliferation at educational and

business-commercial levels. Although infrastructure costs may be lower in comparison with

some countries, there is a lack of suitable telecommunications andquality real estate infrastructure, which is a bottleneck for investors.

High inflation and interest rates, despite recent decreases. No policies or incentives specifically for the ITES-BPO sector. Low level of incumbent presence in spite of early offshoring

activity (ACS.)

Strengths Weaknesses

Leverage the image of its democratic and relatively stablepolitical environment towards establishing itself as a regionalhub for offshoring services.

Establish itself as a subcontracting hub for more establisheddestinations.

Collaborate with countries such as South Africa and offercomplementary services.

Develop offerings such as medical transcription and dataprocessing in the short and medium term.

Proactive investment promotion of the ITES-BPO industry by com-peting regional destinations, such as Nigeria, Mauritius,Botswana.

Lack of development of necessary educational and traininginfrastructure resulting in limited scalability for the industry.

Opportunities Threats

SWOT Analysis for Ghana as an ITES-BPO Destination


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A large pool of workers with English language skills.6

English is the official language. There is high availability of mature workers, even at entrylevel.

The country offers competitive labor cost dif ferential to U.S.and U.K. investors, as well as the regional competitor, SouthAfrica.

There is strong cultural affinity with the U.S. and U.K.cultures.

Current ITES-BPO staff attrition rates are low at about5 percent as compared with 3540 percent in destina-tions such as India.

Once trained, workers tend to perform consistently. Workforce is flexible to the demands of the ITES industry. It is

not difficult to staff operations in excess of a 12-hour day ora night shift, unlike in established destinations such as SouthAfrica.

Ghana ranks high on both the quality of math and scienceeducation (in schools) and the quality of management educa-

tion (in management schools). Ghana is higher than some ofthe regional countries and even some established destinations7

Despite a large talent pool, employable proportion is low

because of high drop-out rates from primary to secondary to ter-tiary levels, as well as lack of IT skills, There are capacity constraints for providing education at the sen-

ior secondary school and college levels. There is also an absence of market/demand led curriculum.

Course curriculum has not evolved with the changes in the eco-nomic structure and composition of the country.

While talent pool availability is substantial at entry level, it is notso at middle management and senior levels.

Labor cost differential offered by Ghana is not as high as incountries such as India and the Philippines.

Training requirements are high in order to reach requisite qualitylevels of service delivery.

There is a shortage of technical talent and professionals in Ghana. The country is still characterized by low levels of IT literacy and

PC proliferation, at both the educational and business-commer-cial levels.

Ghana does not have any significant foreign language skillsacross the country, rendering it difficult to position it as a strongdestination for European companies.


The telecom industry in Ghana is partly liberalized. Internet availability and penetration is on the rise. Access to telephony (as measured by tele-density) has signifi-

cantly improved over the last five years, primarily due to theintroduction of mobile telephones in the country.

Initiatives are being undertaken to ensure that telecomcosts for ITES-BPO operations are competitive with otherdestinations.

Cost-effective services such as voice over Internet protocol

(VoIP) have been allowed for ITES-BPO. Real estate developers are granted several fiscal incentives

including custom import duty exemptions, depreciation orcapital allowance measures, exemption from taxes on con-struction activity, etc8.

There is a significant lack of telecom bandwidth, which is exacer-bated by a lack of competition in the industry, which is keepingprices of services currently higher than in competing destinations.

Telecom set up time (especially where location requires substan-tial last mile interventions) has come down, but is still high.

Quality of network (for voice, data and Internet) needs substan-tial improvement.

Information availability (on cost, availability, terms, and condi-tions) is highly imperfect.

Connectivity beyond Accra is considered unsatisfactory, even tokey centers such as Sekondi- Takoradi, Kumasi and Tamale.

There is a lack of quality real estate which is a constraint to thegrowth of the industry.

Availability of Grade A buildings is limited and subsequentlyrentals for Grade B buildings are artificially driven higher.

Real estate ownership and title procedures are considered cum-bersome and unclear due to presence of customary laws.

As most of the technology park projects are currently in the plan-ning stage, park availability is limited in the short to mediumterm. The Shell concept is envisaged but not yet in place.


6 http://www.oasisint.net/about.php7 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 200320048 Source: Ghana investment Profile: Property Development, a publication of the Ghana Investment Promotion Centre (GIPC)

People Driver

Recommendations

Set up an ITES-BPO vocational training expert group comprising of industry and educational experts. They would review and commentupon a set of uniform skills standard for ITES-BPO.

Define and adopt the set of uniform ITES-BPO skills standards and implement a National Level ITES-BPO skills assessment, certification andtraining program. This program would assess potential candidates on certain pre-determined skill requirements and provide a score that canbe used by prospective employers to judge capability. This would reduce some of the costs associated with in-house recruitment assessment.

Develop and introduce an accreditation policy in conjunction with the Vocational Training Expert Group for private training institutions.This will help ensure quality of training.

Review and internationally benchmark educational syllabus at secondary and tertiary levels with a focus on building language, analyti-cal, and computer skills,

Introduce courses providing specialization in ITES-BPO management through the Ghana Institute of Management and PublicAdministration (GIMPA) and other facilities to develop local management talent.

Attract and retain skilled workers in the industry by: building awareness of career opportunities provided by ITES-BPO; setting up ITES-

BPO career counselling cells; and aggressively targeting and promoting Ghanas ITES-BPO industry in `Diaspora forums. Enable educators to participate in the ITES-BPO movement by training them and providing a hands-on experience in the ITES-BPOand IT environment through Teacher externships, summer work programs, and consulting opportunities.

Infrastructure Driver


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of Ghana in the Environment Driver and includesrecommendations for developing a facilitative envi-ronment for the ITES-BPO industry.

1.3.5 Clusters DriverA cluster is defined as a concentration of companiesand sub-industries in a geographic region that areinterconnected by the industry they serve and theproducts they produce. The following table addressesthe strengths and weaknesses of Ghana in the Clusters

Driver and the recommendations for developingancillary industries for ITES-BPO establishments.

1.3.6 Incumbents DriverIncumbents refer to businesses in the relevantindustry sectors that are already established andoperating in the country. Established businesses canprovide immense insight about what works and

what doesnt. The following table addresses thestrengths and weaknesses of Ghana in the

Recommendations

As in the case of the Ghana Internet Service Providers Association (GISPA), reducing E1 prices for its members9 proactively encourageavailability of cost competitive telecom ser vices for ITES-BPO companies.

Monitor quality of telecom services through the National Communication Authority and intensify investment promotion in the telecomsector to ensure effective competition and multi-provider situation.

Provide infrastructure development assistance to telecom companies establishing infrastructure to provide services to ITES-BPO establish-ments within Technology/ICT parks and designated special zones.

Review ICT Park Strategy and unify other ICT Park initiatives. Revisit current model of Tema Park Development including availability of Shells (Public Sector led). Ensure that incentives provided to commercial real estate developers are l inked to quality of development and timeliness. Existing incen-

tives in this regard should also be proactively promoted to international developers. Government should also work towards simplifying land ownership and title procedures.

Financial structure in Ghana is healthy and investor friendly. Several incentives are in place to benefit foreign ITES-BPO

investors including Income tax holiday for 10 years from startof operations (if registered under the Ghana Free Zone Board(GFZB) and Double Taxation Agreements (DTA)10 signed withFrance and the United Kingdom.

Ghana is taking steps to develop through World Bank-sponsoredstudies on developmental steps for the IT/ITES-BPO sector, requiredin line with requirements from investors.

Ghana can leverage its favorable time zone. It follows theGMT standard providing `real-time offshoring capability tocompanies in the United Kingdom. It offers U.S. a good timefit with a four-seven hour difference depending on the timezone, and a five-seven hour difference with Asian countries.

Ghana has high political stability, and internal security is nota concern for investors.

Ghana has high inflation and interest rates, and an artificiallystrong cedi. As a result, the financial environment is not attrac-tive for domestic entrepreneurs.

Though Ghana is relatively low on geo-political risk, the percep-tion is otherwise because of the overall image of the region.

There are no special provisions for the ITES-BPO industry. TheGhana Investment Promotion Centre (GIPC) Act of 1994, theGhana Free Zone Act (1995) and the ICT for Accelerateddevelopment (ICT4AD) policy do not include any provisions orincentives for the development or promotion of ITES-BPO.

There is an absence of a common framework or strategy linkingall of the governments efforts for developing and promoting theITES-BPO industry despite best intentions.

Unionism is perceived to be active and present by foreigninvestors.

There are currently no cyber security laws in place.

Recommendations

Reposition ITES-BPO/Services vis--vis Agriculture and Manufacturing Sectors. Simplify set-up procedures and related regulations; provide single window clearance and support for ITES-BPO investors established in

areas outside the Free Zones. Develop a comprehensive economic and policy package for facilitating growth of ITES-BPO. Set up 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. Urge the government to ensure that cyber laws and e-crime legislation for data protection and security are introduced and implemented

on a priority basis.


9 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)10 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

Environment Driver


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Incumbents Driver and the recommendations fordeveloping incumbents in Ghana.

Given the limited resources available, we recom-mend that Ghana prioritize activities to be under-taken in the short term and those to be undertakenin the medium and long run.

While initiatives on developing human resourcecapacity will be an ongoing process, these will also

be a necessary first step requirement for the devel-opment and growth of the industry. The develop-ment of an ITES-BPO policy and formation of anITES-BPO Secretariat is also closely linked for thecurrent and future development of the industry.

With regards to infrastructure development,telecommunication infrastructure, once addressedin the short and medium run, will be expected toapply market corrections, again based on the indus-

All factors of production (for setting up an ITES-BPO facility)

are available locally in Ghana. Some prominent training institutions, providing programs forthe IT/ITES-BPO sectors have developed including theNational Institute of Information Technology (NIIT), Aptechand Kofi Annan Center of Excellence in ICT.

There are increasing opportunities available for financing frominternational sources, including venture capital firms, bilateraland multilateral donor agencies.

Private training institutions in Ghana are mainly providing train-

ing related to IT and Networking and not ITES-BPO skills. As a result, incumbents have to invest heavily into in-housetraining leading to high costs, bench as well as lack of talentpool creation.

Absence of an organized recruitment sector in Ghana impedesefficient, timely, and cost-effective hiring, a critical requirementof the people-intensive ITES-BPO industry.

Real-estate consultants, developers, and architects need toimprove skills to meet international standards.

There is an inactive trade association resulting in lack of a concert-ed effort towards knowledge exchange and strategy formulation.

Recommendations

Create a nationwide training infrastructure incorporating public and private educational and commercial institutions. Publish a set of well-laid-down criteria in terms of academic curriculum (as per curriculum guidelines for ITES-BPO vocational/supplemen-

tal training), infrastructure, teaching faculty, and methodology for training institutions in the private and public sectors that wish to provide

ITES-BPO training to prevent mushrooming of ill-equipped training institutes that do not provide quality education. Develop an inventory and rationalizations for sources of capital and financing. Develop potential ITES-BPO destinations other than Accra, such as Cape Coast, Winneba and Kumasi.


Presence of a `big-name client (ACS) that has expand-ed operations nearly ten fold since its set-up in 2001.

Ghana has the availability of domestic ITES-BPOorganizations, such as Exzeed that are interested inestablishing an offshore model.

There has been a generally low level of incumbent presence inspite of early offshoring activity (ACS in 2001).

Absence of formal linkages with established ITES-BPO destina-tions and of experienced players (other than ACS) in the mar-ket, has not allowed the local or small entrepreneurial set-upsto learn from best practices and experiences of others.

The lack of service provisioning maturity results in problemsfaced by the industry on account of service quality, work plan-ning and productivity issues.

Recommendations

Facilitate the creation of an ITES-BPO Industry Association, an autonomous association, with a primary membership comprising onlyITES-BPO industry incumbents in Ghana and secondary membership from cluster organizations.

Train ITES-BPO companies on quality and establish a Global Delivery Model by adopting industry benchmarking systems to measureagainst global standards.

Develop an enabling environment for small ITES-BPO businesses through training, incentive schemes, incubator centers, and access toventure capital.

Encourage, promote and develop strong linkages and tie-ups with companies, industry associations, and private education serviceproviders in established destinations, such as India and Philippines, and also regional hot-spots, such as Mauritius and Egypt.



Clusters Driver

Incumbents Driver


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try requirements and volumes. Once these initia-tives are addressed, the technology park initiatives

will be smoother to role out for Ghana as theymove up the value chain.

1.4 SUGGESTED TARGETMARKETS AND SEGMENTS

1.4.1 Ghanas National ITES-BPOOffer or Value PropositionBased on our experience and understanding ofITES-BPO market at large, its dynamics andpotential, we have defined three possible `value dis-ciplines11 that we believe a country could adopt to

build its unique positioning and strategy in theITES-BPO market. These are:

Scale/volume play Niche/product leadership Operational excellence

Ghanas current capabilities, its latent strengths,

hindering weakness, and market perceptions are thecrux to our determining Niche/Product leadershipas Ghanas National ITES-BPO Offer based onthe concept of sustainable competitive advantage.Developing a Niche/Product Leadership involvesoperating in a particular niche and developingproduct leadership, and setting quality standards.

1.4.2 Market Opportunities for GhanaIn the dynamic world of ITES-BPO, prevailingconcepts and definitions are continually being chal-lenged as market players redefine the boundaries of

ITES-BPO and therefore there are various evolving

Regional shared servicescenter for West Africa

Primary offshoring hub for

medical transcription, cod-ing, billing and data pro-cessing (entry, conversionand transfer) work

Position as business Gateway to West Africa. Stable and peaceful economy. Improving macroeconomic situation. Free market economy with an emphasis and commitment towards private sector led development. Positive investment climate with attractive incentives. Positive perception with the world business community. Increased economic cooperation and coor-

dination with the region through the Economic Community of West African States (ECOWAS)andWest African Monetary Union (WAMU)treaties.

Experience in delivering these services.

Critical mass available to increase scale. Low complexity, lower infrastructure requirements with respect to both capacity and investment

(relative to voice processes) intensive work; enable domestic entrepreneur participation. Typically high-volume work. Other African ITES-BPO destinations focusing on voice processes; clear opportunity in non-voice

for the region. Established destinations unable to sustain cost arbitrage for such work as they move up the

value chain.

Sub-contracting hub forestablished ITES-BPOlocations.

Mature destinations plagued by escalating salary levels and high attrition rates. Movement up the value-chain leading these countries to focus on mid high-level work Established destinations such as India, Philippines, and China looking to subcontract work such

as data entry, data conversion, and data processing to more cost-effective destinations. Increasing requirements by clients to have global footprints to mitigate country and region

specific risks.

Complementing SouthAfrican ITES-BPO operations

South Africa is the largest economy in Africa, and also the most established in the ITES-BPOmarket.

It has a significant pool of skilled workers but is plagued by high emigration and low appetite for

working a 24*7 shift. Labor market perceived by foreign businesses to be relatively inflexible. Not competitive on salary cost aspect when compared with destinations in Asia and East

Europe. While the focus in South Africa is on voice/contact center processes, Ghana can complement

South Africa and help it to extend its offering on both voice and data processes. Ghana seen as a familiar and secure business center by South African businesses; hub for South

African companies seeking to do business in West Africa with more than 40 South Africancompanies doing business in Ghana.12

Niche area Drivers

11 Adapted from the `Treacy and Wieserma Model of Value discipline12 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


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and latent opportunities that late entrants such asGhana can adopt and exploit.

Based on the value proposition that we havedefined for Ghana, we have identified the following

market opportunities or niches for the country asan ITES-BPO destination:

1.4.3 Target ITES-BPO Segmentsfor GhanaBased on our study of Ghana, the suggested valueproposition and the niches identified, we haveidentified the following ITES-BPO segments forGhana to target. The following illustration depictsthe service sectors and functions within each sectorthat Ghana should focus on in the short and themedium term:

1.5 MONITORING ANDEVALUATION INDICATORS

The ITES-BPO industry can make a significantcontribution towards job growth. However, the

rate of growth for the industry is highly dependenton the level of institutional and government sup-port provided to develop the sector and the rela-tive stage of development of the ITES-BPO sectorin a country.

1.5.1 ITES-BPO WorkforceProjections13Taking into consideration both the parameters ofexpected government initiative and current stage ofdevelopment of the ITES-BPO industry, we haveprovided projections on the impact of the ITES-BPO industry on job creation in Ghana.

The projections made are based on three scenarios: S1: Realistic Growth S2: Optimistic Growth

S3: Conservative Growth

As shown in the diagram above, the employmentgeneration in the ITES-BPO sector over the nextfive years, assuming a realistic growth rate, is pro-

jected to be 24,727. Assuming an optimisticgrowth rate, it is 36,910. In a conservative growthscenario, this will be 16,565.

TABLE 1.4.3.1 Target ITES-BPO segments for Ghana

Vertical Based Services

DataConversion

DataEntry

MedicalTranscription

SharedServicesFunction

Banking InsuranceHealthCare

TelecomFinance &Accounts

HumanResources

Indexing Data

verification

Data entry Check

processing

Loanprocessing

Mortgage

processing

Indexing

Data verification Data entry

Loan processing

Claims processing Application

processing

Indexing Data

verification

Data entry Account

payable

Accountreceivable

Invoiceprocessing

Indexing Verification

Image keying

Transcription Translation

Invoice processing

Medical billing Member

management

Indexing Verification

Order

management Invoice

processing

Billing

Indexing Data

verification

Time andattendance

Employee data

management Leave tracking

Invoiceprocessing

CustomerSupport

Services(Voice/

E-Mail)

Inbound/outbound customer services, help desk, product inquiries, (sale, services &reminders), ticket logging, collection support

Functions

MediumTerm

Targeted Opportunities for Ghana

Vertical Based Services

ShortTerm

13 Projections are based on growth trends witnessed by other ITES-BPO destinations across the world as well as the expected growth of the global ITES-BPOindustry in future. For detailed methodology refer Chapter 5


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Figure 1.5.1.1 ITES-BPO total employment projections for Ghana14

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

Y0 Y3

16,565

24,727

36,910

9,011

2,200

Projected Growth of Total ITES Employment in Ghana

9,011

6,037

Y5

S1 S2 S3

TABLE 1.5.1.1 ITES-BPO total employment projections for Ghana15

EMPLOYMENT PROJECTIONS FOR ITES-BPO

2005 - Y0 Y3 Y5

S1 2,200 9,011 24,727

S2 2,200 9,011 36,910

S3 2,200 6,037 16,565

TABLE 1.5.1.2 Projections for women in ITES-BPO in Ghana

PROJECTIONS FOR WOMEN IN ITES-BPO

2005 - Y0 Y3 Y5

Ratio 70:30 65:35 65:35

S1 1,540 5,857 16,073

S2 1,540 5,857 23,992

S3 1,540 3,924 10,767

14 Source: Hewitt Associates, 200615 Source: Hewitt Associates, 2006


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The ITES-BPO industry is also a high employer ofwomen. The female-to male-ratio in Ghanas ITES-BPO industry is 70:30. This is expected to ration-alize to international standards of around 65:35

resulting in a female workforce of 16,073 in a real-istic scenario, 23,992 with an optimistic growthand 10,767 in a conservative growth scenario.

Based on the above-mentioned employment projec-tions as well as an estimated revenue contributionper employee per annum, the revenue projectionsfor Ghanas ITES-BPO sector will be as follows:

1.6 CONCLUSION

With one of the most competitive demographics inthe ITES-BPO world, Ghana has the potential of

developing itself as the preferred ITES-BPO desti-nation in the region. The country benefits from astable and supportive political scenario as well as alatent talent pool which, if trained, can provide thenecessary scale for growth of the industry.

Ghana can develop itself as a niche player develop-ing product leadership in specific ITES-BPO verti-cals and processes. Moreover, the country canexploit collaboration opportunities with relativelymore established countries, such as India and South

Africa, by providing sub-contracting or comple-mentary services.

However, to achieve the desired success, Ghana willneed to develop cost-effective and suitable infra-structure, Moreover, the country will need to devel-op the talent pool, as well as introduce the neces-sary policy and regulatory frameworks. Therefore,high growth aspirations will demand that adequateactions are taken to ensure that supply-side con-straints do not prevent Ghana from realizing itspotential.

If Ghana is able to successfully distinguish itself as

an ITES-BPO destination among other emerginglocations, the sector will lead to approximately36,910 jobs and revenue creation of aroundUS$738 million in year five.

TABLE 1.5.1.3 Projections for ITES-BPOrevenue generation in Ghana16

ITES-BPO INDUSTRY REVENUE CREATIONUSD Million Y3 Y5

S1 180.22 494.53

S2 180.22 738.20

S3 120.74 331.30

16 Revenue per employee is assumed to be around US$20,000 (for a US based voice/data process). The revenue generated per employee is assumed to bethe same over the years. Source: Hewitt Associates, 2006


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Ghanas Attractiveness in the Global ITES-BPO Arena . 13

2 GHANASATTRACTIVENESSIN THE GLOBALITES-BPO ARENA

While embarking on a journey to make Ghanaattractive as an offshore destination, it is imperativeto compare the country with established and otheremerging offshore destinations. This will enable adetailed evaluation of Ghanas positioning vis--vis

other destinations. The best practices of othernations analyzed will also provide lessons andimplications for Ghana and lead to an evaluation ofoptions where Ghana can achieve a definitive com-petitive edge in the global offshoring space.

Based on our experience in advising national andstate governments in developing their locations asITES-BPO destinations, and our work withclients in evaluating various locations for estab-lishing their offshore operations, we have definedfive critical parameters that are essentially thedrivers to its success in attracting and sustaining

the ITES-BPO industry. These comprise theHewitt Five Driver Model for Location

Attractiveness Analysis. These five drivers are:People, Infrastructure, External Environment,Incumbents, and Clusters.

Eleven established and emerging offshore destina-tions have been benchmarked with Ghana. Theyare: India, Philippines, China, Romania, Mexico,South Africa, Mauritius, Egypt, Botswana, Senegal,and Nigeria.

For comparing Ghana with other destinations, wehave customized the Model and aggregated theanalysis under four drivers. These are: People,Infrastructure, Environment, and Incumbents. Thefifth driverClusterswas not included because ofthe subjective nature and lack of quantifiable dataavailable for this driver.

A four tier data hierarchy was used for the data col-lection and analysis. Each of the four drivers was

further broken down into factors, parameters, anddata elements. These data elements were a mix ofquantitative and qualitative data elements.

2.1 OVERALL ANALYSIS

Ghana comes high globally and in the region onthe size of its English-speaking population andcompetitive labor costs. It, however, comes outpoorly on quality of infrastructure and demon-strated government focus towards the develop-ment of the ITES-BPO sector.

The benchmarking clearly establishes Indiasposition as the leading global destination forITES-BPO delivery in concurrence with com-

mon knowledge. Indias key strengths are in itslarge labor pool with high English language andanalytical skills, propelled by a good qualityeducation system. Low salary levels, favorablegovernment policies, and market environmentalso help put India in the top position.However, India scores lower than some of theother countries with respect to infrastructuredevelopment.

With its low cost base, superior infrastructure,and large talent pool, China is a keen challengerto Indias position as a leader. It is howeverseverely constrained by language capabilities.

Philippines is attractive as an ITES-BPOdestination because of its high Englishlanguage skills and cultural and educationalalignment with the West. It however, lacksscale in terms of talent pool size.

Mexico is seen a key player in the ITES-BPOspace because it is a near-shore player to theUnited States. Its positioning as a low-cost baserelative to the United States and its close prox-imity serves as an attractive proposition for U.S.companies considering offshoring. However,Mexicos talent pool is not at the same skill level

as that of India, Philippines, or China. Romania, along with other Central and East

European nations, is trying to become a hub fornear-shoring with its multi-lingual capabilitiesand high cultural affiliation with Europe. Thetalent base is small and therefore the scope forfuture scalability remains a concern.

South Africa is seen as the prime offshore desti-nation in Africa and is becoming become thetier one location for contact center and ITES-BPO


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work, both captive17 and outsourced. Qualitystandards are high and there is high culturalaffinity with Western countries. The countryhowever faces high telecom costs and escalating

wage levels. Deregulation is currently on theagenda though progress is reportedly slow.

Mauritius with its bilingual (French andEnglish) population and a firmly established tra-dition for attracting, winning, and successfullymanaging inward foreign investment, is posi-tioned as a promising offshore destination. Dueto its popular tourism industry, the service ori-entation of Mauritius and its people is high and

suited for the ITES-BPO industry. However, thecountry does not provide sufficient potential forscalability.

Egypt is one of Africas strong emerging destina-tions for offshoring with a growing contact cen-ter industry that is scalable and cost effective.Egypt has strong English language skills andhigh quality IT and engineering skills. However,

the country scores low on cultural adaptabilitywithin the talent driver.

Botswana can boast of one of Africas most highlyeducated, English-speaking workforce and a trans-parent business environment. The internationalbusiness community has marked it as a country to

watch out for in the African continent. It has a rel-atively competent IT infrastructure, but its attrac-tiveness is hampered by concerns about scalability,high telecom costs and health hazards due to highprevalence of HIV-AIDS. Botswana also does notscore well with regards to cultural adaptability.

Senegal is being considered as an ideal off-

shoring location for French contact centers andITES companies. French is the official languagein Senegal and there exists a large workforce ofFrench-speaking nationals there. However, thecountry is rated comparatively lower on theTalent Driver than other countries in the region.

Nigeria is one of the largest economies inWest Africa. However, a weak talent pool,

Figure 2.1.1 Overall country analysis

1

2

3

4

5

6

7

8

9

1 0

1 1

1 2

1

2

3

4

5

6

7

8

9

1 0

1 1

1 2

17 Captive refers to an organization which provides dedicated support only for operations of the parent company


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poor infrastructure, and an unsatisfactory law-and-order situation do not contribute towardsenhancing Nigerias position as an offshoringdestination

Performance of each of the countries on the fourdrivers and overall rankings are provided in the fol-lowing graph:

Other key inferences for Ghana: People Driver: Ghana has a sizeable talent pool

with good English language skills. Ghana comesout as one of the most suitable ITES-BPO des-tinations on the talent front.

Infrastructure Driver: Ghana has scored poorlyon this driver mainly because of a lack of avail-ability, suitability, and reliability of requisite

infrastructure. Countries such as China lead inthis area because of the governments clear focusand efforts leading to proactive development

Environment Driver:While Ghana has a com-paratively stable political environment in theregion, it scores poorly on this driver because ofthe lack of demonstrated focus for ITES-BPO.

While ICT has been adopted as a nationalpriority, efforts to provide an enabling environ-ment may lack focus and coordination.

Incumbents Driver:Although Ghana scoreslow on this driver, it has a small but significant

ITES-BPO population.

2.2 ANALYSIS ON THEPEOPLE DRIVER

2.2.1 Factors consideredThe ITES-BPO industry is a people-intensiveand manpower-dependent industry, and as such,this criteria represents a critical driver in definingthe attractiveness of any offshore location.Favorable offshore locations offer an abundant

and suitable labor pool that is cost effective andproductive.

The People driver plays a crucial role in definingthe direction of policy intervention, since this high-lights the gaps and concerns that need to be target-ed for future development of the talent pool.

The factors considered under this driver are as follows:

Talent Availability

Talent Quality Talent Costs Cultural Adaptability

2.2.2 Analysis and Rankings About 52 percent of the population in Ghana

speaks English. English-speaking skills, asused in our analysis, refer to the number ofpeople with the ability to read and write inEnglish. However, the base being smaller, thistranslates to around 11 million for Ghana ascompared to India (350 million) and China(220 million).

Comparing Ghana with regional ITES-BPOdestinations in Africa, it can be inferred thatGhana has high potential with regards to talentavailability and suitability in the region. But it

has been unable to capitalize on its peopleresources to promote offshoring.

Overall scalability of the talent pool in Ghanais limited. In terms of talent cost, Ghana is lessattractive than established destinations, such asIndia and Philippines. In terms of talent quali-ty, it is among the laggards when compared toboth established and emerging internationaldestinations.

A large, well-qualified talent pool is necessaryfor making a destination ITES-BPO attractive.

Although China has a large talent pool, it still

needs to develop its talent with regards toEnglish language capabilities. Therefore, it hasbeen a less attractive ITES-BPO destinationthan India.

Countries such as Mexico and Romania possessingmulti-lingual capabilities have an added advantage,because they provide an added incentive for com-panies servicing multi-lingual populations.

Ghanas position on the People Driver bench-marked with Global and Regional destinations isrepresented in the graphs below:

2.2.3 Best Practices and LearningTalent is the most critical factor in determining theattractiveness of an offshore destination. Ampleavailability of a suitable talent pool at efficient costsis key to providing an impetus to this industry.There are a number of examples of countries thathave been successful or are working to make a suc-cess on developing this aspect, as elaborated in thefollowing pages.


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Figure 2.2.2.1 Ghana compared with international destinationson the people driver18

Figure 2.2.2.2 Ghana compared with regional destinations onthe people driver19

People: Ghana Compared with International Destinations

6.816.00

4.63

2.43 2.25 2.32

3.82

3.07

2.84

2.88 2.80 2.73

0.96

0.87

1.00

0.830.57 0.91

1.00

0.20

1.00

1.001.00 0.60

India China Philippines Romania Mexico Ghana

Talent availability Talent quality Labour costs Cultural adaptability

12.58

6.576.62

7.47

9.47

10.14

People: Ghana Compared with Regional Destinations

2.322.65

2.291.92

1.47 1.42

0.74

2.732.68

2.85

2.70

2.772.61

2.42

0.910.94

0.94

0.55

0.64 0.83

0.80

0.60 0.20 0.20

1.00

0.20 0.20

0.20

Ghana Egypt Mauritius South Africa Botswana Nigeria Senegal

6.57

4.16

5.065.07

6.176.28

6.47

Talent availability Talent quality Labour costs Cultural adaptability

18 Source: Hewitt Associates, April 200619 Source: Hewitt Associates, April 2006


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Nicaragua - Vying for a Share in the Near-shore Offshoring Pie

Creating a sustainable and substantial BPO industry that in-turn creates jobs is the governments number one priority. The government iswooing investors through an aggressive incentive structure, suitable talent base and best-in-class infrastructure.

Building suitable talent is the key to offshoring and Nicaragua's leaders realize that English is the linga-franca of offshoring. It has estab-lished an English-language registry so outsourcing suppliers can easily find workers. There are 4,500 people in the directory with around40 percent that are fluent. The country also has several bilingual high schools so students can perfect their English before graduating.Additionally, the cost structure is competitive with a bilingual customer service representative earning $300-$400 a month fully loaded.

The government is interested in attracting outsourcing service providers to Nicaragua because the country has a huge pool of talentedworkers looking for jobs. Around 70 percent of the population i s under 30.

Source: OutsourcingBPO.com, April 2005

Ranking of Ghana International RegionalPeople Driver #6 Overall the people driver #1 Ahead of all regional

requires improvements comparators

Talent Availability #5 Better positioned than Mexico #2 After Egypt

Talent Costs #3 After Philippines and India #3 After Egypt and Mauritius

Talent Quality #6 Ranked last among all countries #3 After Mauritius and Botswana

Cultural Adaptability #5 Better positioned than China #2 After South Africa

Summarized Comparison

Lost in Translation: Poor English Skills Threaten the Philippines Dreams ofBecoming a New Call-center Magnet in Asia.

In a recent speech while inaugurating a Dell call centre in Manila, President Gloria Macapagal Arroyo predicted that up to 2 millionFilipinos will be employed in such places by 2010. However, the burgeoning BPO industry is already encountering growing painsserious ones. The problem: many call centres cant keep up with demand because they cant find enough employees who speak properEnglish. For every 100 people that apply in the call centres, only three to five are accepted, says Mitch Locsin, executive director ofthe Business Processing Association of the Philippines.

Now, to become more globally competitive, the government is scrambling to promote English to young people as the ticket to a goodcareer. Three years ago the Department of Education reinstated English as the primary language of instruction in schools. Various businessgroups, including both the U.S. and European chambers of commerce, are sponsoring public-relations programs lauding the career benefitsof English; one of the campaigns is called English is cool and is designed to break young people of their habit of speaking Taglishamix of English and Tagalog. In addition, Arroyo has promised to set aside $9.6 million to help put so-called near hiresan industry euphe-mism for applicants rejected due to a weak command of Englishthrough a 100-hour English refresher course. The grant was made after anaggressive campaign by the industry lobby group, which was getting worried about call centers losing business to countries like India.

The government well understands the critical importance of the industryone of the few high-value sectors in which the country can com-pete with its bigger Asian neighbours. Manila has granted the outsourcing companies various concessions, ranging from tax breaks tozoning changes that allow fast-food restaurants, for instance, to operate in office buildings to serve call-centre employees.

One enterprising Filipino has also started a private school catering to near hires. Based in the city of Cebu, the company, calledExcelAsia, is opening a second branch in the Manila financial district of Makati, where many call centres are located. The goal is tohelp the locals not only understand common American expressions and idioms, but also to speak with an American twang. Just imaginethe problem we get when an American says to one of our call-centre employees, Get outta here, Locsin jokes. And the call -centreemployee responds, Sir, you want me to put down the phone already? For a country desperately in need of an economic-successstory, such gaffes are no laughing matter.

Source: Newsweek International, May 2006


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2.2.4 Implications for Ghana Talent development is critical because it increases

employability for the ITES-BPO sector, whichis key for ensuring offshoring success. Ghana

already has a large English-speaking population(52 percent)among the largest in the region.Ghana needs to leverage this to launch itself inthe ITES-BPO market.

Development of education infrastructure and aconcentrated effort to increase the enrolment-to-actual-admission ratio are also critical toensuring greater employability. This ratio is cur-rently low in Ghana, compared with developedcountries.

It is important to increase utilization of studentsfrom senior secondary schools and colleges whoare not absorbed by tertiary institutions to

increase the availability of the talent pool and todrive down talent costs.

The government of Ghana needs to implementconcentrated initiatives to promote ICT educa-tion and computer literacy to provide a readytalent pool for the ITES-BPO industry.

Ghanas talent pool is not experienced in off-shoring, it is important to determine an evolu-tion path that starts with lower-end ITES-BPOoperations and moving to high-end, complextransactions.

2.3 ANALYSIS ON THEINFRASTRUCTURE DRIVER

2.3.1 Factors ConsideredThe availability of best-in class and reliableinfrastructure is a critical parameter for anITES-BPO organization, as one of the key successfactors for any such organization is its ability todeliver continuousservices in afast, efficientandcost effectivemanner. Consequently, the industry

is heavily dependent on real time connectivity with

a high demand for robust telecom and power infra-structures.

Taking into consideration the infrastructure

requirements of ITES-BPO, this driver includesanalysis of the following factors: Telecom Power Availability Real Estate Costs Accessibility and Connectivity

2.3.2 Analysis and Rankings Africa lags as a continent in terms of develop-

ment of infrastructure. The basic physical infra-structure networksroad and railroad, powersupply and distribution, and telecom are often inpoor condition. They are concentrated in urban

areas and along major roads in the countries. Infrastructure is a bottleneck for Ghana. In

comparison with most international and region-al offshore destinations, Ghana ranks low onbasic telecom and power efficiency. The countryscores low on critical telecom parameters such asavailability, quality, and cost.20 Faults per 100mainline per year are about 67.4 in Ghana, sig-nificantly higher than most established offshorelocations such as China (3.49), Philippines(5.20) and Mexico (1.70) and countries in theregion such as Botswana, South Africa, and

Mauritius. Internet bandwidth and E1 costs arehigh.21 The high cost makes services such asITES-BPO, which are directed towards servingexport markets, an expensive proposition.

Average link uptime at 95 percent in Ghana ismuch lower than the internationally acceptednorm of 99.5 percent. Access to telecom andpower are important factors and the backboneto service delivery for ITES-BPOs. In thisrespect, China, Mexico, and Philippines providethe best infrastructure facilities for offshoring.Even when comparing Ghana with regional off-shore destinations, the single factor that pulls

down the attractiveness of Ghana has been the

20 The bandwidth price for a full-circuit E1 line between Accra and Portugal is $7,000 per month for Ghana Internet Service Providers Association (GISPA)members and $10,000 for non-members. This price is charged by Ghana Telecom, the sole provider of E1 in Ghana. This is higher than approx. $6,000per month for full-circuit connectivity between the US and most established offshoring destinations. The costs are likely to be made more competitive forITES-BPO establishments. Internet bandwidth costs in Ghana are also on the higher side ($680 per 100 kbps per month versus $4 in Philippines, $5 inRomania, $16 in India, $3 in China) Source: Hewitt Research

21 Cost of E1 IPLC link has not been used as part of the scoring. We have however, used these costs to draw inferences and analyze Ghanas current statewith other countries - Source: Hewitt Research


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Figure 2.3.2.1 Ghana compared with international destinations oninfrastructure driver22

Infrastructure: Ghana Compared with International Destinations

8.767.75

6.91

5.69 5.84

4.40

2.66

2.63

2.98

2.44 1.92

2.10

1.41

1.031.30

1.75

1.23

1.42

0.41

0.98 1.08

0.46

0.51

0.24

Romania Mexico China Philippines India Ghana

Telecom connectivity Power Real estate Accessibility and connectivity

13.23

8.17

9.50

10.34

12.2612.38

availability and cost of a suitable telecommuni-cations network across the country.

Apart from Egypt and Mauritius, most of Africasuffers from a lack of bandwidth, which is aserious impediment to the development ofoffshore businesses. The bulk of the internation-al bandwidth available is provided through satel-lites, which weakens the price competitivenessof these countries.

Costs of suitable, high-quality real estate arelowest in the Philippines and this is an impor-

tant factor in determining its attractiveness as anoffshore location. Ghana has low real estatecosts as well, but due to an inadequate presenceof suitable and scalable buildings or IT parks forITES-BPO operations, the total business cost ofquality real estate gets artificially inflated.

Although Indias success in ITES-BPO has beenexcellent, the availability of suitable infrastructurehas been diminishing the overall attractiveness ofthe location. However, significant improvementshave been made, spurred by increasing competi-tion among a large number of service providers.

South Africa has the best international anddomestic accessibility and connectivity as com-pared with its African counterparts. However,the International locations are far ahead in termsof having a well developed international and

domestic transport system as compared to theAfrican countries.

Overall, Ghanas position on this Driver in compar-ison with Global and Regional destinations is rep-resented in the graphs on the following page.

22 Source: Hewitt Associates, April 2006We have not considered Telecom costs (Cost of E1 IPLC link) as part of the scoring. We have however, used these costs to draw inferences and analyzeGhanas current state with other countries.


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Figure 2.3.2.2 Ghana Compared with Regional Destinations onInfrastructure Driver23

Infrastructure: Ghana Compared with Regional Destinations

7.166.16 5.92

5.354.40 4.37

3.42

2.48

2.682.34

1.76

2.101.28

1.88

1.52

1.371.59

1.64

1.42

1.75

1.19

0.04

0.330.42

0.22

0.240.24

0.31

Mauritius Egypt South Africa Botswana Ghana Senegal Nigeria

11.20

6.80

7.648.17

8.97

10.2710.55

Telecom connectivity Power Real estate Accessibility and connectivity

23 Source: Hewitt Associates, April 2006We have not considered Telecom costs (Cost of E1 IPLC link) as part of the scoring. We have however, used these costs to draw inferences and analyzeGhanas current state with other countries.

Summarized Comparison

Ranking of Ghana International RegionalInfrastructure Driver #6 Overall the infrastructure driver requires #5 Ahead of Senegal and Nigeria

improvements so Ghana can compete withestablished locations

Telecom #6 Ranked last among all countries #5 Better positioned than Senegal andNigeria

Power Availability #5 Better than India #4 Ahead of Nigeria, Botswana andSenegal

Real Estate Cost #2 After Philippines #5 More economical than Egypt and Nigeria

Accessibility and Connectivity #6 Ranked last amongst all countries #4 Along with Senegal better positioned thanMauritius and Botswana


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2.3.3 Best Practices and Learnings

China develops Dalian as a National Software Export Centre

In 1984 the Chinese government declared Dalian a Coastal Open City in order to attract international business. China wanted tocapitalize on the boom in outsourcing of IT and ITES-BPO services.

Pre-empting the need for superior infrastructure as a key enabler to development of these industries, the Chinese government declaredDalian Software Park (DLSP) as a National Software Export Centre in 1998 and developed world-class infrastructure including suitablereal estate, telecom, and power.

Built strategically close to many universities and research institutes, Dalian services companies engaged in software development, busi-ness process outsourcing and IT-enabled services.

IBM opened its BPO centre in Dalian in May 2005 with an initial target to hire 600 people. It is estimated that this number has alreadycrossed 1,000.

Global MNCs such as Accenture, Dell, SAP and Braxton are among a host of companies already running their BPO centres in Dalianand all are scaling up aggressively.

The pioneer among Indian BPOs, Genpact (formerly GE Capital International Services) already has a 1,800 people center in Dalianand is expected to grow to 3,500 in the near future.

We were the pioneers in Dalian when we started our centre six years ago (in 2000). We will expand in China, as it is a major thrustfor us. And Dalian has all the requisites required to grow business: good infrastructure, educated workforce, and excellent governmentsupport, says Genpact CEO Pramod Bhasin.

The reason Dalian is very attractive is that companies find world-class infrastructure along with the ability to service proximity marketssuch as Japan, Korea and China.

Source: Media, Hewitt Analysis

2.3.4 Implications for Ghana Improving infrastructure is imperative to devel-

oping the offshoring industry. Telecom availability, including international

bandwidth, is critical. ITES standards do notallow inefficiencies in terms of operations orcost.

There is an urgent need to accelerate the devel-opment of specialized zones, which will serveas a software/ITES-BPO export centers withenabling infrastructure, such as power and tele-com in conjunction with real estate developers.

2.4 ANALYSIS OF THEENVIRONMENT DRIVER

2.4.1 Factors ConsideredFor the offshoring sector to succeed, it is importantthat the external and internal environments of acountry be properly aligned to its needs. Whileexternal environment refers to government andother related administrative bodies, internal

environment refers to the countrys economic scenario,

its markets, political and regulatory environment,and intellectual property laws.

The factors considered under this driver are as follows: Economic and investment scenario General law and order situation Business environment Tax and regulatory environment

2.4.2 Analysis and Rankings Ghana has been ranked fifth amongst the seven

countries in the region on this driver. It needs tocreate an attractive business environment for

offshore companies, as well as provide a stimu-lus to the industry in the form of additionalincentives (tax and fiscal).

Ghana lacks a focused development effort towardsthe offshoring sector and the ability to create anenvironment for growth, despite good intentions.

Growth of home-grown entrepreneurs in theITES-BPO industry in Ghana is hampered bythe unavailability of cost-effective finance. As ofFebruary 2006, the London Interbank Offered


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Rate (LIBOR) is around 5.3 percent, GhanasPrime Lending Rate (PLR) is 14 percent, mak-ing it expensive to raise finances within the

country. The emergence of entrepreneurs isimportant for the development of the overallprivate sector as well as for the ITES-BPO sec-tor, which relies on cheap sources of finance foran undeveloped industry/segment. Absence ofprovisions of seed capital by banks or financialinstitutions in this nascent industry hampersdevelopment and growth of entrepreneurs.

Among international destinations, China andIndia offer the most preferred environment for

offshoring. Both countries have focused specifi-cally on the offshoring sector and have tailoredtheir policies and incentives to suit the off-

shoring business. Additionally, both economiesare on a fast growth path, making them attrac-tive investment destinations.

South Africa offers the most conducive businessenvironment as well as the highest economicpotential in the region, with GDP growth at5 percent per annum.

In the region, Botswana, South Africa, andMauritius score high on the desire and intent toestablish a suitable offshoring environment as

India improves its infrastructure offering

India, in the 1980s and 1990s had a monopolistic and controlled telecommunications regime, which was primarily state owned andoperated. This had built in several inefficiencies including cost and operating efficiencies.

After privatization of its telecom sector, India has witnessed world-class infrastructure being developed with fat pipes and dark fibrecapacity across the country. This in turn has created bandwidth capacity and from an earlier situation of shortage of bandwidth, Indiahas moved to a bandwidth surplus nation.

Telecom Regulatory Authority of India (TRAI), a quasi- government body, has issued from time to time a large number of regulations,orders and directives to deal with issues coming before it and provided the required direction to the evolution of Indian telecom marketfrom a Government owned monopoly to a multi operator multi service open competitive market.

The directions, orders and regulations issued cover a wide range of subjects including tariff, interconnection and quality of service aswell as governance of the Authority. TRAI has played an important role in reduction of tariffs, which has benefited the growth of theBPO sector in India.

Now multiple service operators bring in efficiencies of both cost and operations, driven by competitive forces. As can be seen from thegraph below, after privatization, cost of E1 lines has come down drastically in India

Source: Elmst & Young

Additionally, with special IT zones and parks being developed, high speed digital communication, independent power infrastructure andother basic facilities are being pre-developed to cater to the needs of IT/ITES-BPO companies. The government plays an important rolein providing private sector developers concessions and incentives to develop IT parks. The core strategy of the Ministry of InformationTechnologys (MIT) is the development and growth of technology parks for both software and hardware. Technology parks have also beensetup by various state governments like the HITEC City located in Hyderabad, Andhra Pradesh and the Chandigarh Technology Park.

Source: Media, Hewitt Analysis

Mumbai-US E1(Mbps)(Half Circuit Cost, USD)

106,38395,745

55,319

42,553

28,889

0

20000

40000

60000

80000

100000

120000

Q1 2001 Q4 2001 Q4 2004Q1 2002 Q4 2005


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Figure 2.4.2.1 Ghana compared with international destinationson the environment driver24

Environment: Ghana Compared with International Destinations

3.66

2.28 2.70 2.081.61

0.99

0.58

0.550.63

0.610.55

0.59

8.09

8.56 8.00

7.20

7.04 7.71

1.23

1.371.00

1.011.53 1.05

China India Mexico Romania Philippines Ghana

Economic and investment scenario General law and order situation Business environment Tax and regulatory environment

13.56

10.3410.74

10.90

12.32

12.76

measured by proactive steps taken by thegovernment and industry. For example,Botswana provides the lowest tax on goods andservices and the highest country credit rating inthe region. Additionally, Botswana has the high-est level of transparency and the lowest level ofcorruption. However, Botswana needs to focuson providing a package of incentives specificallydesigned for the ITES-BPO sector.

Ghanas position on this Driver benchmarked withGlobal and Regional destinations is represented inthe graphs that follow.

2.4.3 Best Practices and LearningsA number of countries have introduced tailoredpolicy interventions for attracting investments inthe offshore sector. They have provided compellingreasons through a focused development of theinternal and external environments, for becomingattractive global offshore destinations. Some of thecountries and their developmental efforts are listedbelow:

2.4.4 Implications for Ghana Government involvement is a must- to kick-

start the development of the industry. The roleof nodal agencies is critical in lobbying with thegovernment and providing the industry withbenefits and incentives. Most local governmentsin developed ITES-BPO destinations have real-ized the importance of giving this industry animpetus for growth, and have set up special taskteams to recommend strategies that need to beadopted.

There is a need to develop a comprehensive eco-nomic policy for promoting the ITES-BPO sec-tor including an attractive package of tax, fiscal,

and investment incentives. The government should provide a business-

friendly environment, make it easier for foreigncompanies to enter, and have simple regulationspertaining to the ITES-BPO industry. All sup-porting regulations (labor, company, inflow offoreign funds, infrastructure availability, multi-shift and night-shift operations) must be aligned

24 Source: Hewitt Associates, April 2006


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Figure 2.4.2.2 Ghana compared with regional destinations on theenvironment driver25

Environment: Ghana Compared with Regional Destinations

2.48 2.76 2.79

1.480.99 0.69 0.90

0.750.61 0.65

0.600.59

0.450.60

8.819.28

8.11

7.787.71

6.97 6.36

2.00 0.93

0.93

1.27

1.05

1.501.22

Botswana South Africa Mauritius Egypt Ghana Nigeria Senegal

14.04

9.089.62

10.34

11.13

12.48

13.58

Economic and investment scenario General law and order situation Business environment Tax and regulatory environment

25 Source: Hewitt Associates, April 2006

Ranking of Ghana International RegionalEnvironment Driver #6 Overall , the environment driver

improving business competitiveness and increasing economic growth in web

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