As the increment in utility tariffs takes effect today, businesses are bemoaning the adverse effects this hike will have on their cost of production.
The Public Utilities Regulatory Commission (PURC) towards the end of September announced new tariffs to take effect on October 1, 2024. According to the PURC, Ghanaians should expect a 3.02% increase in their electricity bills while water is also set to increase by 1.86%.
The Commission says these price hikes are a result of the increase in the cost of delivering these essential services naming the depreciation of the cedi as a major factor.
Following the utility price hikes, the Ghana National Chamber of Commerce and Industry (GNCCI) says this development is bad news for businesses.
CEO of GNCCI, Mark Badu-Aboagye says following the Bank of Ghana’s cut on the policy rate, businesses expected other variables affecting the cost of doing business to remain the same to give some respite to the business community. However, the announcement of the hikes will not only increase the cost of production but will possibly lead to an increase in prices of goods and services.
This development, the CEO shows the complicated and rigidity of Ghana’s economy.
“Our economy is very complex, we were all hoping that once the policy comes down, at least other costs of doing business will also follow suit but here is the case we have one side coming down and the other side going up. It is basically not a good thing. We have had a consistent increase in utility tarrifs; both water and electricity and it’s not too good for businesses,” he indicated.
The CEO further revealed that “if you take a typical manufacturing company, electricity is about 30% of the total cost of production. Somebody may say, electricity has gone up by 3% or 1% and it’s small. It is not small. If 30% of your cost is on electricity, just a small percentage increase and you can imagine how it will increase your cost of production. It’s generally not a good news.”
Speaking to The High Street Journal in an interview, Mark Badu-Aboagye explained that the latest hike further threatens Ghana’s inflation which has been on a downward trend for some time now.
He noted that, “this will definitely increase the cost of production further. It will also be a threat to a reduction in inflation. Inflation is going down but if the cost of production goes up, it means producers will have no option than to push its cost to consumers and that will increase the price of goods and services and cause inflation to also increase further.”
“There are some businesses that will be able to absorb this increment, others may not be able to absorb it. It is either they push the entire cost to consumers or consumers will share the cost of the increase based on the elasticity of demand of that product,” he added.
The Chamber is therefore appealing to the managers of the economy to intensify that all macroeconomic indicators move towards positive directions to create a conducive environment for businesses to be competitive.
