Alcohol, Meat Imports killing Ghana Cedi
The heavy importation of meat and meat offal (such as liver, intestines and stomach of ruminants or ‘yem adie’ as known in the local parlance), alcoholic beverages and cereals among other things, has been identified among the 10 major items which are seriously affecting the strength of the cedi against the major foreign currencies in the country.
Other products include animal/vegetable oil, fish and other aquatic products, including tilapia as well as iron and steel.
These are what businesses and individuals spend the country’s hard earned foreign currency on, importing assortment of non-oil items, a good chunk of which can be produced locally with minimal investment and seriousness.
For instance, statistics available to the paper indicate that last year alone a whopping GH¢998.8 million was spent on importing cereals, predominantly various types of rice and wheat to feed flour mills.
More than GH¢1 billion was spent importing mining equipment and about GH¢700 million on importing telecom equipment. The list also includes vehicles and accessories, which according to sources within the Ghana Revenue Authority (GRA), actually contributes the highest to custom duties.
Plastics, mainly poly products and intermediaries (granules), consumed more than GH¢300 million.
Market watchers are even more worried that the wide range of the country’s imports includes very petty articles that the country could find local substitutes for or do without. These include catapult, toothpick, fruit juice, fish, meat and other agro-based products that the country can prop up its local industries to produce.
Top 10 importers
The GRAPHIC BUSINESS search also indicated that some of the top 10 importers of cereals, predominantly rice and wheat for flour mills, are Olam Ghana; Continental Commodity Trading Company (CCTC) and Market Direct, both members of the Finatrade Group; Stallion Industries; Royal Bow; Takoradi Flour Mill, and Irani Brothers.
Others are Winpec Ghana, Supreme Rice; Forewin Ghana Ltd as well as SNJ Investments.
The rest are Caitec Ltd; telecom companies, primarily due to their equipment imports; Ghana Gas because of the equipment for the gas processing plant; and mining companies.
Interestingly, besides vehicles, spare parts and other durable goods, Ghana can partially or completely produce locally some of the imports on which the Bank of Ghana has to make available hard-earned foreign currency at the disposal of those importers.
In the next couple of weeks, the central bank has hinted it will be pumping in several millions of dollars a week to meet commercial banks’ outstanding requests for close to a billion dollars.
Impact on economy
Govt revenue: The government gets revenue from imports, with some durable goods, such as cars, attracting very high duties.
Statistics available from the GRA indicate that out of the total of GH¢4.8 billion in revenue that accrued from custom duties, more than half came from the top 10.
Vehicles topped that chart contributing about GH¢1 billion to government revenues from duties, followed by cereals (rice) with more than GH¢350 million; electrical equipment and appliances imports raked in GH¢270 million; meat and offal (yem adie) contributed above GH¢180 million to revenues from duties, while beverages and spirits raked in about GH¢190 million to the country’s revenues from duties, the GRA source said.
However, the wanton importation of such products has two main negative effects on the local economy, namely unemployment and shortage of foreign exchange which puts pressure on the local currency to depreciate in value.
Agriculture: First, imports hurt sectors of the economy, particularly the rice and poultry sectors where thousands of jobs could have been created and used to boost economic growth and development.
The country’s agricultural sector has been performing poorly in the last four years. Out of the over GH¢745 million, the Ministry of Food and Agriculture asked to prosecute its plans and programmes for 2013, only GH¢292 million, representing 39 per cent of its planned budget, was approved in the 2013 Budget Statement and Economic Policy of the government.
The underfunding, which has remained the same in recent years, has led to the under performance of the agricultural sector of the economy.
The agric sector ceased to be the largest contributor to the country’s productivity index or gross domestic product (GDP), losing its stellar place to the services sector, dominated by Information and Communications Technology (ICT), which now contributes about 50 per cent according to the 2012 GDP releases.
Agriculture, which contributes about 23 per cent to GDP, grew by 3.4 per cent last year against a target of 4.9 per cent; 1.3 per cent in 2012, against a target of 4.8 per cent and 0.8 per cent in 2011. In 2010, the sector grew by 4.8 per cent against a target of 6.0 per cent. The agricultural sector grew by 6.2 per cent in 2009, against a target of 5.7 per cent.
The 0.8 per cent growth of the agricultural sector, the lowest in decades, compares unfavourably with industry’s 7.0 per cent growth rate and services’ 10.2 per cent growth rate.
The service sector remains the largest with a share of 50 per cent of GDP, followed by industry (27.3 per cent) and Agriculture 22 per cent.
Some of the agric sub-sectors such as fishing recorded a negative growth of 8.7 per cent in 2011 and 2.3 per cent in 2012.
Agriculture’s share of employment has also reduced from over 60 per cent before year 2000 to 37.3 per cent as recorded in the 2010 Population and Housing Census.
Poultry producers have for long complained about the unbridled importation of poultry products which they could produce, when adequately financed.
A thriving poultry industry will promote the production of cereals such as maize for feed production and hence can absorb a lot of the youth into commercial agriculture.
Current account and the cedi: Secondly, the wanton importation of such products for which substitutes could be found, put pressure on the country’s current account and eventually leads to a depreciation of the cedi.
Being the account in which the country’s export inflows and outflows from imports are recorded, a deficit means Ghana will always require more dollars to support its imports. This means there will be less dollars available to meet higher demand, thus, the value of the cedi will depreciate.
Last year, the country spent US$1.2 billion more to import than what it received from its exports and inward transfers.
The current account deficit for last year was 12.3 per cent expressed in terms of the value of goods and services produced within the country (GDP), slightly higher than the 12.1 per cent recorded in 2012, the Bank of Ghana reports.
This led to a decline of 14.6 per cent in the value of the cedi last year and at a much faster rate of 7.8 per cent in January 2014 alone, compared to the 0.2 per cent decline in the cedi’s value for the same period in 2013.
Several analysts, experts and economic commentators, such as Mr Alhassan Andani of Stanbic bank, Mr Kwami Pianim, an economist and Mr Sidney Casely-Hayford have all commented on the way forward and converged on the fact that exports have to be increased and industries that can generate foreign exchange should be propped up.
They stress the importance for the country to look at imports for which there are local substitutes. Agriculture, which employs a great chunk of the country’s population, comes in handy. Productivity in agric should improve for all crops and sub-sectors.
Secondly, the analysts have suggested serious agro-processing to check post-harvest losses and ensure food security as an important area to reduce the importation of substitutes.
It would also important for the country to be bold and bank certain imports and rally local manufacturers to fill the gap, just as neighbouring Nigeria has done with rice, fruit juices, poultry and poly products and a few items, which it now produces locally.
The country has very little to export and the few are predominantly unprocessed raw materials. The main exports are gold, cocoa, bauxite and manganese, timber, non-traditional exports (NTEs) and now oil, which adds only a little for now. Adding value to our raw materials should therefore be taken seriously, the analysts agree.