Majoring on minor matters, ignoring the essential

About a week ago, the Legislative Instrument (LI) to regulate the pricing of cement matured in Parliament and subsequently has become part of the existing laws in the country. 

This LI has generated controversy from the Cement Manufacturers Association of Ghana (CMAG). Other industry players have also waded in their opposition to regulation.

As a competition economist and consumer protection advocate, I do not endorse any measure that can lead to market distortions and create inefficiencies.  

Short vs long-term, unintended consequences

In the short term, consumers in the country may be able to see cement prices stabilising or plummeting because of the government's tsarist effort. However, the potential medium to long-term cost may outweigh the short-term benefit.

When a government intervenes in a deregulated market and comes with such a measure, it has the potential to scare industry players, as well as potential investors.

If care is not taken, the 14 cement companies in the country could be reduced to one or two. This can take us back to the antediluvian days of the GHACEM monopoly or the GHACEM-Diamond duopoly. The solution that the government is proposing should not be worse than the problem it intends to solve. 

Lessons, financial sector clean-up

I am sometimes worried about how regulations are crafted in this country, without ministries and agencies undertaking a robust Regulatory Impact Assessment (RIA) to understand the potential of any unintended consequences.

The financial sector clean-up ended with the decimation of indigenous banks and savings and loans limited from the banking landscape.

What have been the effects of the banking sector clean-up? Now, the majority of the high street banks in the country are owned by foreigners, and when they wire their profits and dividends in dollars back to Lagos and Johannesburg, the cedi bleeds heavily.

Everywhere in the world, standards authorities like the Ghana Standard Authority (GSA) set and enforce technical standards as contained in Act 1078. Nowhere in the world is a standard agency involved in price setting and price control.

The Cement Price Committee consists of six scientists headed by the Director General of the GSA, Professor Alex Dodoo.

Price regulations fall within the competencies of economists and mathematicians.

A careful reading of the Ghana Standards Authority Act 2022, Act 1078 makes me doubt whether the lawmakers conferred any mandate to the Minister to formulate a regulation to regulate cement prices.

The GSA (Pricing of Cement) Regulations derive its basis from paragraphs (f & r) of Section 80 of the GSA Act 1078.

The Section 80 preamble states: “The Minister shall, within six months after the coming into force of this Act and on the advice of the Board, by a legislative instrument, make regulation, (f): to govern the treatment, processing and manufacture of goods, the packaging, labelling, advertising and selling of goods and the size, dimensions and other specifications of packages of good”.

Paragraph (r): generally, for the effective implementation of this Act. Clearly, the rules on statutory interpretation do not confer price regulation to the work of the GSA.

I entreat the industry players to challenge the matter before the highest court of the land.

What cement LI cannot achieve

Whilst the LI may succeed in the short run to tame cement prices, the LI cannot resolve the issue of cartels, if any in the cement industry.

Cartels can connive to control the supply of essential goods just to cause the prices to go up. The LI cannot resolve the issue of price fixing and territorial allocations in the industry, if any.

Currently, price fixing in Ghana is not an offence, except in Section 44 of the National Petroleum Act 2005, Act 691, which criminalises the conduct of price fixing, cartels, market sharing and other restrictive trade conducts within the petroleum downstream sector.

Competition, Fair-Trade Practices Bill

The purpose of competition law is to promote fair competition, protect consumers, ensure a level playing field for businesses and foster innovation and economic efficiency.

Competition law seeks to prevent the formation of monopolies and the abuse of dominant market positions, ensuring that no single entity can control a market to the detriment of competitors and consumers.  

It addresses practices such as price-fixing, market sharing and collusion among businesses, which can restrict competition and lead to higher prices and reduced choices for consumers.

Competition authorities review mergers and acquisitions to ensure they do not significantly reduce competition or create monopolistic entities that could harm the competitive landscape.

By fostering competitive markets, competition law helps to ensure that consumers benefit from lower prices, better quality products and services and greater innovation and variety. It also ensures that MSMEs are protected against unfair business practices. Competition results in increased efficiency.

Since 2005, Ghana has a draft National Competition and Fair-Trade Practices Bill and the Consumer Protection Bill with the Ministry of Trade and Industry (MOTI). The

MOTI has demonstrated no appetite for taking “these two magic bullet bills” to Parliament.

The best approach is for the MOTI to take these two bills to Parliament. I am also reliably informed that an LI is also coming to regulate the prices of ceramics.

When the magic bullet that solves all problems is available, we do not atrophy our energy and time on bits and pieces of subsidiary legislation. 

It is through a functional competition and consumer protection regime that the free market will be safeguarded against the tyranny of unfair trading practices, bringing efficiency to the market and ensuring that consumers get the best possible from the market.

Let the MOTI major in major things and minor in minor things. 

The writer is a competition economist & a lawyer. He is the West Africa Regional Director of CUTS International. 

E-mail: apa@cuts.org