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12-Feb-2015  
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The outlook for industry this year seems gloomy as the woes of businesses continue to deepen by the day.  

Over 70 per cent of member organizations of the Association of Ghana Industries (AGI) say they will be unable to take on fresh employees this year due to the unfavourable economic conditions in the country.

The views of the over 1,200 members were captured in AGI’s Business Barometer Report for the last quarter of last year.

“As many as 56 per cent are unsure of what conditions will be in the next six months while only 27 per cent are slightly optimistic of things getting better and anticipate increasing their work force in six months,” the report said.

The report mentioned non-availability of reliable power supply, poor access to credit and the cedi’s depreciation and multiplicity of taxes as the leading challenges affecting businesses in the country.

The high cost of credit, unfair competition on the market, high labour costs, and excessive port charges are some other challenges mentioned in the report as negatively affecting the growth of businesses. 

President of the AGI, Seth Twum-Akwaboah says, even though the power situation was better last year, the manufacturing sector of the economy grew by negative eight per cent.

“Given the deepened crisis of the power supply situation and unreliability of the power rationing schedule this year, the situation looks even bleaker,” he laments.

Mr Stephen Antwi, President of the Ghanaian German Economic Association (GGEA) reveals that there is a freeze on the hiring of labour in a number of companies under the Association as “most of them are seeking to cut down costs which include “labour so they can stay competitive even though they find it very unpleasant.”

As part of efforts to manage the country’s deteriorating energy crisis, mining firms  have been required to cut their power consumption by shedding a little over 30 per cent from the initial 25 per cent agreed in December last year.

This means mining companies have to virtually shut down their operations every two days , a situation both the Chamber of Mines and the Ghana Mine Workers Union are worried could lead to more job losses in the industry .

 “We definitely will lose some jobs, there’s no doubt about that , we will lose market share and more imports will come in as government loses tax revenues , says Chief Executive Officer of the Chamber, Mr Suleman Koney .

General Secretary of the Union, Prince William Ankrah recalls how the sector lost over 8,000 workers last year as a result of plummeting gold prices .

There have recently been reports to the effect that in the wake of the worsening power crises and falling gold prices on the world market some firms are contemplating selling off their mines.

But Chief Executive Officer of the Minerals Commission, Dr Tony Aubynn is optimistic of brighter prospects.

”I believe this power situation will be addressed over time so I don’t think mining firms will easily want to relinquish their processing facilities,” he said recently in an interview.

 Though he reckoned there are challenging times, he called on mining companies to properly manage their operations as ”government is making more efforts to address the power challenge, it is a problem but I think it is not insurmountable.”  

Human resource practitioners and experts agree that the problem as it stands goes beyond employers not taking on new people but that many companies will shed off staff to cut down costs.

“This is because production has been badly affected by the present economic and power supply challenges. Companies are making huge losses so they have no option but to cut down on operational costs. A major component of their operational costs is labour so they will readily cut down on labour,” they maintain.

Indeed, if research done by Databank Financial Services which revealed that power outages experienced last year had resulted in businesses losing as much as US$62million on monthly basis is anything to go by, then  businesses will struggle to survive.

Unemployment will increase and this is because people are not employing, rather those who are employed will become unemployed so “the unemployment pool will increase,” adds the human resource experts.  

Businesses which are supposed to offer opportunities to the thousands of graduates churned out each year by the country’s tertiary institutions are themselves facing challenges, mainly emanating from unreliable and costly utilities that threaten to erode their margins.  

 Since these businesses are unlikely to break even, let alone meet their profit targets this year, revenue from taxes and other levies will decline with the attendant dire implications on government’s developmental efforts.

It is important to recall how difficult last year was; the depreciation of the Ghana Cedi and energy crisis among others which  stalled statutory payments into the Ghana Education Trust Fund, the District Assembly Common Fund and the National Health Insurance Scheme among others.

These compelled the country to seek the ongoing discussions for a bailout from the International Monetary Fund (IMF) to restore credibility to government policy.

Experts however hold the view that for Ghana and other African countries to achieve significant economic ‘growth and reduce poverty, it is imperative that they took bold and decisive measures to transform the structure of their economies. 

 “It’s a big worry to all of us who are experts because we are all affected one way or the other. It’s pathetic to reckon that for all these years we have been unable to fix basic, standard and foundational parameters for a booming economy,”

The experts have observed that even in countries that have achieved rapid growth and poverty reduction such as Ethiopia, Ghana and Rwanda, there has been very little structural transformation.

The share of Gross Domestic Product (GDP) by the manufacturing sector for example is scarcely higher than it was before these countries started enjoying serious growth.

According to them, “there are many reasons why competitive manufacturing has not taken off in Africa, but most of them revolve around the high costs of production.” 

Even though per capita incomes in Africa are among the lowest in the world, wages are relatively high and unit labour costs are even higher.

According to the Economic Development in Africa Report 2014 published by the United Nations Conference on Trade and Development (UNCTAD), “while Africa has maintained high growth rates over the past decade, higher than the world average, it has failed to translate this into inclusive growth.

“Africa lacks growth that creates jobs, builds infrastructure and lowers poverty,” the report says.

Essentially, Africa hasn’t produced enough investment and growth in the domestic economy.  This is in view of the fact that public sector investment has been low, and foreign direct investment has largely been channeled into sectors such as oil, gas and minerals.

The difficulty with that is that these sectors are not very good at generating economic benefits outside a very small enclave. They are not labour intensive so they don’t create large numbers of jobs and benefit the wider economy.

The UNCTAD report observed that commercial banks in African financial systems tend to focus their lending on high turnover activities, such as commerce, to the detriment of productive activities such as agriculture and industry.

“In Ghana, for example, 26.5 per cent of bank credit for 2012 went to the commercial and financial sectors and 26.3 per cent went to the services sector. On the other hand, the manufacturing sector accounted for 11per cent, while agriculture, forestry and fishing accounted for about 5 per cent, “the report said

The report therefore recommends that investment be made to support sectors such as agriculture, manufacturing and industry that have the potential for higher growth and job creation.

 

As a matter of urgency, and to avert the expected job losses in Ghana, it behooves government and stakeholders to continue to dialogue in order to find effective and permanent solution to the energy crisis that is crippling businesses. 

Beyond that, industry must also manage power demands more adequately and avoid wastage as it is detrimental to the concerted efforts at augmenting generation.
 
 
Source: The Finder
 
 

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