BEING TEXT OF APRESENTATION BY MRS FLORENCE SERIKI,

MANAGING DIRECTOR,OMATEK COMPUTERS(GHANA) LIMITED

AT A WORKSHOP ON THE DEVELOPMENT AT A WORKSHOP ON THE DEVELOPMENT & IMPLEMENTATION OF A NATIONAL BROADBAND STRATEGY FOR GHANA

INTRODUCTION TODAY, GLOBALIZATION AND RAPID TECHNOLOGICAL CHANGE HAVE

MADE KNOWLEDGE A CRITICAL DETERMINANT OF COMPETITIVENESS IN THE WORLD ECONOMY.

WITH GLOBALIZATION, THE INFORMATION REVOLUTION, AND INCREASING DEMANDS FOR A HIGHLY SKILLED WORK FORCE, IT IS CLEAR THAT NATIONS MUST ACCORD HIGH PRIORITY TO BUILDING THE CAPACITY TO EFFECTIVELY UTILIZE TECHNOLOGY IN EVERYDAY LIVING.

THE EFFECTIVE UTILIZATION OF NEW INFORMATION AND COMMUNICATION TECHNOLOGIES WOULD HELP TO MEET THE GROWING NEED FOR A MORE SOPHISTICATED LABOR FORCE, MANAGE INFORMATION SYSTEMS, AND CONTRIBUTE TO POVERTY REDUCTION AROUND THE WORLD

I THANK THE PEOPLE AND GOVERNMENT OF GHANA FOR GIVING ME THE OPPORTUNITY TO CONTRIBUTE TOWARDS THE NATIONAL IT POLICY FORMULATION

ICT STATUS BEFORE 1992

UP TO 1992,KEY COMPUTER BUYERS INAFRICA WERE BANKS/OIL&GAS SECTOR

THEY WERE BUYING ONLY FINISHED PRODUCTS – MAINLY COMPAQ & IBM.ONLY CHEVRON WAS BUYING APPLE MACINTOSH

THE OIL & GAS SECTOR WERE BUYING ONLY FROM THEIR OFF SHORE THE OIL & GAS SECTOR WERE BUYING ONLY FROM THEIR OFF SHORE COMPANIES

THEREFORE THERE WAS NO OPPORTUNITY FOR AFRICANS TO SELL TO THE OIL SECTOR

ICT STATUS BETWEEN 1992-2002

BY 1992,SOME OF US WERE LOOKING FOR THE OPPORTUNITY TO DO BUSINESS WITH THE BANKS AND THE OIL & GAS SECTOR

IT WAS DIFFICULT FOR THE BANKS TO BUY DIRECTLY FROM THE LIKES OF COMPAQ BECAUSE OF LOW VOLUME

IT WAS THEN I TOOK THE ADVANTAGE OF BEING A CHEMICAL ENGINEER TO APPROACH THE THEN GM TECHNICAL AT THE NATIONAL TO APPROACH THE THEN GM TECHNICAL AT THE NATIONAL PETROLEUM INVESTMENT MANAGEMENT SERVICES (NAPIMS) AND THE JOINT VENTURE MANAGER.

WE PRESENTED OUR CASE TO THEM AND THEY TOOK IT AS A JOINT VENTURE ISSUE

THUS WE GOT SOME CONCESSION FOR OIL COMPANIES TO DO BUSINESS WITH NIGERIANS THOUGH WE WERE REQUIRED TO HAVE OFF-SHORE AFFILIATES

THE OMATEK STORY

THE STORY AND ORIGIN OF OMATEK STARTED OVER 21 YEARS AGO WITH THE TRAINING OF BANK EXECUTIVES AND OIL COMPANY EXECUTIVES

I SAW AN APPARENT NEED TO CHAMPION THE USE AND APPLICATION OF ICT IN OUR DAY TO DAY LIVES

IN 1998,UPON GAINING THEIR TRUST AND CONFIDENCE THE IN 1998,UPON GAINING THEIR TRUST AND CONFIDENCE THE EXECUTIVES RELIED ON MY EXPERTISE TO SOURCE FOR THEIR PERSONAL COMPUTERS.

I THEN PROCEEDED TO BECOME A PREMIUM PARTNER FOR THE FOREMOST FOREIGN BRANDS IN THE LIKES OF COMPAQ, HP, IBM AND APPLE.

IN 1993, AFTER POSTING OVER $1MILLION IN REVENUE FROM SALES OF THESE BRANDS, OMATEK COMMENCED THE ASSEMBLY OF OMATEK BRAND OF COMPUTERS FROM SEMI KNOCKED DOWN (SKD) PARTS

THE OMATEK STORY cont’d

THE COMPANY FURTHER DIVERSIFIED ITS BASE AND COMMENCED THE PRODUCTION OF COMPUTERS AND OTHER COMPONENTS FROM COMPLETELY KNOCK DOWN (CKD) COMPONENTS

OMATEK IS THE FIRST FACTORY IN AFRICA TO PRODUCE COMPUTER CASINGS AND SPEAKERS FROM CKD, THE ASSEMBLING OF COMPUTERS AND NOTEBOOKS ALSO FROM CKD. AND NOTEBOOKS ALSO FROM CKD.

THE COMPANY LATER GRADUATED INTO BUYING COMPONENT PARTS FROM SEASONED FIRST CLASS MANUFACTURERS THAT PRODUCE FOR OTHER FOREIGN BRANDS.

TWINHEAD, A MAJOR PRODUCER OF NOTEBOOK PARTS PROVIDED THE BULK OF NOTEBOOK PARTS FOR THE FIRST SET OF LAPTOPS PRODUCED BY OMATEK.

THE COMPANY FURTHER GRADUATED TO BUYING FROM QUANTA WHO ALSO PRODUCE FOR THE NOTABLE BRANDS.

PC PRODUCTION AS A FUNCTION OF SUPPLY CHAIN MECHANISM

Individual PC’s consist of variable parts sourced from producers of these parts across the globe.

These parts are produced at various degrees of quality for various categories of Original Equipment Manufacturers (OEMs) with the high quality component parts being at the top of the ladder

An average producer will procure his raw materials from these sources after a detailed production planning session to determine the kind and quality of PC to produce.

Often times, cost of production will involve incidental costs arising from regulatory charges from country of export.

Cost of variable parts will also be influenced by the Minimum Order Quantity allowed for purchase.

MINIMUM ORDER QUANTITY• This represents the limit or purchasing volume required by the parts

factory to ensure production of the component required.

• MOQs vary from company to company and also as you climb up the quality ladder.

• For instance, the Mother Board Factory requires a Minimum Order Quantity of 10,000 units per month.

The bulk procurement of these parts also attract margins on discount for • The bulk procurement of these parts also attract margins on discount for purchases, especially taking into consideration the economics of scale determined by the manner of freight – while it costs an average of $35 to sea freight one M/B, same will cost an average of $60 by air freight.

• The demand locally for a company’s product will influence growth on production as well as growth in the quality grade to buy from. This will influence the overall cost of the finished goods when passed through the process of assembling.

SOME FACTORS THAT AFFECT PRODUCTION

1. Qualified and Competent Human Capital2. Availability of constant and affordable

Power supply.3. Access to cheap and long term funding.3. Access to cheap and long term funding.4. Strong regulatory framework to protect

industries and their investments.5. Tax and duties incentives .6. Policy inconsistency from the Government7. Innovation, Research and Development

Qualified And Competent Human Capital

•Under-supply of competent and qualified Computer Engineers.•Non-availability of trained and competent technicians for production.technicians for production.•Absence of a quality assurance framework.•Absence of clear ICT for the framework on manpower development and sustainable growth.

Availability of Constant and Affordable Power

•Sustained investment in power generation and distribution to ensure even access.•Explore use of alternative energy sources and create incentives for private sector and create incentives for private sector investment in power generation, transmission and distribution.•Encourage adoption of green power that will further enhance access to carbon credits.

Access to Cheap and Long Term Funds

•Dearth of knowledge on IT business cycle by financial institutions.•Absence of Project Management Approach towards lending and transaction cycle by financial institutions.lending and transaction cycle by financial institutions.•Unrealistic terms and conditions for lending to the sector.•Absence of funding a bane for the growth of SME’s in the sector.•Funding as catalyst for the emergence of local component production.

Strong Regulatory Framework to Protect Industries and their

Investments•Absence of laws and regulatory capacity to protect local production and even intellectual property.intellectual property.•Absence of laws to protect local market from the abuse of foreign goods.•Business regulation to ensure practitioners are experienced and capable “technopreneurs” that can engender change.

Taxes and Duty

• Motherboard (1 container; approx 10,000units) import charges including VAT paid approx Ghc 25,000.00 representing 34.5% of CIF

• Hard disk (10,000 units) Ghc 224,900.00; 34.5% of CIF

• Memory (10,000 units) Ghc 102,000.00; 34.5% of • Memory (10,000 units) Ghc 102,000.00; 34.5% of CIF

• Combo drive (10,000 units) Ghc 269,000.00; 34.5%

• This is just a fraction of the list of components •

The Import/Duty Tax Table

a. COST OF PRODUCT (FOB); C ( based on economies of scale)

b. Freight Fc. Insurance Id. Custom Duty 0% CIFd. Custom Duty 0% CIFe. Processing Fee 1% CIFf. Ecowas Levy 0.5% CIFg. Inspection Fee 0,5% CIFh. NET Charge 4% FOBi. VAT on NET Charges 15% of NETj. VAT 15% CIF

The Import/Duty Tax Table

k. IRS 1% CIFl. Export Dev. Levy 0.5% CIFm.. Electronic IDF fee GHc 7n. Ghana Shippers Council GHc 3.5o. Port Charges 20ft GHc 270o. Port Charges 20ft GHc 270

40ft GHc 380p. Handling Fee 20ft GHc 350

40ft GHc 500q.Transportation 20ft GHc 300

40ft GHc 450r. Agency fee 20ft GHc 145

40ft GHc 250TOTAL 34.5% OF CIF

Other Costs

• Local transport from port to warehouse• Local transport from warehouse to factory• Utility bills, electricity, water, etc• Salaries and other emoluments for factory staff• Salaries and other emoluments for factory staff• Rent • Warranty/ replacement costsWe can then imagine how much price reduction we

can pass on to the consumer if the tax component of 34.5% is reduced even by 15%!

Taxes and Duty Incentives• A mechanism to safeguard local production by

applying tax incentives and the reduction of VAT from 15% to 5% will be welcome especially in this sector.

• Import duty waiver(0%) for IT component goods that are CKD should be instituted to protect local production and also reduce cost of production. production and also reduce cost of production. This was done successfully in Nigeria to aid the growth of SME’s.

• Freight, handling costs should be reviewed while government can create incentives for local production like tax holidays, pioneer status

Government Policy on Computer Ownership

• Promotion of local initiatives to encourage PC ownership should be a matter of priority for government.

• Personal ownership encourages application as well as the hunger for further knowledge in IT. It also allows for information access via the net which helps to enhance IT information access via the net which helps to enhance IT efficiency across the workforce.

• Examine and institute a policy on local patronage to give locally produced IT components and hardware preferential purchase ratio over foreign brand.

• Increase duty and tax for import of finished or SKD components as against duty waiver for CKD and tax holiday for locally produced hardware.

Omatek Factory Initiative on Computer Ownership-eXpress

• Launched as part of the Government Assisted PC program (i-Advance)

• Own a PC and pay over a period of 12, 18 and 24 months• Secured a deduction code from the CAGD • Secured a deduction code from the CAGD • Secured funding for the scheme• Open to all Civil servants and public workers• Institutions and students can also take advantage and own

Computers• Promotion of e-learning on our campuses

Innovation, Research and Development

• Incentives to be introduced to encourage local adoption of research findings by the industries for commercial production.

• Companies to assist institutions with sponsorship • Companies to assist institutions with sponsorship and endowment for research and development purposes in the field of IT.

• Government to institute awards and national honours for achievers in the field of IT to ensure continuous research and innovation.

Pricing DiscussionPricing is a function of various componentsImport duty - weight, size & value of componentsOther taxes - VAT, clearing & agency Other taxes - VAT, clearing & agency chargesVolume advantageIf these are taken care of, prices can come down by 20% as demonstrated

Conclusion•Factors outlined above that affect production if carefully managed can drastically reduce the cost of PC ownership.

•Policy development in line with ICT4D initiatives will further place IT in the front burner of all other activities while ensuring gradual transformation of the real sector

Questions & Answers

THANK YOU