Ghana Chamber Of Commerce And Industry Bemoans The Rising Cost Of Production In Ghana
The Ghana Chamber of Commerce and Industry has observed with grave concern, the rising Producer Price Index (PPI) and its attendant effects on industry in the country. The Producer Price Index measures average changes in the costs of production over specified period of time. The data from the Ghana Statistical Service for the month of July 2014 indicate that the PPI rose by 47.4 percent, compared to July 2013. Between June 2014 and July 2014, the rate of inflation increased by 10.2 percent.
These are very steep increases in production costs for our members, who are already reeling under unfavourable local business environment. The situation makes domestic production and domestic industry uncompetitive relative to imported products. The Chamber believes this situation has the potential to worsen the country’s balance of trade.
The rising import bills that have already resulted in large and growing trade deficit have been the direct consequence of economic policy regimes that seem to penalize domestic production and make imports super lucrative. The implications for employment in particular and overall national development are obvious.
Indeed, our excessive consumption of imported goods has been cited as one of the main reasons behind the rapid depreciation of the local currency. The President, H.E John Dramani Mahama, in his recent statement has called on all Ghanaians to patronize made-in-Ghana goods. However, this laudable call will be an illusion if local industries cannot produce to meet local demand due to rising cost of production as reflected in the Producer Price Index. Businesses in Ghana have had to deal with rising costs of doing business resulting from depreciation of the Ghana Cedi, high interest rates, multiple taxes amongst other factors.
Ghana cannot hope to build strong industrial base when the business environment continues to deteriorate and production cost hit the roof. There is urgent need to lighten the burden on domestic industry. There are important lessons to be learnt from countries that have made the transition from primary commodity production into industrial value added. The lesson from such countries is clear: domestic industries that are considered strategic to national development including employment generation need to be supported, protected and nurtured into maturity. Such industries did not become strong by being thrown into the situation of unbridled and unsustainable competition.
There is urgent need to arrest the rising costs of production to avert a collapse of domestic industry. There is a lot that government can do to help; working with the industry players across the board. A key area of concern and focus is the utilities subsector. The high and rising costs of utilities are certainly feeding into the rising cost of production for all other industries. And as a country, we are already aware of the factors driving the rise in the cost of utilities. What is needed is the political will to address the deficiencies in that sector to bring relief to both industry and households.
There are other aspects of the business environment including the tax rate and its administration that requires constant and structured interactions between government and industry to address. The GCCI uses this opportunity to invite government to a dialogue on these and many other issues that are inimical to the industrial base of the country. The sentiment of the business community isn’t encouraging and confidence is sagging. Failing to act could be catastrophic.
The Chamber, therefore calls on government and all and sundry to put hands on deck to mitigate the situation as swift as possible.
Dr. Seth Adjei Baah
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