COVID-19 throws manufacturing sector into shambles

iEPA amidst AfCFTA will offer economy competitive advantage – economist
Prof Peter Quartey
  • Quartey calls for consumption of Made in Ghana goods to revive sector

If there is any sector that was not spared the ruins of the coronavirus pandemic, then, the manufacturing sector cannot be overlooked, as new data shows it has experienced its biggest contraction in more than six years.

GDP figures released by the Ghana Statistical Service (GSS) indicate the sector contracted 14.3 percent in the second quarter of 2020, making it the worst hit in the industrial sector; and its worst performance since the first quarter of 2014 when it contracted 27.7 percent.

It doesn’t really come as a surprise, though, as lockdown measures and restrictions imposed by government effectively brought almost every activity in the sector to a halt. Most companies in the sector heavily rely on imported raw materials for production, hence, the closure of in-land and air borders left them with no option than to shut down temporarily as they were not able to produce. The virus also shifted consumption to food and medical supplies, consequently leading to lower demand for other manufactured products which were not necessarily essential at the time.

In fact, the GDP data confirms this as it shows the manufacturing sector had more than 14,900 businesses closed as of June 2020, with sales revenue slashing by almost half, recording GH¢25.6 million in April compared to GH¢44.9 million same period last year.

To avert this and boost fortunes in the sector, Director of the Institute of Statistical, Social and Economic Research (ISSER) at the University of Ghana, Prof. Peter Quartey, says it is important to intensify the campaign to consume made in Ghana products in order to create local demand for the sector.

“During the lock down and the restrictions, there wasn’t much production – demand had gone down, getting raw materials became a problem, among other challenges. So putting the situation in that contest will help us understand why growth was significantly affected.

So to stimulate that sector, we must promote the consumption of made in Ghana goods. Our insatiable demand for imported products is not helping us at all. We intend to import everything even if it is available here or is of cheap quality when there are better local substitutes.  So the demand for locally-made products is very critical in stimulating the manufacturing sector in the country,” he said in an interview with the B&FT.

He also called for better integration of the manufacturing and agriculture sectors so that both sectors will inter-depend on each other for raw materials for production.

“Then, also, we must link the agriculture sector to the manufacturing sector so that whatever is coming from the agriculture sector, the manufacturing sector will use it as raw materials and vice-versa. And we saw the importance of that one during this lock down. If we had a very well-integrated system between agriculture and manufacturing, we wouldn’t have waited for borders to open for us to import raw materials.

The cost of production has also been another problem for the manufacturing sector. Sometimes the cost and access to water and electricity is so expensive that it makes local companies uncompetitive on the global market,” he said.

He further noted the challenge of high lending rates that has made it difficult for manufacturing companies to rely on the financial system for capital to expand.

“The interest rates we have in this country is very high. You ask yourself what kind of business will go for a loan at such a rate and make profit enough to cover for its operational cost and still pay an interest of about 25 percent? So I think the cost of credit is quite expensive and must come down,” he added.

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