Government cannot but consolidate macroeconomic gains being chalked up, since they are a major panacea to a lot of the country’s challenges, including the manufacturing sector’s worsening situation, Edward Effah-Board Chairman of Unilever, has said.
“Macroeconomic stability cannot be overemphasised; If you have macroeconomic stability, it solves a lot of your problems and you become competitive,” Mr. Effah, who is also the Fidelity Group CEO, told the B&FT in an interview.
“All the countries which we admire have had macroeconomic stability for 50-60 years. Malaysia, Singapore and South Korea have had interest rates at 5-6 percent, electricity at cheap rates, currency has been stable and so companies can grow over a long period of time without suffering from devaluations or disruptions,” he said.
While commending the cedi’s relative stability, dwindling inflation, reduction in policy rate among others, he said there is still room for improvement.
“You cannot build Rome in a day, it takes time. The fact that it is in the right direction is good enough. These are not problems we can fix overnight…but we would like them to be done quicker,” he said.
In 2011 manufacturing grew by 17 percent after growing by 7.6 percent in 2010, contributing significantly to Gross Domestic Product (GDP). Since then the sector has seen its fortunes dwindle, reaching 0.5 and 0.8 percent in 2013 and 2014 respectively – due mainly to a four-year energy crisis.
After recovering to 2.2 percent in 2015 and being expected to grow at 4.6 percent this year and 5.1 percent over the medium-term, the sector is still struggling with high production costs from electricity, cheap imports and over-taxation.
But investments are coming into the manufacturing sector as it was the major driver of Foreign Direct Investment in 2017, which improved from US$2.24billion in 2016 to US$4.1billion.
Electricity tariffs must come down further
The Public Utilities Regulatory Commission (PURC) in March this year announced a general reduction in electricity tariffs. Residential customers, per the new tariff cuts, are to enjoy a 17.5 percent reduction while non-residential customers have seen their tariffs cut by 30 percent.
While lauding government on the tariff reductions, Mr. Effah said he strongly believes tariffs could come down further if managers of the economy rely more on local gas, take care of the debt overhang on the energy sector, replace old equipment with new ones and generally introduce more efficient ways of generating electricity.
To him, Ghanaian industry cannot compete globally if it pays nearly four times the energy cost price of that in China and India, which are major industrial hubs.
“Whatever you produce with electricity going into it, you will not be competitive. Even service companies cannot compete. It is important that we find ways and means to drive down the cost of electricity.
“We need to work hard – government and industry, because everybody is suffering when the price of electricity is high. It would be unrealistic to expect that we’d be able to change electricity tariffs from the 30 cents per kilowatt hour to the 8 cents in China overnight. It could take 20 years of gradual reduction,” he added.