Plastic Industry Faces Big Threat
The country’s plastic industry is facing unfair competition that is threatening its collapse unless policies are fashioned out quickly to salvage the industry.
The bane of the industry is a taxation regime which tends to motivate the importation of finished plastics and rubber products as it makes the prices of locally produced ones higher than their imported rivals, industry players have said.
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Currently, while raw materials attract an import duty of 10 per cent, imported finished products attract 20 per cent.
In addition to other costs incurred in manufacturing, the locally produced ones end up being noncompetitive compared to the imported ones.
The plastic packaging industry has a direct linkage to the manufacturing industry which relies on most of their finished products for packaging such as plastic bottles, jars, containers, closures, films & flexible and as well as Poly Proplene Woven sacks.
One of the companies that is seriously affected is the Poly Group of companies, which has been operating in the country for 40 years.
The Daily Graphic has learnt that the group has of late been digging deep into its reserves to finance its operations.
Options opened to the group include turning its facilities into a trading and distribution venture or relocating its manufacturing facilities to a neighboring country, preferably Nigeria, and thus send out the 1,600 direct employees of the company and also render another 2,000 indirect workers redundant.
The Executive Director of the company, Mr Ashok Mohinani, said that the company was hoping for an improved environment until the first quarter of next year.
He said if conditions did not improve, the company would look at other options, which may include relocating to neighboring Nigeria where duties on raw material were extremely lower and imports of plastic finished goods or products into the country were also banned.
Mr Mohinani said the 10 per cent spread between imported raw material and finished products was not significant to make local production competitive and that the government should act promptly.
The 10 per cent spread in tariff comes in the wake of increased imports from economies with higher economies of scale such as China and some Far Eastern countries that flood the Ghanaian market daily.
"Industrialisation is important and we should protect it through policy initiatives. If the policies remain the same, they will remain a threat to the industry," Mr Mohinani stated.
He said high overhead costs in the country coupled with other structural difficulties created a lot of hidden costs of doing business that conspired to make local products uncompetitive.
Issues of concession on imported finished plastic goods where an importer brought in semi finished but declared it as raw material made the situation from bad to worse.
"We are the first in the industry but we have reached a crossroad where we have to rethink or look elsewhere," he said.
He added that the company's raw material base which was petrochemical bi-products had risen by 52 per cent in the last one-and-a-half years, but the company had increased its prices only between seven and twelve per cent this year.
One of the company's units, Poly Kraft, the leading manufacturers of corrugated carton boxes, had slowed down since pineapple exporters, one of its major customers, were granted a VAT waiver to import such cartons into the country, Mr Mohinani said.
Although the pineapple exporters were also entitled to VAT refunds when they bought from the local market, such refunds took a longer time to be received and the exporters preferred to import, he added.
The Poly Group of companies controls a substantial share of the plastic packaging industry, supplying for most of all the small-, medium- to large-scale companies, such as the water companies, pineapple and yams, breweries, pharmaceutical, food and beverage, agro food processing, oil marketing companies and has provided timely packaging solutions to a lot of companies in the country.
The Group is made up of Poly Products, which produces films and flexibles, Poly Sacks produces Poly Proplene Woven sacks for rice, maize, sugar and salt, Poly Tanks produces overhead water tanks, dust bins among others, while Poly Kraft produces paper carton boxes for the local and export markets.
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The Daily Graphic has also learnt that some Free Zone companies brought in the plastic raw material but instead of adding value and re-exporting 70 per cent, they rather sell the raw material to smaller plastic manufacturing companies at extremely low prices than the correct market price which tend to undercut the market.
But the Deputy Chief Industrial Promotions Officer of the Ministry of Trade, Industry, Private Sector Development and PSI, Mr Issah Nicabs, disagreed that the conditions in the industry were not favourable, saying “it will not have been able to attract the about 80 companies that operate in that sector”.
He said however that the government was implementing a number of measures aimed at promoting industries in general in the country.
According to Mr Nicabs, after the forum with the private sector, the ministry had started meeting the representatives of some industries to factor in their concerns into the 2007 budget.
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Mr Nicabs added that as part of the Trade Sector Support Programme (TSSP), the ministry was conducting a general study on the effects of tariffs on industrial concerns.
The sector minister, Mr Alan Kyerematen, said he would meet with representatives from the plastic industry, particularly those worse affected to find a lasting solution to the condition.