Monday, May 26, 2008
By Kofi Bentil
Recently, Ghana’s President announced a relief package aimed at reducing the impact of the global food crisis on Ghanaians. The package however late, is full of infinitesimal subsidies on specified excise duties on fuel and significant percentage reduction in import duties on staple food items that should not have been imposed in the first place
As government statisticians believe the relief package is worth US $1 billion, some analysts have began questioning the wisdom behind the intervention, and if at all heavy import duties on staples for which we lack local production capacity, (partly induced by flawed monetary policies, poor agricultural infrastructure and pricy inputs) were necessary in the first place. IMANI’s advisor and AfricanLiberty.org contributor, Mr. Kofi Bentil gives us his two cents on the purported intervention.
Read on….
I have a few key positions to share, on the President’s package.
Note- Package 1: Specified excise duty on gas oil was reduced from 9.1Gp to 6.2Gp; duty on kerosene from 6.4875Gp to 4.5375Gp; duty on marine gas oil from 6.4945Gp to 3.9945Gp, while the current duty of 5.1456Gp on premix fuel is being completely removed.
Note- Package 2: Certain percentages of import duty were removed on staple food items. They are rice, 20 per cent; wheat, 10 per cent; vegetable oil, 20 per cent, and yellow maize for poultry, 20 per cent.
1. Since the package is worth $1 billion, it means we will be losing $1 billion in revenue. This means we should be getting results worth that much. However, it is doubtful that we will get a billion dollars of results because the measures don’t seem to have the ability to deliver that, either financially or in kind.
The big question is will prices reduce? If it did, however short term, it would most likely lead to re-exportation to countries around us, who will buy from and smuggle further, even though the President warned against the practice. So we will not only be subsidizing Ghanaians, we would end up subsidizing our neighbours as well.
2. We should be seeing this problem as an opportunity to encourage quality local production of certain foods instead of taking the steps which will make us continually dependent. However, Ghanaian attitude to locally produced staples must change.
3. We cannot change the main factors causing this problem because they are global in nature, therefore whatever we do will not affect that, and if the trend continues all the money we have lost trying to control it will be lost twice, and we won’t have any benefit. If however we use this to grow our own because the price difference will be significant, then whether the problem persists or blows over soon, we win anyway. This however demands a radical make over of monetary policies-a paltry 6% of all funds for agriculture going into peasant farming is not good enough. Borrowing at now cut-throat interest rates of approximately 30% is just offensive.
4. My fourth point may seem strange to some but we need to reflect carefully. We have a global food crisis, but we do not have a food crisis in Ghana! If the price of rice and some foods go up, it doesn’t mean we have a crisis in Ghana, the average Ghanaian can go for a week without eating rice, rice is a staple in Ghana, but it is also a food of choice, especially in Ghana.
We have so much variety in corn, cassava, beans, and other meals that a problem with rice doesn’t constitute a national food crisis. Moreover, though the prices of rice have gone up, we don’t have a shortage of rice, those who really want to eat rice can do so without too much expense. Let us soberly analyze this, and decide on the best use of our scarce resources.
I have on many occasions publicly commended the President and his men on their superb handling of the economy especially because Ghana has not had a better management of our economy since independence. However, this latest package by the government is not the best. Meanwhile all of us Ghanaians must be encouraged to make our circumstances worth while.
Kofi Bentil, an advisor to AfricanLiberty.org is a Lecturer in Marketing and Enterpreneurship at the University of Ghana Business School and Ashesi Univerty respectively.