Consumers Need Protection - In The Wake Of Expanding Private Sector
Consumers Need Protection - In The Wake Of Expanding Private Sector Website
A development economist, Dr Nii Moi Thompson, has called on parliament to pass a competition law to protect consumer interests in the face of an expanding private sector. He said such a law should check collusion among companies in the setting of prices as the private sector grows so as to prevent unwarranted and unjustified increases in the prices of locally produced goods. Dr Thompson told the Daily Graphic in an interview that he did not find the reason and explanation for the rise in the prices of some consumer items produced in the country such as beverages, dairy products and groceries in the last quarter of last year, despite the reduction in fuel prices in October last year. He said those sudden price rises contributed to the high inflation and contended that there was some degree of collusion among producers of such products and that they should be investigated, especially when the food component of inflation increased consistently in the last three months of last year. "Parliament should step in with a regulatory framework because there appears to be a collusion among food producing companies in the country towards the end of the year to see prices rise," he said when the Daily Graphic contacted him to comment on the latest report of the Monetary Policy Committee (MPG) of the Bank of Ghana after its assessment of the economy for the last quarter of last year. The MPC meets quarterly to review the economy and make projections for the ensuing months. The bank described the economy as robust on account of growing exports, electricity consumption, credit to the private sector, increased tourist arrivals and so on. Dr Thompson said that sudden rise in the prices of those beverages did not also reflect in the MPC report of the central bank. The Executive Director of Databank Financial Services, Mr Yoofi Grant, attributed the sudden increase in the prices of consumer goods to the inordinate increases slapped by traders, who cashed in on high demand, and not to any collusion on the market. "Education is important to stop the practice and get people to resist such unwarranted price increases in the market," he stated. However, Dr Thompson disagrees with the assertion that the economy is robust, because as he puts it "the economy could not stand the energy crisis although it managed the petroleum price increases because it is now done incrementally and not radically as the case was in the past." Mr Grant has a sharply different view to that, saying the economy withstood shocks and remained resilient. "The global economic shocks have not had any serious negative impact on our economy due to the prudent" management and good fiscal policies," Mr Grant stated. He said the economy would be further strengthened by prospects of increases in commodity prices - cocoa and gold. The price of cocoa closed the year at $2,202 per tonne, representing an increase of 18.1 per cent over the end 2006 price. Gold also ended the year at $831.16 per ounce, having increased 33.7 per cent over the level in 2006. . The average weekly price of Brent crude oil for last year was $94.09 per barrel. This was a 50.4 per cent increase over the price level recorded for 2006. Dr Thompson said the growth in the manufacturing sector declined by 2.3 per cent with electricity consumption going down by 15 per cent, a sign that the economy was not that robust. "That's not a robust economy and it is in our interest to recognise this and put in place measures to remove structural difficulties in the system," he said. Though credit to the private sector increased by 59.8 per cent from GH¢1,234.2 million in 2006 to GH¢3,298.2 million last year, compared with 42.8 per cent (GH¢618.6 million) recorded for 2006, manufacturing attracted only 6.2 per cent of the credit as compared to the 27.5 per cent by the services sector or 22.3 per cent by commerce. "There are serious problems with manufacturing. They don't receive much credit; how can they when the infrastructure is not there?" Dr Thompson quizzed, citing a World Bank study which had shown that Ghana's manufacturing concerns could compete with their peers in China and India on the factory floor, but the high cost of doing business derailed that advantage. According to the Association of Ghana Industries (AGI), industry as a share of GDP was stuck around 23 per cent compared with 32 percent in N amibia,53 per cent in Botswaria,36 per cent in Egypt and 52 per cent in Malaysia. The sector, which grew by five per cent in 2005, reduced to 4.2 per cent in 2006. The government's attempt to improve the growth of the sector to 5.5 per cent last year, ended in a negative 2.3 per cent growth rate at the end of the year. The contribution of manufacturing to GDP was 8.9 per cent in 2005 compared to the 8.1 per cent contribution in 2007. He said there should be a concerted effort by the government and the central bank to aggressively remove bottlenecks in the manufacturing sector. These bottlenecks should include reducing the interest rate spread, thereby reducing the cost of credit. On the widening trade deficit gap, the development economist said the deficit should favour intermediate goods for the country's manufacturing sector to grow. "Rather our deficits are growing while the manufacturing sector collapses," Dr Thompson said regretfully. Mr Grant said increased credit to the private sector was a good sign and that it was not misplaced that manufacturing did not attract a good share of the credit. "As a policy I don't think manufacturing should be the focus of our economy because of competitive manufacturing giants like China and India," he stated. Mr Grant said it was, therefore, difficult for the country to pump hard currency into buying heavy machinery to chase, those manufacturing giants, especially when those countries also manufactured machinery, while Ghana did not. It was important to remember also that those countries had the full spectrum of the manufacturing chain that complemented one another, the Databank executive director said. In his view, the country should emphasise resource exports, which was set to see price appreciation in the global market shortly. Mr Grant said non-traditional exports, which increased marginally from $1,055.27 million in 2006 to $1,107.56 million, held a lot of prospects and must be supported. He was hopeful that the country could achieve a single-digit inflation by the middle of the second half of the year, and advised against fiscal indiscipline. The cocoa sector, he said, would also see an improvement with Cadbury's pledge to invest about £600 million in the cocoa sector of Ghana and other countries.