Businesses skeptical about power improvement

Members of the Ghana National Chamber of Commerce (GNCC) have raised concerns about the present improvement in power in the country.

The concerns, which bordered on a five-year-long power crisis that had led to the shutdown of a number of businesses across the country, dominated the discussion of members of the chamber at its 40th Annual General Meeting (AGM) in Accra.

Most of the members that participated in the AGM stated clearly their displeasure about the way and manner in which the energy crises was being handled by the government.

The out-going president, Mr Seth Adjei-Baah, in an interview with the GRAPHIC BUSINESS indicated that the manufacturing sub-sector over the 2013 and 2014 suffered a negative growth of 0.5 per cent and 0.8 per cent respectively.

“This negative growth, was due to the power crisis which has plagued the country over the past five years,” he said.

He said the energy crisis had resulted in businesses cutting down production, folding up and laying off workers which had further worsened the already precarious unemployment situation in the country.

According to him, businesses which had survived the hardship had to look for alternative sources of energy at exorbitant prices which largely rendered most of them uncompetitive and unprofitable.

“Although the private sector have seen an improvement, we are not enthused about the way energy crisis had been handled as it had lingered on for far too long, worsening the plight of business,” he noted.  

Cedi depreciation

He stated that the local currency over the period under consideration performed abysmally against the major international trading currencies such as the dollar, euro, and the pounds sterling.

Again, he said, the private sector had to grapple with the rapid depreciation of the cedi for several months until it began to show signs of stabilisation in 2014.

“In 2014, the Ghanaian cedi depreciated by 31.2 per cent, 29.3 per cent and 23.6 per cent against the US dollar, the pound and the euro respectively,” he said.

High interest rate

The president noted that the high volatility in the foreign exchange market made it extremely difficult for businesses operating in the country to plan.

“Clearly, the inability of the cedi to withstand the major trading currencies was due to the country’s excessive imports against exports. This structural problem which must be addressed immediately requires the collaborative effort between the government and the private sector,” he added.

He said high interest rate had also been a significant concern for businesses in Ghana. Indeed, the World Bank Doing Business and Enterprise Survey on Business Environment Constraint indicated that access to affordable credit was a major challenge inhibiting business growth in Ghana.

The Bank of Ghana Policy Rate was reviewed upward from 16 per cent in 2013 to 21 in 2014. Interest rates in the country generally followed the upward trend in the policy rate.

The 91-day treasury bill rate increased from 23.1 per cent in 2013, to 25.8 per cent at the end of 2014. Lending rates in Ghana ranged between 27 per cent and 35 per cent which was ranked among the highest lending rates in the world.

He said the high interest rates recorded in the last two years was partly fuelled by government’s excessive borrowing from the domestic market, thereby crowding out the private sector.

The rate of inflation, which stood at 13.5 per cent in 2013 went up to 17 per cent in 2014, the rise Mr Adjei-Baah said, was as a result of the depreciation of the local currency as well as the effects of the utility and fuel price adjustments.

Economic performance

Touching on the performance of various sectors of the economy, the Chief Executive Officer (CEO) of the chamber, Mr Mark Badu-Aboagye, said the country’s Gross Domestic Product (GDP) growth rate in 2013 was 7.3 per cent but reduced to 4.2 per cent in 2014.

“The difficulties the country experienced in 2013 and 2014 reflected in the performance of the various sectors of the economy,” he said.

The service sector continues to be the lead sector to GDP growth followed by the industrial sector and the agricultural sector in 2013 and 2014.

Whereas the service sector in 2013 and 2014 grew from 49.8 per cent to 51.9 per cent, industry and agriculture sectors recorded a downward movement from 27.8 per cent to 26.6 per cent and 22.4 per cent to 21.5 per cent respectively.

Outlook

The outgoing president said in the midst of the challenges, the private sector stood as a major anchor of socio-economic development in the country.

Moving forward, he said, the economic activities were expected to pick-up once the energy challenges were fully addressed and appropriate monetary and fiscal policies were put in place to stabilise the local currency. — GB