Government needs to urgently address the energy crisis in the country to save industries and businesses from collapsing, the Institute of Economic Affairs (IEA) Ghana, Business Confidence Survey (BCS) report, has said.
According to the study carried in November last year, “the current energy crisis is crippling businesses and leading to layoffs of workers by some companies”.
Presenting the highlights of the maiden BCS which is on the theme, “Towards sustainable economic growth: Building a viable private sector,” in Accra, a research fellow at IEA, Dr. John Kwakye said 95 per cent of the respondents interviewed identified the energy crisis as the most pressing problem facing the private sector.
The survey which covered 93 firms in three key industrial regions: Greater Accra, Ashanti and Western, and touched on three important sectors of the economy comprising agriculture, industry and services, also cited the high cost of credit and the depreciation of the cedi as some of the challenges facing businesses in the country.
The study, Dr. Kwakye said, found out that the performance of the firms had worsened in the last six months of last year, due largely to the adverse business environment.
“This is evident in the obstacles facing businesses – including shortage of energy, high cost of credit and poor infrastructure – and adverse macroeconomic environment, including high inflation and currency instability,” he said.
The study revealed that companies in the financial services sector performed better than their counterparts in the non-financial services sector.
“This dichotomy appeared to emanate from the fact that these two sectors had different sets of constraints. It suggests that the financial sector may be riding on unusually high returns, as a result of the exceptionally high interest rates and spreads,” he said.
Dr. Kwakye said many of the companies in the period under review laid off some workers as a cost cutting measure, noting 41.5 per cent of the firms in the non-financial sector laid off some of their workers, while 12.86 per cent was recorded for companies in the financial services.
According to the report, the government must put policies in place to relieve businesses of the challenges they were going through and prop up the private sector as the real engine of growth of the economy.
Commenting, Dr. Charles Jebuni, Director of Research at IEA, said the survey was in recognition of the private sector as an engine of growth.
He said the survey would be done twice a year to adequately monitor the current business situation in the country and to enable the IEA forecast short term developments in the country.
Dr. Jebuni explained that the survey focused on the agriculture, industry and services based on the sector’s contribution to Gross Domestic Product, adding that some of the indicators used for the study were business performance, business environment, and business expectations and prospects.
Mr. Seth Adjei-Baah, the President of the Ghana Chamber of Commerce entreated the government to implement the recommendations in the report, saying that this year had been very challenging for the business community due to the energy crisis, high cost of credit and the depreciation of the cedi.
He said in spite of the high cost of credit, the Bank of Ghana had increased the Monetary Policy Rate and that would invariably lead to the upward adjustment of interest rate.
By Kingsley Asare