“The in-coming government should take some measures to revive conditions crippling the local textile industries,” said Samuel Hemans-Arday, Deputy Marketing Manager at the Akosombo Textiles Limited (ATL), citing the 17.5 per cent VAT rate as an example.
He also noted that, smuggled goods into the country, unstable exchange rates, influx of Chinese products and high utility tariffs were other conditions that were hindering business growth.
Mr.Hemans-Arday, who said this in an interview with the Ghana News Agency, cautioned that if the current economic situation continues, ATL would be pushed to lay workers off.
He said in order to prevent fabrics smuggled into the country, the government should consider allowing only one border for importing fabrics, preferably the Tema Harbour.
Mr. Hemans-Arday added that this would help curb the problem of smuggled goods and the government could earn some revenue from the tax or import duty paid.
“Besides avoiding duty payments, these smuggled goods usually copy our logo, design and brand and they sell it cheaper on the market. So we have fake ATL fabrics smuggled into the country.
“The custom officers and authorities at the various borders should be able to identify these fake goods and take the appropriate action against smugglers,” he added.
He said, “If the conditions persist ATL will eventually have to lay off some workers or close down the spinning and weaving sector which employs about 500 people and resort to importing gray cloths for production.
“We have moved from employing about 3,000 people to 1,100 currently.”
He also said that because of the challenges, the local textiles industries such as Printex, GTP and ATL inclusive run their machines three times a week instead of five times a week.
“For you to achieve 50 per cent production capacity a textile company must run five times in a week on three shifts: morning, afternoon and night,” he said.
Mr. Hemans-Arday recommended a reconsideration of the VAT rate for the local industries. “The government can decide that the textile industries pay VAT rate of 5 per cent to help the local industries compete with the Asia products.
“Because Asian textile companies, for instance China, get 13 per cent export incentive on any export they do. So they can decide to sell their products at the cost price and then keep the rebate as their profit.
Cost of production
“The cost of production has been very high for local industries. Besides paying high duties for the importation of raw materials, high utility tariff, paying Social Security and National Insurance Trust (SSNIT) contribution for each staff and high cost of raw materials has made production very expensive.
“We use black oil for our production, which is petroleum by product but it is more expensive than even petrol which should not be the case. Chinese companies use steam which is free to run their machines. Energy cost is also crippling the textile industry,” he said.
He iterated: “The local textile industry do dread competition, but it is the unfair competition we detest.”
He suggested that the government should give a concessionary tariff for local industries in terms of energy and water for all industries, reduce interest rates and also ensure the cedi stability.
“The interest rate is too high for companies. 30-32 per cent is too high for companies. It makes it difficult for companies to invest, reap profits and pay back loans. Some bank even has a rate as high as 40 per cent. The exchange rate is also not too stable.
“For instance, you import raw materials at a particular price, then you produce and fix prices based on the cost of production. After less than three months we get to the market only to find that the currency has devalued by a certain percentage.
“The company needs to either increase the products price or absorb the costs. Most often, the company absorbs the cost.”
Despite all these challenges, Mr. Hemans-Arday says ATL remains the only vertically integrated manufacturing company and noted for its quality cotton fabrics.
It is part of the “CHA Textile Group of Companies, a leading textile multinational conglomerate.