By Patrick Owusu AGYEI
The logistics sector is a vital driver of Ghana’s economy, supporting trade, supply chains, and economic development.
However, the cost of financing logistics businesses remains a significant challenge. From high port taxes to expensive credit facilities, the industry grapples with financial constraints that impact growth and competitiveness.
This article examines the financial landscape of Ghana’s logistics sector, focusing on port taxes, business financing, and how tax reforms could reduce costs and foster growth.
Understanding the financial burden in logistics
The logistics business is inherently capital-intensive, involving investments in vehicles, warehousing, equipment, and human resources. In Ghana, these costs are compounded by high operational expenses, taxes at the ports, and limited access to affordable financing.
High port taxes and charges
Ghana’s ports, particularly Tema and Takoradi, are gateways for international trade but are also known for their high tax and fee structures. Key charges include:
- Customs duties: Import duties on goods can range from 5percent to 20percent of the cargo’s value, depending on the product category.
- VAT and NHIL: Importers are required to pay Value-Added Tax (VAT) and the National Health Insurance Levy (NHIL), totaling 19.25percent.
- Port handling charges: These include terminal handling fees, demurrage, and container charges, which escalate with delays.
- Excise taxes: Specific goods attract excise taxes, further increasing the overall cost.
These taxes and fees make Ghana’s ports among the most expensive in West Africa, increasing the cost of doing business for logistics firms and importers.
Limited access to affordable financing
Accessing capital to grow or sustain logistics businesses in Ghana is another significant hurdle. Challenges include:
- High-interest rates: Bank loans in Ghana attract interest rates ranging from 25percent to 30percent per annum, making borrowing costly.
- Collateral requirements: Financial institutions demand substantial collateral, which small and medium-sized enterprises (SMEs) often cannot provide.
- Limited credit products: Financing options tailored to the logistics sector, such as vehicle leasing or asset-backed loans, are scarce.
- Currency risks: Fluctuations in the Ghanaian cedi create additional risks for businesses with international trade exposure.
These financial constraints limit the ability of logistics firms to scale, invest in technology, and compete effectively in the regional market.
The need for tax regime revisions
The high cost of port taxes and duties significantly impacts the profitability of logistics businesses. A revised tax regime could alleviate financial pressures and stimulate growth in the sector.
Proposed tax reforms
- Streamlining import duties:
- Harmonization of tariffs: Ghana could align its import duties with regional trade agreements such as the African Continental Free Trade Area (AfCFTA) to reduce costs and encourage trade.
- Exemptions for key logistics assets: Vehicles, equipment, and spare parts essential for logistics operations could be exempted from certain duties or attract lower rates.
- Reducing VAT and NHIL burden:
- Lowering VAT and NHIL rates for logistics-related imports would reduce overall costs for businesses, especially those reliant on imported vehicles and equipment.
- Customs process efficiency:
- Digitalization of customs procedures and simplified tax calculations could minimize delays and reduce the associated costs of demurrage and container handling.
- Incentives for SMEs:
- Providing tax breaks or rebates for small and medium-sized logistics companies can support their growth and encourage formalization.
- Adopting a tiered tax system:
- A tiered tax structure based on company size and turnover could ensure fair taxation without overburdening smaller players.
Financing solutions for logistics businesses
To address the challenges of expensive financing, stakeholders must explore innovative solutions:
- Development Bank support:
The Development Bank Ghana (DBG) can offer subsidized loans or guarantee schemes specifically for logistics businesses, reducing the cost of capital. - Public-Private Partnerships (PPPs):
Government collaboration with private entities can introduce affordable financing options, such as leasing programs for logistics vehicles and equipment. - Specialized credit facilities:
Financial institutions can create tailored products like trade finance, invoice discounting, or supply chain financing for logistics firms. - Export credit incentives:
Companies engaged in cross-border trade can benefit from export credit schemes that offer lower interest rates and favorable repayment terms. - Alternative financing models:
Exploring crowdfunding, venture capital, and microfinancing could provide new avenues for smaller logistics firms to access funding.
Conclusion
The logistics business in Ghana holds immense potential to drive economic growth, but the high cost of financing and port taxes remains a significant obstacle. Revising the tax regime to reduce the financial burden on businesses, coupled with innovative financing solutions, can unlock opportunities for growth in the sector.
With strategic reforms and investments, Ghana can transform its logistics landscape into a competitive and efficient ecosystem, positioning itself as a regional hub for trade and supply chain excellence.
>>>the writer is Managing Director/CEO PSG Express Link Services ltd. He has over 15 years’ experience in the logistics business. He can be reached via [email protected]
