According to data on producer price trends issued by the Ghana Statistical Service on Wednesday, July prices of manufactured goods stood at 40.3 percent more than a year ago, showing how multiple economic 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 in the data, 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.
Manufacturers of refined petroleum products, such as the Tema Oil Refinery, saw the biggest increase of 77.3 percent in price during the 12 months to July 2014. Producers of food products and beverages boosted their prices over the same period by 32.6 percent.
Producers in the printing industry raised their prices by 21.2 percent, while textile manufacturers increased prices by about 7 percent –one of the lowest among all manufacturers and probably due to fear of further losing ground to cheaper imported textile products.
According to Nana Osei-Bonsu, chief executive of the Private Enterprises Federation, the rapidly-rising cost of operations is the major challenge confronting companies currently, with most of the pressures coming from the fall in the value of the cedi.
The currency has lost close to 30 percent of its value against the dollar in 2014 based on official Bank of Ghana data – but other quotations show that the currency has fallen by about 40 percent against the greenback in the year.
Shoring-up the central bank’s foreign currency reserves to stem the cedi’s depreciation is perhaps the most urgent intervention needed now to stabilise the situation, Nana Osei-Bonsu said.
Business leaders have been saying throughout the year that the mood among companies is very depressive because economic conditions seem to be getting worse rather than better.
At the beginning of August, 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, its report revealed.
Businesses ranked the steep depreciation of the cedi as their number-one challenge, followed by the defective power situation and the multiplicity of taxes imposed on them as the government tries to increase revenues to close a yawning fiscal gap.
“With the rising cost of doing business, businesses risk shutting down if the trend continues,” said a communiqué issued by the Economic Affairs Committee of the AGI, which met over the alarming results of the survey.
“The present economic conditions are not conducive enough to attract the local and foreign investments which could generate much-needed employment. AGI believes the restoration of macro-economic stability is central to Ghana’s economic recovery,” it added.
The business lobby also endorsed the government’s turn to the IMF for assistance, calling it “the only option left”.