Mr. David Ofosu Dorte, a business strategist, has disclosed that businesses looking forward to expand this year will face very serious challenges.
According to Mr. Ofosu Dorte, while many businesses had not forecasted such a harsh economic landscape coming into the New Year, the existing crisis in the country, means companies would have to adapt and probably lay aside some of their plans in order to survive the situation.
The business strategist emphasized that, the ongoing domestic debt exchange will underprivilege businesses of key financing support, as a result of the liquidity problems it will create for banks in the coming months.
“Most businesses don’t expand using returns on bonds except the financial sector. Businesses expand using loans and debt instruments or other corporate financing instruments that they take.
“The challenge is that, the banks are going to have liquidity problems, so you still will not be able to do that expansion because the banks will not be giving you the money or the cost of that borrowing will be so outrageous that you’ll not be able to make returns on it. So definitely expansion programmes are going to be very very difficult.”
Mr Ofosu
Mr Ofosu Dorte also disclosed that, even with businesses that have other sources of income, borrowing for expansion will still be very difficult.
“And if you reduce it to GDP terms, the government’s own expectation of GDP is not that bullish because if businesses are not growing and expanding then we are going to have a situation where we are going to contract. There will be some growth but I don’t expect very bullish growth.”
Mr Ofosu
Staff Retrenchment Is Not The Best Solution
The business strategist further advised business owners to resist retrenching staff even as businesses battle challenges due to the existing harsh economic conditions.
According to him, though he agrees retrenchment is an easier solution to address the shortage of cash, he called on business owners to rather explore cutting administrative costs and increasing productivity instead.
Mr. Dorte further explained that, while laying-off staff might look like the preferable option, when the crisis passes and there is the need to increase staff, it might incur an even larger expense for the company. “The issue of letting staff go is often the easier route and I agree. But if you look at it, within a certain period if the economy recovers, then getting them back is a more of a larger cost,” he stated.
Mr Ofosu indicated that reducing the number of staff will just add to the social problems the country is already facing and would however, not improve business.
“I will look at the number, and I give you percentages, if my percentage of remuneration or staff cost is above 35% of my total, I will make a decision on that. But there are ways to cut. If I can consciously cut cost of administration, I will cut that rather than let employees go.
“If I can cut the net profit that I make, I will cut that than rather let employees go. Because you will be adding more to the social problem and as a Ghanaian or as an African you need to take that factor into account. That’s one thing I’ll take into account.”
Mr Ofosu
Mr Dorte opined that, employers need to ensure that employees increase productivity in order to create other streams of income to support business operations.
“It will be important for me to also understand that the staff have to be… talked to regarding productivity and their ability to make sure that they produce to the level that we can earn other sources of income, especially non-government dependent income. So I will rather retain staff than let staff go.”
Mr Ofosu
