Bail-out won’t work -- Chamber of Commerce boss

Instead of heeding expected IMF advice to cut public-sector jobs, increase taxes and add to the burden of Ghanaians, government should look within and cut down the wastage to bring the economy out of the woods, Seth Adjei Baah, president of the Ghana Chamber of Commerce and Industry, has said.

“All the things that they are proposing are going to put a lot of pressure on the ordinary Ghanaian,” he told the B&FT in reference to the IMF and the austere measures it is wont to prescribe for the country.

“I will not absorb the taxes at the ports. If I import anything and the tax is huge I just pass it on to the consumer. If you put taxes on fuel and I am using fuel for manufacturing, it adds to the cost of doing business. So at the end of it I include it in the cost component. So it is the ordinary consumer that is going to lose,” he said.

As a team from the IMF is expected in the country this week, indications are that government may have to introduce new tax measures, among other things, in return for whatever goodies the Fund offers.

Even before government put in a plea officially, the IMF in a May country report called for higher taxes on fuel and real-estate, government workforce reduction, and spending cuts on wages and the Ghana National Petroleum Corporation, among others.

These measures, according to the Fund, will contain government borrowing and cause the budget deficit to contract to 8.5 percent of GDP in 2014, 6.3 percent in 2015, and a more sustainable 4.5 percent of GDP in 2016.

Seth Adjei Baah argues, however, that Ghanaians will be the worse for these measures since they are not new and have failed to prop-up the economy.

“We already have a huge unemployment situation on our hands; so if you are asking us to cut down on employment, what are you asking us to do? As at now, most of the people in formal jobs are employed by the public sector. We have not done much to encourage the private sector to create jobs. What are we doing to stimulate the private sector to be able to create jobs for people to be employed? It is not just there. The private sector is just resorting to imports or trade because what gives us the opportunity to produce locally is not there.”

The issue, he said, is not the number of people employed in the public sector: “The issue is what they are putting out. So if they cut down the jobs by even 30 percent and they are still not efficient and effective, we have not addressed any issue”.

He thus urged government to stop competing with the private sector for funds on the local market, and make it easier for them to get cheaper loans to run their businesses and create much-needed jobs.

“We forget that we are in a global village where people can bring goods from anywhere and sell in Ghana, and people produce in cheaper environments than Ghana. So at the end of the day it is cheaper for me to go to China to buy things, ship them in here, pay my duty and sell -- without electricity frustration, without high electricity bills and without water shortages here and there. All these are the things that have to be put right to encourage private sector people to go on expanding their businesses.”

Since the beginning of the year, the cedi has depreciated against the US dollar by about 30 percent -- a reason why government says it is seeking the IMF’s support.

The currency has however enjoyed seeming stability in the past few days, a situation some have credited to the government's decision to bring in the IMF.

Here again Seth Adjei Baah believes it is more the removal of unhelpful forex measures introduced by the Bank of Ghana that is restoring a level of confidence in the economy.

“If I bring in dollars and I have to ‘melt’ it into cedis and then in six months’ time I have to buy the same money at a higher rate, who will do that? So those were the challenges. It is not about IMF. They are just taking the credit. It is the change of directives that is helping us,” he said.

The Ghana Chamber of Commerce and Industry is one of two major business lobbies in the country. Its sister-body, the Association of Ghana Industries, has equally had cause to complain about the economic downturn but has however endorsed the IMF bail-out, calling it “the only option left”.

By Basiru Adam | B&FT Online | Ghana