A Cautionary Tale of a Ghanaian Businessman

“It’s distressing because you work so hard all your life to live a comfortable life. [But] because someone wants to steal what you have, you have nothing,” Kofi lamented.

For the last five years, Kofi has been embroiled in court with his former business partner and a local Ghanaian bank.  (Since the case is ongoing, I have changed the names of those involved.)

Stress from court and mounting financial costs has impacted his health.  In both 2008 and 2009, he had heart attacks; in 2013 he had a stroke; in 2014 he also suffered from a mild stroke. To cover his expenses, he’s had to sell his land and property.

Unfortunately, Kofi’s situation is not unique.  Disputes between business partners can arise in any country and litigation seems like a predictable path for resolving differences.  Nonetheless, his situation has some uniquely Ghanaian features.

Well, let’s first put things in context:


Born and raised in Ghana, Kofi attended St. Thomas Aquinas for secondary school in  Accra.  While in high school, he worked for his father in his auto spare parts retail store in the Tudu neighborhood of Accra.  As he built relationships with his customers, he found that they would bring him “shopping lists” of supplies.  He would source these parts from importers and sell them to his customers for a small margin. When he completed high school, he travelled to the UK where he earned the equivalent of a higher national diploma in business and finance.

In 1996, he returned to Ghana because he felt there would be more opportunities working in his home country and for the family business than outside.  Kofi’s father also owned a company that sold radio frequency communications equipment to foreign companies as well as Ghana’s military and police forces.  Kofi worked there for three years until he and his father had a disagreement over which direction to take the business.  He joined his uncle in his building materials retail store and worked for him for two years.  After that, he worked for Interplast, a manufacturer of PVC pipes, as a stock and warehouse manager.

When his father got sick, Kofi took over the communications equipment business.  By then, they were supplying Ghana’s navy, army, and fire services.  On the whole, working with the government was good business except that it “takes ages to get your money.”  For instance, if a contract stated that they would be paid in 30 days, his company might not get paid for four months!

After a while, Kofi had the idea to supply combat boots and uniforms from Romania to Ghana.  Though the Ghanaian government was not interested, he found demand among Ghana’s private security companies.  Over time, he built relationships with the heads of these companies by providing them service not usually found in Ghana including: 24 hour service, not taking people/customers for granted, replacing defective equipment even after the warranty period expired.

One day, while having drinks with one of his customers, they came up with the idea of using trucks to deliver gold to and from the mining companies.  Up until then, the mining companies had relied on helicopters to deliver the gold.  Helicopters were expensive and could only transport a limited amount of gold.  Kofi’s company supplied the armored trucks, the uniforms, boots, and radio equipment as well as provided training for guards to the mining companies.

Power Shifts

President Kufour (left) and President Rawlings (right)

President Kufour (left) and President Rawlings (right)

In January 2001, President Jerry Rawlings’ second term had ended and President John Kufour came to power.  It was a peaceful hand over of power from one party, the National Democratic Congress (NDC), to another, the New Patriotic Party (NPP).

With the new administration, Kofi said his company was labeled as an NDC-affiliated company.  Phone calls stopped being returned and doors were “shut in the face.”  At this time, Kofi considered returning to the UK.  (Similarly, when the NDC won control of the presidency in 2009, many companies that were affiliated with the NPP also suffered from a drastic slide in business.)

Project Finance

The dream - to build a water treatment plant

The dream – to build a water treatment plant

After a year of frustration, Kofi decided to work on water and sanitation project development.  “There is no sewage system in Ghana,” Kofi explained.  Trucks remove sewage from residential septic tanks then dump the sewage untreated on local beaches.

He brought in a South African (SA) engineeering company and a large, SA banking house to provide financing.  He identified three areas — Techiman, Tamale, Cape Coast — that suffered from water and sewage related problems. Working on a success completion fee basis — meaning he only got paid if the project got funded — he put together proposals for the decision-makers of these three areas.  Their proposal was to construct a new treatment plant using the SA bank’s financing and collect payments over the ensuing 15 years to cover the cost plus a profit margin to operate the facility.

In each case, he discovered that corruption made projects economically infeasible.  Due to the long-term nature of these projects, he felt that even if his group “paid to play” they would still be exposed.  A change in political party could lead to a independent audit of the project financing and could be awarded to another company.  The SA bank would still have its money locked in the project without a guarantee that it would get its money back.  In each of these situations, he felt the risk was too high.

New Direction

Given these frustrations, Kofi then entered the haulage (or transportation) business.  He rented trucks and hired drivers to deliver limestone chippings from the (misnamed) Eastern Region to a building materials company in Tema.  After a while he believed he could source his own limestone clippings.  Kofi found another area in the Western Region, conducted geological surveys, and received a concession from the Minerals Commission. He spoke with someone at the building materials company and received a letter of intent agreeing to purchase chippings from his company.

Rock Crushing Equipment

Rock Crushing Equipment

In order to finance the purchase of rock crushing equipment and working capital, he approached several banks.  Eventually he chose a bank his business partner recommended and that the business partner had a relationship with one of the leasing managers.  Despite being approved for a loan facility, his company soon ran into problems receiving funds from the bank to pay for the equipment he ordered.  He was able to cover these gaps by further drawing on the loan facility.  Not long after part of the facility was disbursed, however, he discovered that his bank was not being very helpful in providing statements and providing further funding.  Shortfalls in disbursements from the bank made it difficult for him to meet the terms of his contract with the building materials company.

In order to find an outlet for his chippings, he tried to set up contracts with other companies that needed chippings.  Each time, however, his bank seemed to get in the way of his company’s ability to operate by withholding funds.

During this period of arguing with his bankers he discovered some troubling findings.  Around the time he was setting up his loan facility, his partner and the leasing manager from his bank set up a separate company to do exactly the same business that he had initially proposed.  It seemed that all the banks actions were meant to thwart Kofi’s company’s progress.

It’s not clear how many people from his bank were involved in this rival company.  Nonetheless, the bank began pursuing Kofi for breach of contract.  Since his company was unable to conduct business, his company was also unable to make payments on the loan facility.  The bank employed both debt collectors and seemed to use the police to intimidate Kofi.  The debt collectors had “macho men” or thugs visit his house and his attorney’s house to intimidate them.

From 2009 to the present, Kofi has been involved in litigation with the bank and his business partner.  He said that for two years, he kept going to court but had to keep coming back because bank officials either stonewalled him on documents or failed to show up on the requested dates.

Kofi’s Advice

“I probably am the happiest I’ve ever been in my life because my heart is clear and my head is clear.   I didn’t do anything wrong,” he said.  Oddly enough, Kofi seems content despite all the looming uncertainty.Kofi is closer to his family.

He does  wish he started a family when he was 30 years old; he feels he’s ten years behind.  Due to the costs of the situation, his father has had to come out of retirement to support his costs.  You can see that this fact really weighs on him; he wants to get back to making money so he can “make things right’ with his father.

1. Don’t trust anybody.  Just be careful.

2. Nothing should be taken for granted.  You must verify that 100 percent of payments, contracts, and partners must be verified.  “If you don’t know the person well enough, then he should not be your partner.”  Have him work in a consultancy arrangement.

3. “The banks are all thieves.”  Kofi pointed out that banks in Ghana do not notify their customers of changes in bank policy and they (never?) provide bank statements.

“If facilities are not structured properly, then you never stop paying them.”  Let say you want to use a bank loan to finance the purchase of a 1,000 cedi phone, Kofi explained.  the bank says it will charge you 20 percent per annum and along with fees works out the total amount to be paid is 2,000 cedis over 3 years. At the end of every month, you make your payments on time.  At the end of the loan term, you think you’ve paid it off.

But then your bank officer tells you that, “Sorry, you still owe us money.”  They failed to mention to you that the interest rate rose because of the falling cedi.  They failed to notify you so you’ve been in default since the unannounced change and you have been incurring a 9 percent monthly penalty on the balance. Thus, the banks seem to always have a grip on you.

Borrowing from a bank in Ghana is very dangerous because the rates are usurious.  People in the US worry about falling behind on their credit card payments when the rate is 15 percent per annum.  In Ghana, the borrowing rate for an individual could be 8 percent per month or 152 percent per annum.

4.  “Get a lawyer every step of the way”.  Nonetheless, be careful of the lawyers because they may not have the same interests as yourself.

Closing Thoughts

While having disputes with business partners can happen in any country, I find that Kofi’s experience has some uniquely Ghanaian features.

First, the legal system in Ghana is notoriously slow and inefficient.  Unlike the US where the courts will set aside a certain period of time for you and your opponent to conduct all court proceedings, the Ghanaian system does not offer such scheduling conveniences.  For instance, Kofi said that he wasted two years because people from the bank failed to show or failed to bring the proper documents to be submitted in court.  Each time they “forgot” or failed to appear, the court simply adjourned to a future date.  Furthermore, it doesn’t seem to difficult to get into a legal scuffle in Ghana but once you do it’s hard to extricate yourself from it.

Second, it seems common for business partners in Ghana to double-cross each other.  I think it has something to do with Ghana’s relative small size.  The perception seems to be that there are limited economic opportunities in Ghana; thus, if you happen upon a good concept, then keep it under wraps because other people are bound to steal your idea.  I was warned on several occasions to be careful of copycats.  Though imitation is common in the US, I find that people are less paranoid because the perception is that the economic pie is larger.

Third, the police in Ghana are not to be trusted in the same way that those in the US or more developed countries are.  In the US, if you do something stupid in front of a police officer, you should be worried about getting arrested.  In Ghana, the concern is that the police will extort you for money.  Ask any taxi driver what they think of police officers and you will get some variety of “police they be criminals.”

Historically, the police services do not operate much like those in more developed countries.  For instance, when I arrived in 2011, a friend said you could hire a police motorbike to turn on the sirens and get you through traffic expeditiously.  Recently, the Inspector General of the Police (IGP) or the chief of police, said it would begin weeding out the criminal elements within the police force.  A minority of police officers may be involved in extortion or acting as the personal security of private individuals and they are ruining the image of all the police.

Just like working in any other country, you have to be careful not to get in a situation you cannot easily remove yourself from.  At the end of the day, if you’re not Ghanaian, you may not have structures and support that will enable you to endure a long drawn out fight in court.

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