18 Levies choke food, beverage firms

The food and beverage sub-sector of the economy is facing acute challenges that are crippling the businesses of operators in the sub-sector.

Companies such as UNILEVER, Nestle, Olam, Guinness Ghana Breweries, Coca-Cola and Wilmar Africa that produce locally and also import finished and semi-finished products are faced with 18 different levies and charges at the ports, aside from the general taxes and fees that they pay to shipping lines and other private institutions to facilitate their trade.

The taxes include 20 per cent import duty, 12.5 per cent each of import value added tax (VAT) and National Health Insurance Levy (NHIL), 0.5 per cent ECOWAS Levy, two per cent special import levy (SIL), 0.4 per cent and 12.5 per cent network charge and network charge VAT, respectively, and 0.2 per cent African Union Import Levy.

The companies are also faced with general taxes such as the COVID-19 Levy, the sanitation and pollution levy (SPL), the financial sector recovery levy, among others.

The enormous tax burden on operators in the sub-sector, coupled with the rising cost of shipping and other operational expenses, has affected the ability of the companies to operate at optimal capacity, leading to some of them folding up, while others have relocated part of their operations to neighbouring countries where they say conditions are relatively better.

It has also weakened their ability to create and sustain jobs, as well as expand and contribute to national development through moderate prices for increased consumption and higher revenue generation.

Implications

The Executive Secretary of the Food and Beverages Association of Ghana (FBAG), Mr Samuel Aggrey, told the Daily Graphic that efforts to seek relief from the government and other regulatory agencies had failed, forcing the operators to occasionally pass on the cost to consumers through price increment, adding that the companies were mostly compelled to absorb the cost as well.

He, therefore, described efforts to reverse the discount policy on imports introduced in 2019, as well as the introduction of the E-Levy, as detrimental.

Mr Aggrey said those policies would drive players in the sector underground, and expressed surprise that many of the 37 items listed to be impacted by the discount reversal were food and beverages.

“We deal in essentials — food, water and drinks, and when the cost of operation is uncontrollable, right away the citizens feel it through prices, and that has a security implication. As it is now, the discount on the benchmark is the only cushion we have, and if that is taken off, then I can assure you that we will see further collapses, astronomical hikes in prices and the cost of living will worsen,” he said.

Mr Aggrey was speaking on the state of the food and beverage industry at a time businesses and the economy were recovering from the COVID-19 pandemic.

“What we are telling the government is that now is not the time to increase taxes or introduce new ones. In a COVID-19 era, especially when most companies are not breaking even, if you introduce new taxes, they will also increase prices and consumers who cannot afford will reduce their consumption.

“When that happens, companies suffer decline, consumption is reduced and that hurts the economic recovery effort,” he said.

According to him, if businesses in that sector were supported with good policies and incentives to operate optimally, it would keep prices stable, increase consumption and create more jobs, while reducing the cost of living.