The high cost of credit of doing business, unreliable and inadequate supply of utility services, and indiscriminate and unmeasured imposition of taxes have led to the high cost of doing business, thereby, placing a huge burden on the private sector to operate, argues the New Patriotic Party (NPP).
This, according to the opposition party, was attributable to mismanagement of the economy on the part of the Ghana government.
"The private sector, which is supposed to be the engine of growth, is bleeding as the Mahama-Amissah Arthur government mismanages the economy," noted the Member of Parliament (MP) for Wenchi, Prof. George Yaw Gyan-Baffour.
The legislator, who doubles as the Ranking Member of the Parliamentary Select Committee on Trade, Industry and Tourism, made this observation yesterday, on behalf of the NPP, when he addressed journalists about the effects of the government's policies on the private sector.
According to him, the above-mentioned challenges were heavily underpinning the growth of the private sector, thereby, injuring the investment climate, and resulting in the soaring of the unemployment rate in the country.
The 4th Quarter Business Barometer of the Association of Ghana Industries (AGI) 2012 Report indicates, in part, that access to credit was the topmost challenge limiting the growth of the private sector.
Again, the 1st Quarter Business Barometer of the AGI 2013 Report, also, in part, states that access to credit continued to be a major constraint to the growth of the private sector. According to the report, it was the second most pressing issue for the private sector.
The same report also revealed poor supply of electricity as the leading obstacle to the growth of existing and start up businesses, with delayed payments identified as the second highest obstacle limiting growth in the construction industry.
To Prof. Gyan-Baffour, domestic credit to the private sector, as a percentage of GDP, had fallen gradually, from about 16% of GDP in 2008, to 15% of GDP at the end of the expanded oil economy in 2012, and "continues to decline."
He attributed the problem to excessive borrowing on the part of the government, which had "resulted in high level of interest rates, and made credit very expensive to private sector operators, and crowding them out of the market for loanable funds."
According to the Wenchi Legislator, while the share of credit to the private sector was dwindling, the distribution of the available credit was also skewed towards services and commerce, where turnovers are quick and investment horizons short, as against the share to the manufacturing and agriculture sectors, whose investment horizons were longer, but which employ a greater proportion of the labour force.
For instance, he said, the share of credit to agriculture, forestry and fishing declined from 6.7% in 2010 to 5.9% in 2011, and to 4.7% in 2012.
Commenting further, Prof. Gyan-Baffour argued that the National Democratic Congress (NDC) led government projected to borrow GH¢2.7 billion from the domestic market, but ended up borrowing over GH¢7.1 billion in 2012.
He said the ever-increasing and high government rates on treasury bills and other instruments were frightening, citing the February 2013 report of the Bank of Ghana's Monetary Policy Committee to buttress his claim.
The report, Prof. Gyan-Baffour noted, in part, reads: "The 91-day Treasury bill rate rose from 10.7% in December 2011, to 22.4% in June 2012, and to 23.1% in December 2012. The 182-day bill increased from 11.1% in December 2011, to 22.0% in June 2012, and increased to 22.7% in December 2012."
"The consequence is that, correspondingly, lending rates in banks in the country hover above 30%. This situation has effectively crowded businesses out of the credit market. How do they expand to create jobs? Government's overspending, and its associated denial of credit to businesses, is one of the strongest factors inhibiting job creation and causing widespread unemployment in the country today," he noted.
The effect of bad management of the economy, according to the MP, was the country's drop in the ranking on the World Bank's Ease of Doing Business Index in 2012. Ghana, according to the ranking, declined from the 63rd position in 2011 to 64th in 2012.
Concerned with the looming threat, the NPP cautioned the government on its policies on the private sector, and advised it to change its ways, since "our economic salvation lies in the private sector-led industrialisation."
"It cannot be achieved by putting constraints in the way of the private sector through further imposition of high taxes, excessive public sector borrowing that crowds out the private sector, erratic supply of electricity, rapid depreciation of the cedi, and undue delay in paying contractors after they have done their work. It can only be done through systematic and conscious governmental actions to remove all aforementioned obstacles to the growth of the private sector," Prof. Gyan-Baffour asserted.
He urged the government to cut waste in its expenditure, and stop the underhand dealings, by adhering to the Auditor-General's advice.
He also advised the government to clear its indebtedness to the utility companies and invest in same, as well as adding value to the raw materials the country produces, in order to earn higher foreign exchange.
"This is the only way through which we can control the vicissitudes in our economy. This is the way that we can provide employment for our youth. This is the way that we can protect our economy from external economic shocks. This is the only way that we can stabilise our currency. This is the only way that we can control our own destiny, and compete effectively with the rest of the world," Prof. Gyan-Baffour argued.
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