Author name: Dr Maxwell Ampong

I. IMPORTANCE OF DIGITAL TRANSFORMATION FOR SMES In today’s fast-paced and highly competitive business environment, digital transformation is no longer a luxury but a necessity, especially for SMEs. That is why if you’re reading this in the newspaper on Monday or my LinkedIn over the weekend, know that the place to be next Tuesday, July 23rd, is the Wesley House, opposite Cedi House.  Ghana’s largest indigenous bank, GCB Bank PLC, is holding a Commercial Banking Capacity-Building Seminar themed “Empowering Growth: Optimizing People and Resources for the Digital Era.” The aim is to impart the knowledge and confidence to drive digital transformation in your and my businesses.  So, why is this seminar important? Why should you tune in? Embracing digital technologies can lead to significant benefits: – Increased Efficiency: Automating routine tasks and optimising business processes can save time and reduce operational costs. – Enhanced Customer Experience: Leveraging digital tools can help you better understand and serve your customers, improving satisfaction and loyalty. – Greater Reach: Digital marketing and online sales platforms can help you reach a wider audience, both locally and globally. – Data-Driven Decision Making: Digital tools provide valuable insights and analytics to inform your strategic decisions. – Improved Security: Advanced cybersecurity measures can protect your business from threats and ensure the safety of your data. However, digital transformation is a journey that requires careful planning, sometimes some investment, and ongoing commitment. As a resource person for this Seminar, I will explore how we can navigate this journey successfully and tap into the vast potential of the digital era. But then I thought I would share my findings with the “Entrepreneur In You” community as I have learned some new things in preparation for this seminar. I know I’ll learn even more on the day with the other resource persons. GCB Bank will also give us an inside track on leveraging their products and service offerings to support our digital transformation efforts.  As a witness, GCB Bank PLC is a trusted partner in this regard. With them, you can access a range of services and products designed to support your digitalisation efforts. From digital banking solutions to financial advisory services, GCB Bank is dedicated to empowering SMEs to thrive in the digital age. How? And why? Let’s dive in. II. NEW TRENDS IN GLOBAL SME BUSINESS Overview of Current Global SME Landscape The global SME landscape is dynamic and ever-evolving. SMEs are the backbone of many economies, driving innovation, employment, and economic growth. However, they also face numerous challenges, such as limited access to finance, intense competition, and rapidly changing market conditions.In this context, digital transformation offers SMEs a lifeline to enhance their competitiveness and resilience. According to recent studies, SMEs that embrace digital technologies are more likely to experience growth and expansion. Successfully combine a Makola businesswoman with the wonders of social media marketplace, and your imagination is your only limit to what could happen. This happened in China with the embrace of Alibaba. It’s not far-fetched to see how it can happen for you, me, and that Makola businesswoman. Key Digital Trends Shaping SMEs E-commerce E-commerce has revolutionised how businesses operate, breaking down geographical barriers and enabling SMEs to reach a global audience. Online marketplaces and e-commerce platforms provide SMEs with the tools to set up virtual storefronts, manage inventory, and process payments seamlessly. Example: I take you back to the Makola businesswoman. She might have a small shop in Accra, but with e-commerce, she can now sell her products to customers in Europe and North America through platforms like Etsy and Amazon. This not only increases sales but also broadens the market reach. Cloud Computing Cloud computing allows SMEs to access advanced computing resources without significant upfront investment. By leveraging cloud services, businesses can store data, run applications, and manage operations remotely and securely. Example: Using cloud-based accounting software like QuickBooks, an SME can manage its finances from anywhere, collaborate with accountants in real time, and ensure data is backed up and protected. Artificial Intelligence (AI) and Machine Learning AI and machine learning are transforming how SMEs operate by automating processes, enhancing customer experiences, and providing valuable insights. From chatbots to predictive analytics, AI solutions are becoming increasingly accessible to smaller businesses. Example: An SME in the retail sector can use AI-driven chatbots to provide 24/7 customer support, handle common queries, and personalise shopping experiences, leading to increased customer satisfaction and loyalty. Internet of Things (IoT) The Internet of Things (IoT) refers to the network of physical objects like devices, vehicles, appliances, and more that are embedded with sensors, software, and other technologies. The goal is to connect and exchange data with other devices and systems over the Internet. IoT can improve operational efficiency, reduce costs, and enable predictive maintenance in various industries. Example: If delivery is a component of your service offering, you can use IoT sensors (or apps) to monitor the position and condition of goods in transit, ensuring timely delivery and maintaining product quality. Blockchain Technology Blockchain technology is a secure, decentralised digital ledger that records transactions across multiple computers. This ensures that the recorded transactions cannot be altered retroactively, providing transparency and security. For SMEs, blockchain can enhance trust and efficiency in various operations, ensuring data integrity and reducing the risk of fraud. Example: An SME involved in international trade can use blockchain to track the origin and movement of goods, ensuring transparency and trust in the supply chain. Check out Myneral Labs as an example. We use their services at Maxwell Investments Group in our Agro-Commodities trading. III. BEST PRACTICES IN DIGITAL TRANSFORMATION Steps to Begin Digital Transformation Assess Current Business Processes Conduct a thorough assessment of your current business processes to identify areas that can benefit from digital transformation. Evaluate your strengths, weaknesses, opportunities, and threats (SWOT analysis) to understand where digital technologies can make the most impact. Develop a Digital Transformation Strategy Define clear goals and objectives for your digital transformation journey. These should align with your overall business strategy and vision. Create a roadmap with specific milestones and

The break-even point (BEP) and break-even analysis are related financial concepts used to assess a business’s financial health. The break-even point is the specific level of sales at which total revenues equal total costs, meaning there is no profit or loss. It is calculated by dividing fixed costs by the difference between the unit selling price and variable cost per unit. On the other hand, break-even analysis is a broader financial assessment that examines the relationship between costs, volume, and profits at various levels of production and sales. It helps businesses determine how changes in costs, prices, and sales volumes impact profitability, providing valuable insights for strategic planning and decision-making. We delve into the core components of break-even analysis, explore its applications, acknowledge its limitations, and highlight its importance in business planning, drawing insights from academic research. A LITTLE HISTORY ALWAYS HELPS Concepts like break-even point (BEP) can be found in the writings of 18th-century economist Antoine Cournot. Cournot’s idea of the “point of indifference” referred to the production level where a firm neither gains nor loses profit. German economist Karl Bücher is often credited as the pioneer of BEP. His work, “Betriebsmittel und Betriebs organisation in Deutschen Handwerk und Manufakturbetrieb des 16. Jahrhunderts” (Operating Resources and Business Organisation in German Handicraft and Manufacturing Businesses of the 16th Century), published in 1893, discussed the importance of understanding cost behaviour and the relationship between costs and revenue. Another German economist, Johann Friedrich Schär, is recognised for his contributions to BEP. His book, “Grundzüge der Kalkulation” (Fundamentals of Costing), published in 1910, elaborated on the concept of the “dead point,” which referred to the production volume where total costs equal total revenue. Since then, BEP has undergone further refinement. Accounting practices have evolved to better categorise fixed and variable costs, and technological advancements have facilitated more sophisticated cost analysis and modelling. KEY COMPONENTS OF FORMULAS Fixed Costs (FC) Fixed costs are expenses that remain constant regardless of the level of production or sales. These expenses do not vary with changes in output. Examples of fixed costs include rent for facilities, salaries of permanent staff, insurance premiums, property taxes, loan payments, and asset depreciation. Even if production is halted or sales decline, fixed costs persist. In break-even analysis, it is essential to identify and quantify fixed costs accurately because they represent the baseline expenses that must be covered before a business can start making a profit. These expenses remain constant regardless of the production volume. Variable Costs (VC) Variable costs are expenses that fluctuate in direct proportion to changes in production or sales volume. Unlike fixed costs, variable costs increase as production levels rise and decrease when production levels decrease. Examples of variable costs include raw materials, direct labour, packaging materials, and utilities such as electricity and water. Variable costs are directly tied to the level of output and are typically expressed on a per-unit basis. Identifying and calculating variable costs accurately is crucial in break-even analysis as they directly impact the profitability of each unit produced or sold. These expenses vary directly with the production volume. Examples include raw materials, direct labour costs associated with production, and utilities used in the manufacturing process. Total Cost (TC) Total costs represent the sum of fixed costs and variable costs incurred by a business. They reflect the overall expenses incurred to produce a given level of output. Total costs provide a comprehensive view of your business’s financial health and represent the minimum revenue required to cover all expenses and achieve break-even. By understanding total costs, businesses can assess their pricing strategies, production levels, and overall cost structure to optimise profitability. Total costs represent the sum of fixed costs and variable costs (TC = FC + VC). Selling Price (SP) The Selling Price (SP) is the amount of money at which a good or service is sold to customers. It represents the revenue generated from each unit of product sold. The selling price is determined by several factors, including production costs, market demand, competition, and desired profit margins. In break-even analysis, the selling price is a crucial variable as it directly influences the revenue generated by a business. By analysing the relationship between the selling price and the cost structure of the business, companies can determine the level of sales required to cover expenses and achieve profitability. Setting an appropriate selling price is essential for maximising revenue while remaining competitive in the market. Contribution Margin (CM) Contribution Margin (CM) is a key financial metric that represents the amount of money earned per unit of product sold, which contributes to covering fixed costs and generating profit. It is calculated by subtracting the variable costs per unit (VC) from the selling price per unit (SP). The contribution margin reflects the portion of revenue available to cover fixed costs and contribute to profit after accounting for variable costs. It represents the excess revenue available to the business beyond variable costs. In break-even analysis, the contribution margin is a critical factor for determining the profitability of each unit sold and assessing the overall financial health of the business. By calculating the contribution margin, companies can evaluate the impact of pricing decisions, cost structure changes, and sales volume fluctuations on their profitability. Maximising the contribution margin allows businesses to cover fixed costs more efficiently and increase profitability. The contribution margin represents the amount of money earned per unit of product sold that contributes to covering fixed costs and generating profit (CM = SP – VC). Break-Even Point (BEP) Formulas Two primary formulas are used to calculate the break-even point. Units: BEP (Units) = Fixed Costs (FC) / Contribution Margin (CM) Revenue: BEP (Revenue) = Fixed Costs (FC) / (Selling Price (SP) – Variable Cost per Unit) Because both denominators speak to the same metric, both formulas give you the same measure of your Break-Even Point (BEP). APPLICATIONS OF BREAK-EVEN ANALYSIS Pricing Strategies Break-even analysis provides businesses with valuable insights into the relationship between pricing decisions and profitability. By analysing the impact of

I wouldn’t call this an opinion piece since it excludes my personal opinions. Also, the story is still unfolding. I am just writing about the events so far and presenting facts to help my audience create their unique perspective. Suppose this Legislative Instrument on cement pricing in Ghana comes to fruition. In that case, it will set an important precedent for many others that could follow within many other sectors in the coming years. That affects you reading this right now, and it also affects me. So, we need to know and comprehend what is currently unravelling. RECENT EVENTS The cement price in Ghana has seen unprecedented fluctuations in recent years, prompting the government to introduce new regulations. As one of the primary materials in construction, the cost of cement significantly impacts the overall expenses for both public and private sector projects. These price changes have posed considerable challenges for construction companies, real estate developers, and consumers, creating a ripple effect across the economy. In response to these issues, the Minister of Trade and Industry, Hon Kobina Tahir Hammond (MP), has presented the Ghana Standards Authority (Pricing of Cement) Regulations 2024 in Parliament. This new Legislative Instrument (LI) seeks to monitor and regulate the price of cement by focusing on price reporting to a Committee.  The nine-member Committee was inaugurated in Accra on 5th April 2024, in line with LI 2480, ahead of introducing this new LI, and is chaired by Professor Alex Dodoo of the Ghana Standards Authority (GSA). It includes representatives from various governmental and industrial bodies, such as the Ministry of Trade and Industry, Ministry of Environment, Science, Technology, and Innovation, Environmental Protection Agency, Ghana Institution of Engineering, Association of Ghana Industries, Chamber of Cement Manufacturers of Ghana, and an expert in cement production nominated by the Minister. Mr Hammond said, “For a long time, we haven’t seen cement prices de-escalating. It is always escalating. I think there is something fundamentally wrong with the pricing of cement in the country.” He indicates that the regulation is not intended to dictate the price of cement; its purpose is to monitor and fairly regulate the price of cement. The move is touted as a proactive step to stabilise the market, promote transparency, and foster sustainable growth in the construction industry. The measure is to become law following a 21-day sitting period in Parliament. However, the Speaker of Parliament, Alban Bagbin, has advised Minister of Trade and Industry, Mr K.T. Hammond, to withdraw the Legislative Instrument (L.I.) on cement price regulation, following constitutional concerns raised by former Minority Leader Haruna Iddrisu. A HISTORICAL PERSPECTIVE OF CEMENT PRICING IN GHANA Ghana’s construction industry has long been a crucial driver of the country’s economic growth, with cement serving as a fundamental building material. However, cement pricing has been a subject of ongoing discussion and concern over the years. We delve into the historical trends and factors influencing cement prices in Ghana, drawing insights from various industry reports and academic sources, as well as facts from recent events. Cement Production and Imports Ghana’s cement industry has a rich history, with the establishment of the country’s first cement factory, Ghacem, in 1967 (Ghacem, 2023). Over the decades, the industry has evolved, with the introduction of additional local producers and the increasing reliance on cement imports to meet the growing demand. According to data from the Ghana Statistical Service, cement production in Ghana has fluctuated over the years, with domestic production accounting for a significant portion of the overall supply (Ghana Statistical Service, 2022). However, the country has also relied on cement imports to bridge the gap between demand and local production capacity, particularly during periods of high construction activity. Factors Influencing Cement Prices Cement pricing in Ghana has been influenced by a combination of factors, including production costs, transportation expenses, market dynamics, exchange rates and government policies. 1. Production Costs: The cost of raw materials, energy, and labour has been a key driver of cement prices in Ghana. Fluctuations in the prices of these inputs can directly impact the cost of cement production, leading to corresponding changes in the prices of the final product. 2. Transportation Costs: The logistics of moving cement from production facilities to distribution centres and construction sites have also significantly influenced cement pricing. Factors such as fuel prices, infrastructure conditions, and transportation distances can significantly influence the overall cost of cement delivery. 3. Market Dynamics: The supply-demand balance in the cement market has been a crucial factor in determining prices. During periods of high construction activity and increased demand, cement prices have tended to rise, while periods of lower demand have often led to more stable or even declining prices. 4. Government Policies: The Ghanaian government has sometimes intervened in the cement market through various policies and regulations. These interventions have aimed to stabilise prices, promote fair competition, and ensure the availability of cement for the construction industry (Ministry of Trade and Industry, 2021). Historical Cement Price Trends Analysing data from the Ghana Statistical Service and industry reports, the historical trends in cement prices in Ghana can be observed: INDUSTRIES IN GHANA IMPACTED BY CEMENT PRICE CHANGES The construction industry is undoubtedly Ghana’s primary consumer of cement, but the impact of cement price fluctuations extends beyond this sector, affecting a range of industries across the Ghanaian economy. Construction Sector Cement is one of the core building materials essential for the construction of residential, commercial, and infrastructure projects. According to a report by the Ghana Statistical Service, the construction sector accounts for over 10% of Ghana’s GDP, significantly contributing to the country’s economic growth (Ghana Statistical Service, 2022). Cement price changes directly impact the overall costs and profitability of construction companies, real estate developers, and infrastructure projects. Manufacturing Industry Ghana’s manufacturing sector also relies heavily on cement to produce various construction-related products, such as concrete blocks, bricks, and pre-cast elements. The Ghana Investment Promotion Centre (GIPC) reports that the manufacturing industry contributes around 11% to Ghana’s GDP, with construction materials being a key subsector (GIPC,