The year 2014 was arguably one of the most difficult for businesses in Ghana. Even President John Mahama admitted that.
The Cedi depreciated by about 30% against the major trading currencies. The economy took a nose dive, the prices for foods, goods and services increased by about 17%, mixed with erratic power supply. The international lending community and rating agencies started losing confidence in the country.
Government did the obvious, resorted to the International Monetary Fund (IMF) for bailout talks just to calm down the international markets. But during all that confusion, the Ghanaian businesses suffered the most, especially from the first to third quarters of 2014.
Top 10 Challenges facing business
1. Erratic Power Supply – No brainer. Industry has been struggling to deal with this problem for years. Even government hasn’t figured it out yet. Most of the businesses have resorted to using generating sets. That also means increased cost of production. Some of them have passed on the cost to consumers. Others have absorbed the cost till they can’t it anymore. However, some businesses have laid workers off to remain in business. The CEOs said they don’t have confidence in the load shedding time table, published by the Electricity Company of Ghana, which is making planning difficult.
2. Access to credit – This has been an age long battle for Ghanaian businesses, especially SMEs and financial institutions. Medium to long term credit facilities are hardly available for most manufacturers.
3. Cedi Depreciation/Exchange – It is rather interesting that at the end of 2014, the issue about the value of the Cedi ranked 3rd, especially considering how devastating it’s effect was on different sectors of the economy. Perhaps the government deserves some credit for putting in measures that eventually slowed down the rate of depreciation.
4. Delayed Payments – Government is the largest employer and a big player in the economy. Major Construction projects are means to create employment and pump money into the economy. But Governments fiscal stress has led to delayed payments to contractors and businesses. This ultimately leads to high interest rates on loans secured by these businesses due to defaults in payments.
5. High Cost of Electricity – Power is not even available readily. Yet very expensive for industry. According to industry watchers, Ghana is one of the countries whose industry pay more for power despite the key employment-creation role it place.
6. High cost of credit – Cost of borrowing is just not attractive, especially when in some instances, they are competing with government. The financial institutions prefer to lend to government, rather than to business for a simple reason. When you lend to government it is risk free. Ghana has one of the highest interest rates in the world, with commercial banks charging close to 30% per annum and micro finance institutions charging more than 70% per annum.
7. Unfair competition on markets – This issue may simply not go away until the Ministry of Trade and Industry is able to walk the talk. There are lots of foreigners operating in sectors reserved for just Ghanaians, as stipulated by law. The Ministry has promised to deal with it but nothing concrete yet. Again, issue of dumping is still lingering. Cheap imports from China are still flooding the Ghanaian market, killing local industries.
8. Labour costs – The poor economic fundamentals meant high inflation rate and high cost of living. This translated into labour agitations for salary increases resulting in several strikse and low productivity. Ultimately affecting revenue generation and the company’s capacity to pay workers incremental salaries.
9. Multiplicity of taxes – Multiplicity of taxes, which hitherto ranked among the top three challenges previous quarters dropped to 9th, in quarter 4.
10. Excessive port charges – According to the AGI, importers felt more frustrated in quarter 4 doing business at the ports, as they have had to pay excessive port charges.
Again, the Ghanaian “magical” economic management skills showed. But in the midst of all the seeming gloom and the negativity, business confidence actually soured among industry, according to the Association of Ghana Industries (AGI) Business Barometer Report for the 4th quarter of 2014.+
The challenges that saddled the economy for quarter 1 2014 impacted negatively on business confidence until quarter 3 when signs of recovery became evident, reflecting a modest surge in business confidence.
Overall perception of business performance: About one-in- three Chief Executive Officers rated the 4th quarter as better than the third.
Why the confidence? – The forex situation improved marginally.
34% of these CEOs also thought regardless of this, quarter 3 was better. 73% of this 34% believe the erratic power supply and unfavourable conditions for doing business impacted negatively on the 4th quarter.
By: Nana Boakye-Yiadom/citifmonline.com/Ghana