The Ghana Chamber of Commerce and Industry has warned of “catastrophic” consequences if government fails to intervene to stem spiralling costs of production and declining confidence among businesses.
In a statement which tone underlined the growing impatience of companies with the lack of improvement in the economic situation, the chamber said it is gravely concerned about the rising Producer Price Index (PPI) and its ramifications on businesses.
July’s PPI, issued by the Ghana Statistical Service, showed that manufacturers have been raising their prices at the fastest pace in years in the wake of soaring utility bills, rising transport costs, and higher prices of raw materials.
Prices of manufactured goods stood at 40.3 percent more than a year ago during the month, showing how multiple challenges – including high taxes, expensive cost of credit, and rising input costs due to the cedi’s depreciation – threaten the competitiveness of domestic producers.
The data also showed that the cost of utilities jumped by 76.8 percent between July 2013-July 2014.
If mining sector prices are included, overall annual producer price inflation was 47.4 percent in July, the highest since January 2010 and up from 33.1 percent in June 2014. Between June and July this year alone, producer prices jumped by 10.2 percent.
“These are very steep increases in production costs for our members, who are already reeling under an unfavourable local business environment,” said the statement signed by Seth Adjei Baah, the chamber’s president.
“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.”
Dr. Baah called for an urgent dialogue with government, warning that “business confidence is sagging and failing to act could be catastrophic.”
Business leaders have been yelling throughout the year that the mood among companies is very depressive because economic conditions seem to be getting worse rather than better.
Last month, the Association of Ghana Industries, made up of 1,200 mostly small enterprises spread across all the main sectors of the economy, reported that business confidence among its members dropped to an all-time low during the second quarter of the year.
The association’s key business confidence index fell from 90.13 in the first quarter to 22.42 in the second quarter.
Businesses ranked the steep depreciation of the cedi – about 30 percent against the dollar this year – as their number-one challenge. Other worries were the defective power situation and the multiplicity of taxes imposed on them as the government tries to increase revenues to close a fiscal gap that has been above 10 percent of GDP since 2012.
Dr. Baah said there is an urgent need to lighten the burden on industry as the implications for employment and national development cannot be played down.
“Domestic industries that are considered strategic to national development and employment generation need to be supported, protected and nurtured into maturity.
“Ghana cannot hope to build a strong industrial base when the business environment continues to deteriorate and production costs hit the roof. There are important lessons to be learnt from countries that have made the transition from primary commodity production into industrial value-added (production).”
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