The Business Year

Togbe Afede

GHANA - Economy

Helping Hand

CEO, SAS Finance Group


Togbe Afede received his MBA from Yale University. He is co-founder of Databank Financial Services Ltd and Sunon Asogli Power Ltd. He is the founder of Accra World Trade Centre Ltd and Africa World Airlines Ltd. He also foundered SAS Finance Group Ltd., an investment banking firm, and Strategic Initiatives Ltd., a private equity and portfolio investment firm.

"One of the most attractive sectors now is energy. Per-capita consumption of electricity is low here compared to other countries."

You founded SAS in 1994. Who are your primary clients?

I started in SAS to do investment, starting with stock brokerage. We soon added corporate financial advisory services, consulting for companies that want to go to market to raise money. Apart from companies, we also advise government institutions. Later, as we established ourselves, we followed accounts and went into asset management—pension funds, provident funds, individual wealth, and, of course, our own investment funds, such as the Fortune Fund. These are our three broad areas; stock brokerage, asset management, and corporate finance advisory services.

How did you then develop Strategic Initiatives Ltd?

Knowing how small the market for these services is, the deals being few and far between. Instead of waiting for companies to come to us for advice to raise money to fund their projects, I decided we looked for opportunities to pursue our own projects. I started Strategic Initiatives Ltd and identified the sectors that were most in need. One area we looked at was the energy sector. I went out and presented a case to my Chinese counterparts, who came in and established Sunon Asogli Power Ltd and initially invested $203 million to build a 200MW combined-cycle gas-fired plant. There is an ongoing expansion for another 360MW, and by May of next year total capacity will be 560MW. We also worked on Africa World Airlines, again with Chinese partners, and this has become the leader in the small domestic market. We hope that next year we will see more expansion and collaboration with other airlines. We are now mostly targeting renewable energy. We are looking at the mini-hydropower segment through a new subsidiary, Lighting and Construction Africa Company Ltd. We have submitted an application for a provisional license covering nine mini-hydro sites, and we are also looking at solar. Hopefully, perhaps within the next two weeks, we will submit an application for a provisional license to build solar power plants in the Upper West Region of Ghana. We are also working with an American company, Zoetic Global, which has a new technology in hydropower production, the in-stream augur turbine. We are negotiating a PPP with the Electricity Company of Ghana (ECG). The augurs, designed to be deployed in fast-flowing rivers, have the potential to revolutionize power generation. We will be the first company to undertake large-scale the commercialization of this technology. We plan to generate 100MW from the post-wash section of the Akosombo Dam, without building any new dam on the river. If it succeeds, we can replicate that at many dam sites across the world. SAS has undergone a major transformation since its founding in 1994. We have become entrepreneurial, and are now in the business of creating businesses.

How would you rate access to capital for local mobilization in the energy sector?

The kind of investment you are talking about is substantial. The difficulty in Ghana is how to mobilize these resources. The resources are there, but the market is still young. The pension industry has been monopolized for many years by SSNIT. Independent pension funds have only recently been allowed, which meant that for a long time big projects that should be funded from pension funds had to rely on just one source. The second headache is the interest regime we have, which makes it impossible to borrow. The monetary policy that has been implemented over the years defines inflation in a simplistic way, as too much money is chasing too few goods. For me, that is the biggest bottleneck to raising capital in this country. Who wants to invest in a risky power plant project or an airline when the treasuries market offers you close to 30%, risk free, and the fixed-income market similarly offers you close to 30%, without risk? Who would want to invest in equities under these circumstances?

What are your expectations for the future in that respect? What sectors are most ready for growth?

One of the most attractive sectors now is energy. Per-capita consumption of electricity is low here compared to other countries. Infrastructure is generally promising. For example, our road density is also low, presenting extensive opportunity for growth, as is the case with energy. That is one of the reasons why Africa is seen as the next frontier for development. The story gets more interesting if you look at the fact that we export our bauxite to Jamaica and then import aluminum. We should develop an efficient aluminum industry, and if we can convert the bauxite to aluminum, so much of the value addition will be done here and many jobs will be created here, with ramifications for sectors that are dependent on the commodity. Agriculture is important because it employs more than half of our people but contributes only about 22% to GDP. There is a lot of opportunity for enhancing agricultural production, given all the fertile land we have.

What role will international partners play in this?

Much of this we cannot do without international capital. The local equity market is small, and long-term savings are not well developed. As far as local investors are concerned, there is competition between equities and fixed income. Fixed income will win any day at this rate. Mobilizing local resources for investment is tough. That gives foreign investors a field day. However, for projects whose viability is entirely dependent on local consumption, I believe we should be able to mobilize our resources locally, but for the interest rate environment. That is why at the World Trade Centre Accra, our objective is to mobilize investment flows into Ghana.

What would you tell people looking to invest in Ghana?

Our country is attractive. Ghana is still one of the most peaceful countries in the region. It is safer to walk on the streets of Accra than Lagos or Johannesburg. We still have a young population, and a small but growing middle class. When it comes to human resources development, we are very strong in terms of education. And we have widespread electricity access, reaching over 80% of the country. We also have great access to the rest of West Africa, with the capacity to produce more power to serve the sub-region under the West African power pool program. We also speak English, which makes doing business easier.



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