Businesses in Ghana are expected to bear the brunt of rising cost of their operations following the increases in utility tariffs which will take effect from Monday December 14.
This could compel some to cut their operations while asking some workers to go home.
They are rejecting the hikes in utility tariffs announced by the Public Utilities Regulatory Commission (PURC), saying “it is a big blow to the private sector.”
They are therefore calling on the PURC and government to as a matter of urgency withdraw the increments and commit to further consultations or else face numerous street protests.
According to Mr Seth Adjei Baah, President of the Ghana Chamber of Commerce and Industry (GCCI), an association of business operators, firms and industries with interests spanning every sector of private enterprise in Ghana, the hikes will lead to the collapse businesses across the country.
“We are shocked and surprised at the increments because as at now, most businesses are not breaking even and I know some of them are contemplating shutting down.” Mr Baah lamented.
He explained that businesses cannot be competitive in terms of pricing if they have to contend with increasing costs of utilities, currency depreciation, high taxes and erratic power supply among other challenges.
The PURC on Monday announced that electricity and water tariffs would from Monday December 14 go up by 59.2 per cent and 67.2 per cent respectively.
This comes barely two weeks before Christmas.
The PURC explained that it increased the tariffs after a “careful investigation” of proposals submitted by the utility service providers as well as inputs and concerns of consumers and key stakeholders who were consulted.
It will be recalled that the utility providers in the country were asking for a 100 per cent increment in utility tariffs, citing high cost of operation among others as reasons for their demand.
Indeed, President John Mahama in October this year called on Ghanaians to be ready to pay more for electricity if they wanted reliable power supply.
He said once Ghana was going to rely more on thermal for power generation, which is more expensive compared to hydro, the cost of electricity would naturally go up.
“If we do not want dumsor and we genuinely want reliable and sustainable power, then we should be ready to pay more and that is the reality," the President explained.
But some stakeholders including the Trades Union Congress are opposed to any increment in tariffs and asked the PURC to defer the increases.
“To raise electricity prices by over 50 percent and water by over 60 percent, tells us that we should stop doing manufacturing and fold our arms. It is quite unfortunate and we think it is indirectly collapsing our businesses.” Mr Adjei Baah stated.
Chairman of the Tema District Council of Labour, Wilson Agana who was worried about the timing of the increases expressed fears that workers could be sent home empty handed even before the Christmas festivities begin.
“By next week we will see a lot of workers going home; with these new tariffs when we go to sit with our employers for pay negotiations they cannot pay,” he lamented.
According to him, workers in the industrial hub have been meeting with their employers over wage increments which had been planned to be effected in January 2016, however the announced utility tariff increases will neutralize any wage adjustments.
Many have argued that the continuous increment in utility tariffs, is as a result of the huge debt government owes the various utility companies, hence the need for government to pay the debt rather than push the cost on consumers who do not get value for money.
The Industrial and Commercial Workers Union (ICU) which has described the new hikes as outrageous is predicting massive layoffs next year.
“This will undoubtedly stifle the growth of many businesses and lead virtually to their collapse,” says Solomon Kotei, Secretary General of the ICU.
With the latest increments, businesses such as hotels and manufacturing outlets who hitherto were paying about GH¢106,000 per month for electricity will be paying GH¢168,540.
This excludes what is spent on fuel to power their generators. Major industrial establishments are spending about GH¢340,000 every month to provide power to run their operations.
Indeed, with no sign of the power crisis ending anytime soon, businesses remain on edge, battered by an extremely hostile operating environment.
Dr Steve Manteaw of the Integrated Social Development Centre (ISODEC) disagrees with the ECG over the practice of demanding tariff hikes to ostensibly increase investments, saying “you don’t make investment on tariffs; if you are a business man, you go and raise capital and invest, with the view that you will recover your investment overtime.”
“If it so happens that you are able to collect enough revenue, and make profit, you recover your cost,” Dr Manteaw pointed out.
The increments are bound to filter through the general price levels in the economy, further heightening inflation, to the extent that Ghanaians could be paying more for even sachet water.
“Sachet water producers will make a case for increment of their prices because they use power; eventually all prices will go up and this will make locally manufactured goods uncompetitive,” Dr Manteaw said.
…….inflation, lending rates to go up
In a related development, Ghanaians should brace themselves up for more hard times as inflation and lending rates are expected to go up while cost of living worsens.
Any increases in utility tariffs affect some items in the inflation baskets which also translate into high lending rates. Disposable income is also expected to shrink further following rising price of items on the market.
The policy rate of the Bank of Ghana has risen by more than 500 basis points this year and is currently pegged at 26 percent indicating a rising cost of borrowing.
Already, analysts are predicting that inflation will remain high for the rest of the year to an almost 20 percent rate, an indication of the 100 basis points increment in the Monetary Policy Committee of the Bank of Ghana to 26 percent on Monday November 16, 2015.
The Central Bank sighted the current level of inflation and the latest inflation expectations which remain far above the medium term target band of 8±2 percent.
Core inflation (CPI inflation excluding energy and utility prices), which typifies underlying inflation, has also continued to rise over the period. In addition, there are imminent upside risks to the inflation outlook such as worsening external financial conditions and the planned utility tariff adjustments which are now likely to be higher than anticipated during the last MPC.
Lending rates presently hovers around of 32 percent on the average, making it difficult for businesses to borrow. Non-performing loans have also been rising forcing some banks to reduce or stop lending.
Though Treasury bill rates have been tumbling since two weeks ago, there is still some liquidity in the Ghanaian economy.
<<Print>>