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Prince Charles Dedjoe, Executive Chairman and Geoffrey Koranteng-Darko, Director, Finance & Administration, Chadeco Group Company Ltd

Interview - December 15, 2011
Prince Charles Dedjoe, Executive Chairman, and Geoffrey Koranteng-Darko of the Chadeco Group, discusses hi company's plans for realising Ghana's oil-based potential
PRINCE CHARLES DEDJOE AND GEOFFREY KORANTENG-DARKO
PRINCE CHARLES DEDJOE AND GEOFFREY KORANTENG-DARKO | EXECUTIVE CHAIRMAN AND DIRECTOR, FINANCE & ADMINISTRATION, CHADECO GROUP COMPANY LTD

Chadeco Group is a group comprised of 14 subsidiaries ranging from fully integrated energy solution to mining and real estate. The bulk of operations is concerned with their oil venture, for which they need approximately $8Bn of funding to register and commence operations. (This would include upstream, midstream and downstream oil processes).

In fact the company even has their eyes set upon developing a refinery to help not only Ghana, but to export to Nigeria, a market of 150M people. Chadeco have high hopes and Prince Charles Dedjoe has even referred to his holdings as an empire.

Ghana is developing rapidly in many areas. Favorable commodity prices are driving growth. But there will always be challenges to growth and development. What are your thoughts of the future challenges of growth and development which Ghana faces?

GEOFFREY KORANTENG-DARKO: The belief that rapid and full integration into the global economy would create more favourable conditions for growth in developing countries has permeated much thinking in development policy in the past two decades. Openness to international trade was expected to allow countries like Ghana to alter both the pace and the pattern of their participation in international division of labour, thereby overcoming balance-of-payments problems and accelerating technical progress and economic growth. The same thinking has also held sway with respect to foreign direct investment (FDI). Quite apart from the belief that it would provide resources for development and balance-of-payments support, FDI has been seen as a crucial factor for success in trade and industrialization. It is expected to improve industrial productivity and competitiveness by bringing new technology, enhancing market access or providing a better services infrastructure. More importantly, since trade has been taking place increasingly within international production networks (IPNs) organized by transnational corporations (TNCs) by locating different stages of production of a final good in different countries, attracting FDI seeking low-cost locations has become increasingly important for participation in such networks and expansion of trade in manufactures.

Rapid liberalization of trade and capital flows has indeed dominated policy reforms in many countries in Africa in the past two decades. Starting in the middle of the 1980s Ghana who had faced serious balance of payments and debt servicing difficulties resorted to big-bang liberalization, dismantling non-tariff barriers, sharply reducing tariffs on a wide range of products, and rapidly shifting from inward-oriented (import-substitution) to outward-oriented (export-promotion) development strategies.

Lack of critical mass of sufficiently educated staff or skilled workers, inadequate infrastructure and the over all industrial structure remains insufficiently aligned with the country’s comparative advantage. Other challenges are product sectors are characterized by deteriorating technology, low capacity, utilization, low productivity and low value added to output ratios.

Furthermore, impediments to FDI have been removed and in fact foreign investors have been provided incentives over and above those enjoyed by domestic investors. The consistent stability of the economy over the past 5 years is helping the country in its development perspectives. Other non-traditional businesses are also getting involved in driving the economy of this country. We need to define a vision of the globally collaborative enterprise for our organization, create a people strategy for embedding globally collaborative values, mindsets, behaviours and skills into the DNA of our organization and implement our globally collaborative people strategy to harvest the modernization of our economy.

Do you believe the Government is doing enough to enable and encourage private industry to develop here?

GEOFFREY KORANTENG-DARKO: The Government has developed a robust partnership with the private sector based on best practice in industrial strategy and policy formulation. There is also a conducive regulatory and business environment to attract and retain domestic and foreign investment. With appropriate policies and strategies in place this partnership would turn into a driving force of economic progress.
Our government and the private sector work in close partnership to develop a sector that: (1) Is competitive, innovative and diversified. (2) Contributes significantly to the country’s Gross Domestic Product and Balance of Payment. (3) Has extensive linkages with the rest of the domestic economy, thereby generating increasing members of well-paid jobs (4) Employs large members of increasingly skilled and motivated workers and managers in safe and efficient working conditions.

What benefits do entrepreneurs bring into the domestic economy, and what do they contribute that foreign companies cannot?

GEOFFREY KORANTENG-DARKO: Local entrepreneurship is a source of job creation, empowerment and economic dynamism. Local entrepreneurship creates employment opportunities for the youth. It brings back the alienated and marginalized youth into economic mainstream. Local entrepreneurship promotes innovation and resilience in youth. It promotes the revitalization of the local community. Local entrepreneurs are particularly responsive to new economic opportunities and trends. Local entrepreneurial activity is incentivized into pursuing socially beneficial innovation and technological advances in the domestic economy. Systemic entrepreneurship would hinge on the existence of local entrepreneurship where poverty persists. Private governance mechanism would emerge at the local level to protect investments and to enforce contracts. Here, the impact of unlimited productive entrepreneurship on individual well-being can be enormous. With a fully functioning local entrepreneurship process our economy can grow and harvest the payoff structures. Local business entrepreneurs have unattenuated property rights.

PRINCE CHARLES DEDJOE:  You can also register your company with the Free Zone Board so you do not have to pay tax for 10 years. We do not have the know-how, foreigners do, so they can bring this in. In addition, most investors or partners already have the financial capability. If you have a good partner with strong technical and financial capabilities, the sky is the limit in Ghana. There is not enough capital here.

GEOFFREY KORANTENG-DARKO: The banks can only give an entrepreneur up to10% of their bank capital. This is the Bank of Ghana’s excathedra and magisterial single obligor limiting order. Just say they have USD50 million of capital - the highest amount they can give is USD5 million to one particular customer and that is not enough to run an effective and efficient petroleum outfit in Ghana.

Please tell us about Chadeco

PRINCE CHARLES DEDJOE: Chadeco Group Company Limited is a private liability company incorporated in Ghana under the Companies Code 1963 (Act 179) and has been in operation for over fifteen years. The company has grown and developed into a formidable investment company with ten different subsidiaries operating in the Mining, Heavy Equipment Hiring, Real Estate Development and Oil & Gas sectors.
Having expanded its oil and gas operations with the establishment of a subsidiary in Nigeria, Chadeco Group Company Limited has become one of the major players in Oil and Gas in West Africa. In line with our policy to become a global player, we intend to expand our operations in the whole of Africa.

Chadeco Group Company Ltd enjoys the extensive recognition in Ghana and abroad and plays an active role in the oil market. Chadeco petroleum business consists of six major segments; exploration and production, crude oil trading, fuel oil trading and distribution, light oil trading and distribution, warehousing and logistics and refining.

Our oil and gas division is divided into 4 parts- Chadeco Oil and Gas Resources Limited (for the exploration of oil and gas) and Chadeco Refinery (We have 1,500 acres of land to build an oil refinery producing a minimum of 200,000 barrels per day).The third one is Chadeco Petroleum Warehousing Limited- we have a plan to build 500,000 cubic metres capacity and storage on the same piece of land as the refinery. The last oil and gas division is the trading business and that is what we are doing now. We plan to drill, refine, store and distribute. We have upstream, midstream and downstream. We are also into heavy equipment and gold mining as well as supplies.

We have just formed a new subsidiary to set up Chadeco Bank. We have frustrations with our banks because of single obligor limit and we are looking for funds to set up the biggest oil and gas bank in Ghana. It has been registered and we are looking for investors for that. We had a problem because we could not finance a specific project with our funds. We were confused by the banks.

What synergies could this possibly create and are you prepared to deal with the demand and set up shop tomorrow?

GEOFFREY KORANTENG-DARKO: While strengthening our competitive advantage in international oil trading and enhancing our business portfolio, we will speed up our strategic transformation of our oil business through specialized operation and optimization of resources allocation. We will promote the coordinated development of all sections throughout the oil industrial chain, and increase the scale and competitiveness of energy section of our oil business so as to achieve a synchronized growth of oil and gas production and the benefits it brings to the economy and society.

The plan seems logical.

GEOFFREY KORANTENG-DARKO:  Yes, by further extending our business to the upstream, midstream and downstream sectors, we will optimize the industrial and profitability structure, and as a result strengthen the sustainability of our oil business. Chadeco will now develop into a large energy company that is highly international with a complete industrial chain, outstanding marketing ability and exerts great influence in the industry.

PRINCE CHARLES DEDJOE:  Burkina Faso and Mali are landlocked countries and they both take oil from Ghana. The market share of the Tema Oil Refinery is no more than 17%; it used to be 30%. It fluctuates. The Nigerian market alone has 150 million people and they have problems with electricity, so they use a lot of diesel. They import a lot because their refineries are not working to full capacity, so the biggest market for our refinery would be Nigeria.

PRINCE CHARLES DEDJOE:  Many countries have their own refineries but we want the latest technology for both hard and soft crude oil.

What benefits would producing finished products have for the people instead of just exporting raw petroleum?

PRINCE CHARLES DEDJOE:  By tapping a decade experience in resources acquisition, Chadeco’s channel and operations are both in the international and domestic markets. Chadeco plays an active role in domestic and international oil and gas supply and Ghana’s strategic oil inventory; strive to help the nation build up diversified crude oil and petroleum products supply system and take an increasingly important part in Ghana’s energy market. It will be easier to deliver products to landlocked countries. You can book your order in advance. The Government can earn a lot of revenue from the refinery through a production sharing agreement or contract processing arrangement. Even though we will be enjoying a loss carry over and tax holiday for 10 years as we will register under the Free Zone Board, the Government will definitely earn some revenue from it.

GEOFFREY KORANTENG-DARKO: Chadeco will be able to provide premium crude oil and professional service premium within and outside Ghana; we want to become an important crude oil and petroleum product supplier in many countries and specifically in the entire West African sub region.

What are Chadeco Group’s competitive advantages in this country and perhaps the region?

GEOFFREY KORANTENG-DARKO:  Chadeco retains a competitive edge in oil trading business, under the long and stable co-operation with the major oil players and financial institution on oil trading and risk management, plus our good and soaring reputation, sound channels as well as technological advantage.

PRINCE CHARLES DEDJOE:  We are making great efforts to develop Chadeco into a world-famous petroleum company with high quality oil and gas assets and comprehensive operation capability and sustainability which can make contribution to the development of the energy sector of Ghana and the whole Africa.

How capital intensive is all this?

PRINCE CHARLES DEDJOE:  The Group needs $8 billion to do everything we want to, from upstream to downstream and so on. There are about 14 companies in the Chadeco Empire.

You rebranded recently. What would you like the international community to think of when they see the Chadeco logo and hear the name of the company?

PRINCE CHARLES DEDJOE:  They should see us as the potential market leader in oil and gas. They should also see us as the best destination for investment.

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