Franklin Cudjoe, President of IMANI Africa, has argued that the proposal to enact a Legislative Instrument (LI) to regulate cement prices is not a feasible solution for stabilizing the cost of cement in Ghana. In a statement addressed to the Majority Leader, Mr. Alexander Afenyo-Markin, Cudjoe emphasized that the Ghanaian constitution upholds principles that protect economic freedoms and free trade.
Mr. Cudjoe referenced Article 36 of the constitution, which states that pricing should be determined by market forces of supply and demand, without undue government intervention. This statement follows the Minister of Trade and Industry, KT Hammond’s, announcement of the LI, which aims to regulate cement manufacturers’ pricing practices by considering factors such as raw material costs, exchange rates, taxes, and electricity expenses to ensure transparency and fairness.
However, stakeholders in the industry have raised concerns over the lack of proper consultation and warned that such regulation could negatively affect the construction sector. Cudjoe reiterated that Ghana, as a member of the World Trade Organization (WTO), is bound by international trade agreements that support market-driven pricing mechanisms. He cautioned that price controls violating these agreements could result in trade disputes and sanctions, which would
damage Ghana’s international trade relations.
Cudjoe outlined key reasons why the proposed LI on cement price control would not be successful, emphasizing that cement prices are influenced by natural market forces, such as seasonal demand fluctuations, manufacturing capacity, and the cost of raw materials. He argued that legislative attempts to impose price stability ignore these dynamics and could lead to market distortions.
Additionally, stakeholders in the cement industry have urged manufacturers to disclose their price build-up for transparency. In response, manufacturers revealed that 77% of their costs are tied to imported inputs like clinker and gypsum, which are priced in hard currency and subject to exchange rate volatility, high port charges, and taxes. Local materials, such as limestone and energy, which account for 23% of costs, are also impacted by inflation. Moreover, the government imposes 22 taxes, levies, and fees on clinker imports, which contribute to 30% of the final cement price, making the cost burdensome for consumers.
Cudjoe warned that price caps could lead to shortages and black markets, as manufacturers may cut production if prices become unprofitable. This could also lead to a decline in product quality as companies attempt to reduce costs.
Historically, price controls have failed, leading to reduced supply, lower-quality goods, and the growth of black markets. Cudjoe cited data from other countries to support his argument. Instead of price controls, he proposed fostering competition by encouraging new entrants into the cement market, which could lead to more stable and lower prices without excessive taxes.
He also recommended passing a Competition Bill to protect consumer interests and promote fair competition within the cement industry. In addition, Cudjoe urged the government to enhance the regulatory environment to prevent price gouging and anti-competitive practices without directly controlling prices. He emphasized the importance of encouraging fair competition across borders, particularly under the African Continental Free Trade Area (AfCFTA), to further stabilize the market.
Source:thehighstreetjournal.com