Business Confidence Improves But....

The rising cost of raw materials is the single most difficult challenge facing industrial concerns in Ghana today.

Although consumer price inflation, buoyed by the good performance of the food basket in the country, has been contained within a single digit range over the longest period of time in the country’s history, prices received at the shop floor for goods and services produced (also known as the producer price index) have been rising.

This lends credence to the high cost of raw materials being the highest challenge industries are contending with, as indicated by the Business Barometre Survey report for the first quarter of the year.

This challenge knocked the other challenge, ‘access to credit’, to the third place, which for the better part of last year, including the last quarter, dominated industry’s list as the most challenging factor hindering their operations.

The study, which is conducted by the Association of Ghana Industries (AGI) every quarter, helps to gauge the current business environment and scans expectations for the foreseeable future. The survey also found out that high level of taxation in the country was also a hindrance to smooth operations in the country.

Other factors identified by industries and their owners in order of priority are high utility prices, low purchasing power, cost of credit, lack of markets, competition from imported goods, lack of finance and delayed payments.

The report, however, captured many businesses recovering from their previous pessimistic outlook about the business and economic fortunes of the country, as the Business Barometre Indicator, which measures business confidence relative to current performance, had 65.2 per cent of businesses being optimistic that things would get better in the year.

This compares favourably with the previous quarter’s (2010 quarter four) 58 per cent of businesses who were optimistic about better fortunes in the year. Another 25.6 per cent of the people said the horizon would remain the same, while nine per cent said it would actually be a worse year.

The Executive Director of the AGI, Mr Seth Twum-Akwaboah, who presented the results, explained that the list of challenges was a reflection of what industry perceived about the economic environment and that the high expectation was anchored on a number of factors, including the start of revenue inflows from the oil and gas sector.

He said, however, that the government should revise its tax rates and regime to ensure that they were not inimical to the operations of the private sector and industries in particular.

Mr Twum-Akwaboah added that the implementation of the Single Spine Pay Policy (SSPP), which would boost disposable incomes and consumption, as well as the payment of arrears to contractors, was part of the reasons why businesses were much more optimistic in the year than they were in the last quarter of last year.

In the sectoral analysis, agriculture had access to credit as its topmost challenge, followed by lack of market and the high cost of raw materials.

Commenting on the results, the President of the AGI, Nana Owusu Afari, called on the government not to pay lip-service to agriculture any longer but channel all the resources there to ensure that the entire value chain was properly explored.

“At AGI, we think that manufacturing and processing, especially agro-processing, should be the way to go for the economy and we should support it and halt the huge importation of food items such as fruit juices and other processed food,” he stated.