'Prime Rate Threatening'

By Samuel Boadi
INDUSTRY CAPTAINS have fingered the Bank of Ghana (BoG)’s prime rate of 18 percent as the basis for high interest rates in the country and the reason for industry’s many woes.
Chief executive officers interviewed by the Association of Ghana Industries (AGI) in its 2009 4th Quarter Business Barometer Survey said despite a decline in BoG’s prime rate from 18.5 percent in September 2009 to 18.0 percent in November 2009, base rates of commercial banks have continued to remain the same.
Touching on challenges that the situation was dealing to industry, the CEOs said in the manufacturing sector, cost of credit rose to 51.16 percent in addition to competition from imported goods which hiked up to 37.2 percent while also high costs of energy and power fluctuation surged to 36.0 percent.
The service sector was also been confronted with inflation in the region of 51.3 percent, high level of taxation around 37.2 percent and high cost of energy and power fluctuations by 37.2 percent.
The agriculture sector is also not left out of the circumstance. It has experienced cost of credit of 54.5 percent, access to credit of 42 percent and cost of raw materials soaring to 39.4 percent.
In the construction sector, cost of credit, access to credit and high level of taxation were ranked first, second and third respectively, as key challenges.
In spite of the afore-mentioned challenges, CEOs of businesses operating in Ghana have expressed optimism that the overall business environment would improve in the next 6 months. Over 80 percent of the CEOs expect the business environment to be favorable.
The 2010 National Budget read in November, 2009 revealed the following growth rates in the key sectors of the economy: agriculture (6.2 percent); service (4.6 percent) and industry (3.8 percent).
However, the latter quarter witnessed a decline in inflation from 18.04 percent in October 2009 to 15.97 percent in December 2009, with exchange rate remaining stable while also the modest macroeconomic stability achieved in the third quarter was sustained in the fourth quarter.
The industry captains also mentioned other challenges that made Ghana’s industry less competitive. These included lack of equipment/technical expertise, lack of ready market and low purchasing power.
However, all the aforesaid challenges declined in the 4th quarter from 54 percent to 50 percent, 47 percent to 38.7 percent and 46.0 percent to 33.0 percent, respectively in terms of percentage points.
Overall, the level of confidence in the business environment declined from 36.6 in the 3rd quarter to 28.8 in the fourth quarter. This implies that the confidence level in the 3rd quarter was higher than in the 4th quarter.