Suggested Mechanics For Stopping The Fall In The Value Of The Cedi …Reducing Inflation And Creating Employment (1)

Ghana cediThe way to achieve the above mentioned objectives is not just an application of   text book economics. It is the practical evaluation and elimination of current socio-economic problems, which have direct and indirect negative impact on our balance of payments   and the consequent fall in the value of the cedi.

Some of these are surplus labor in the public and mercantile sectors, profligate expenditure, excessive imports, import oriented foreign appropriations for unwarranted debt servicing and   import bills on good which could easily be manufactured locally.

MONETARY AND FISCAL MEASURES

Measures under this category can be started by causing the Ministry of Trade and Industry, acting in collaboration with the Bank of Ghana, to compile a list of all enterprises in the private and pubic sectors which demand foreign exchange. The list must embody columns for recording name of enterprise, nationality, economic activity, annual amount of foreign and local currency required and location of the enterprise.

Local banks must strictly be compelled by Bank of Ghana to give foreign exchange to enterprises approved to receive them.

Again   EXCESSIVE IMPORTS as a result of the absence or the paucity of facilities for the manufacture of abundant number of import substitutes are largely not only the cause of inflation but also the cause of the depreciation of the cedi. This problem can be eliminated by the establishment of factories — small, medium and large scale- for renting to the redeployed  importers.

For example, assuming, hypothetically, that an excise tax of two per cent of yearly sales revenue of a manufacturer replaces an import duty. If it amounts to USD30,000,000, the Government   gets on USD200000,000 value of imports,             a little over 700 factories, each with an annual turnover USD 2,000,000, must be established in economically viable areas.

At present this hypothesis is being evaluated by the Building and Road Research Institute (BRRI) as a basis for up advising the Government to approve and fund the building of establish factories built with clay, bamboo wood and other materials. Besides, school buildings will be built at much more lower cost in the hinterlands; and possibly in the coastal areas, depending on the quality of the pilot model to be erected.

It can be explained mathematically.  in the publication entitled a handbook on the mechanics of solving Ghana‘s current economic problems in the pipe line.

Vigorous  publications of viable Projects  by experienced and knowledgeable consultants, with he support of Ghana Investment  Center, will facilitate the    injection  of foreign funds, including remittances, into the manufacturing sector instead being spent on the importation of used and unused consumable goods, which otherwise could be produced locally.  This will greatly be facilitated by ready-built industrial estates (based on BRRI Models)   for renting.

SOURCES AND APPLICATION OF FUNDS SOURCES OF FUNDS

Apart from international loans and grants, it is important to note that funds can be taped from:

o      Avoidance of excessive work shops in  civil and public services;

o      Minimisation of  huge donor consultancy charges and  training cost by some agencies

o      Savings from   excessive and persistent religious  advertisements; and

o      Taxes from commercial churches

APPLICATION OF FUNDS Identified by research, spanning over a period of half a century by some experts ,  strategic projects on which funds  must urgently be spent are :

o      The immediate expansion of farms which produce short–term gestation crops such as groundnuts, maize, rice,   cotton, soy beans and all kinds of cereals and legumes. Others are poultry, livestock dairy products. These can also be processed into edible oils, composite flours and many variety of foods. Abundant cotton can be produced to feed and cause a tremendous expansion of the textile industry.

o      Proper housing and funding of all engineering establishments and other enterprises which now operate under trees and other un satisfactory places.  They can be seen in the Suame, in Kumasi,  Greater Accra and other regional capitals., Being import substitution  establishments,  they will  contribute greatly to the stabilization and appreciation of the value of  the our currency.

Three major projects are needed for immediate implementation: they are Upon Manso Iron and Steel, Bauxite mining and Caustic soda/chlorine manufacturing facilities.

From the iron project   angle irons, channel irons, billets, bridges, including spare parts can be produced to accelerate the production of import substitutes.

o      Bauxite processing to turn out aluminum sheets, profiles packaging containers, utensils and other products.

o      Chlor alkali plant will create over 50 factories producing petro chemical and other products. Close to   oil and gas   fields polyvinyl chloride monomer and allied industries can be produced.

o      Tax revenues from churches can be used to create industrial estates for members of the church who want to go into manufacturing.

CURRENCY HOARDING HORDING

This is perhaps one of the most dangerous things which has occurred in our economic system whereby people hide  or  hoard money for fear of being seen how much money one has . This is where moneys are illegally obtained by some politicians and public servants especially. Again, where moneys are kept in confident expectation that the value of the currency will depreciate further so as to make further gains in the amount held.

This can be SOLVED when such persons are freely allowed and assisted to undertake farming or manufacturing business without being questioned:  but in that case trading in imported commodities must be discouraged since it will exacerbate the propensity to import and thereby depreciating the cedi further.

INFLATION

The obsession of using only monetary measures for curbing inflation must be reviewed. Many definitions have been given to inflation, however, the most popular one being ‘too much money chasing too few goods’: or another being excess of aggregate money demand in conditions of full employment. Nonetheless, it is also believed that inflation can also occur in an economy with less than full employment. Besides, there are two types of inflation: cost push inflation and demand inflation;.

If the supply of money increases so that it becomes easier for individuals to raise funds for the purchase of goods which cannot be increased, prices will tend to rise. Similarly, if employers have as access to money they will be ever ready to agree to inflate wage claims.

But there are some activities which appear to be inflationary: these are surplus labour, “administrative inflation”, hoarding of currency for political or other reasons and religious inflation .

 “ADMINISTRATIVE INFLATION.’ occurs in a country when production activities rely on permits and import licenses to supply consumable or capital goods in the country. In this case their arrival depends on the time spent by officers responsible for granting them. This means as aggregate demand increase, whilst officials delay the supply of capital and consumable goods, they are in effect   creating   demand inflation.

Again, in places where officials take unduly long time to pay moneys due to contractors for legitimate work done, their activities can either be inflationary or deflationary. Abundant evidence reveals that these days moneys received by contractors are largely used for productive purposes such as farming, salt mining and other industrial uses, Thus receiving prompt payment for work done, will contribute greatly to the reduction in prices, increase employment and   per capita incomes. The converse is inflationary. On the other hand where moneys are not paid for a long time this creates DEFLATION since it tends to mop up liquidity in the economic system and raise the levels of preproduction costs.

Other inflationary activities are caused by the delaying tactics of some customs officials in the clearance of goods. In the execution of their administrative duties, some persons in authority unconscionable cause delays in the signature of cheques. As more often these moneys are meant for the supply of goods and services which normally contribute greatly to increase in aggregate supply delay in their supply are highly inflationary.

 

Again   EXCESSIVE IMPORTS as a result of the absence or the paucity of facilities for the manufacture of abundant number of import substitutes are largely not only the cause of inflation but also the cause of the depreciation of the cedi.

This problem can be eliminated by the establishment of factories – small, medium and large scale- for renting to the redeployed  importers.                                                     For example, assuming that  the government bans  the importation of  used and other forms of garments valued at USD 200,000,000 and  loose or forgo an import duty  of            ,say, 15% Ad Valorem, amounting to USD 30,000,000: then  it must replace it with EXCISE TAX levied on factories.  The question thus posed is: how many factories each with a turnover of USD 2,000,000, will be established to yield tax revenue of USD 30,000,000? This is computed to be a little over 700. It means it is the installed and realistic capacities of factories, with revenues determined by internationally competitive ex-factory prices, which must be   established. The smaller the turnover the more the number.

 

To facilitate this the Building and the Road Research institute (B.R.R.I) is  initiating research into the possibility of using   clay, bamboo wood  and other materials to  build such factories, including  school buildings,   at much more lower cost in the hinterlands; and possibly  in the coastal areas, depending on the quality of the pilot model to be erected. But BRRI need funds to build pilot projects.

INFLATION is also caused by surplus or redundant labour in the PUBLIC AND PRIVATE SECTORS of the economy. In the public sector excessive number of people are doing what a relatively few can do.  The solution is to use organization and method techniques rooted in modern information technology systems to identify the surplus. The redundant labour can be engaged by renting out industrial and agricultural estates to them for the establishment of manufacturing and agricultural projects.

In the MERCANTILE OR TRADING SECTORS, one could see large number of people, especially women, selling grocery and other foods stuffs, which a handful of people could sell. Say, about 2000 (two thousand people) are selling what say twenty can sell with the supported by storage and other facilities. Thus 1880 sellers are redundant.

The SOLUTION is to group the surplus to form cooperative organizations with uniforms or   farm aprons and badges.  Given their own farm lands in Ga Rural areas or suburban areas in some regional capitals, they can cultivate these crops. They should also be given large scale grocery stores, integrated with refrigerator facilities which can sell what the 2000 are currently marketing)

The simultaneous effect will be the reduction of the cost of goods sold and prices.   Besides, by producing similar goods and sending them for marketing in their in the large store,  the surplus  will also  increase the output of these products in the Metropolitan area, whilst prices will fall The net effect is THE REDUCTION IN  INFLATION and increase in their per capita incomes.

HOUSING AND FUNDING THE ENGINEERING   INDUSTRY

 

The funding and expansion of engineering and the metallurgical industry will tremendously increase the production of manufacturing facilities. Creating import substitutes, this will greatly appreciate the value of the cedi.

The faculty of engineering of universities, Gratis and other engineering establishments must be given the challenge   to produce the following products: machines for producing sanitary pads, pulp and paper; Hydraulic press to compact saw dust and shavings into particle board which heaps up day by day in timber markets; fruit juice production facilities (See hand book for further details)

PHASE OUT  THE IMPORTATION  OF  KEY CONSUMABLE GOODS

One of the major means of reducing appreciating the value of the cedi is the banning of the importation of USED GARMENTS AND LEFT-OVERS from foreign manufacturers. To SOLUTION to this is by inviting those whose businesses will be affected to   form an association. They will then be given funds to cultivate and process cotton   into yarns through ginneries. They should also be assisted to take over abandoned textile mills for rehabilitation with the assistance of local engineers. COSMETICS can be produced locally through the cultivation and processing of roses, jasmine citronella into sweet essences. This will be used for the manufacture of power, deodorant, lavender and the like.   Ideal locations are at Anfuega in the Volta region; others areas can be found in the Central Region.

By TANNING LEATHER locally, shoes leather bags, belts, hand purses and other varieties of leather goods cabe produced locally

There must be an immediate ban on the importation ALL KINDS OF FURNITURE-including those of metals. Saw dust, can be used to produce particle boards for the production of furniture for schools and offices.

INTEGRATED FARMING AND  PROCESSING OF SHORT –TERM GESTATION CROPS

This is one of the most important means of raising the value of the cedi and reducing the cost of living. These are rice .legumes .maize .sorghun, cotton and the like are extensively produced.  With the formation of cooperatives farmers can be given processing equipment to produce composite maize flour, soybeans flour, cooking oils and sell the residue at rock bottom prices to livestock farmers

. REDUCING THE COST OF EDUCATION

The use of technology to reduce the cost of education has dual impacts: It not only appreciates the value of the cedi through import substitution but also promotes technological expansion technology.

 

LAND USE PLANNING

·         One of the most devastating effects on balance of payments and our currency can be traced to the kind of town and country planning, which do not reserve lands for the erection of manufacturing facilities. On that score, permits given  for the erection of Churches   must be stopped, except in areas where there  are  none.  Collocation must at least be two (2 ) killometers: Owners of Churches with collocations ranging between fifty (50) and one hundred (100) meters  must be compelled to convert them into factories.        It  is recommended that there must be an  average of (five hundred) 500 factories in a Metropolitan area; and about 50 (fifty) in a Sub- District. Investigation reveals that at present there is an intense scramble for lands in residential areas for the establishment of commercial churches. These are in the Weija, Ablekuma and other districts.

·         Metropolitan Authorities must realize that if they allocate land, which is fixed by nature to organizations that do not contribute to the increase in the supply of goods and a services then their actions are causing DEMAND INFLATION since aggregate supply of such goods will be lower than aggregate demand. Worse still, permits are increasingly being given to people to build commercial churches in residential areas. They create UNBEARABLE NOISE for long hours all day long, including working days. There are many of them in the Weija and other districts.  They are the key customers of some commercial banks and micro credit institutions; and not – manufacturers.  A copious research has revealed that these small banks exist because of huge deposits by some pastors.

THE ECONOMICS AND LOGIC OF RELIGION

The Christian council, Theological Colleges, the Clergy and Pastors alike must note the following effects on the country’s balance of payments, the value of the cedi and society.

·         Firstly, if one   preaches on road sides and pray all night in working days for the Almighty to better their conditions of life, then they are causing aggregate supply of goods and services to be lower than aggregate demand; and this causes demand-inflation.

·         Secondly, when Metropolitan Authorities  irrationally allocate lands for the erection of  churches at the expense of factories and also permit persons to  convert buildings into a churches, which  otherwise could be  used as factories to create import substitutes , then they  are also causing  DEMAND INFLATION AND  DEPRECIATING THE VALUE OF THE CEDI

·         Thirdly, conducting sermons in working hours has the same effect!

·         Fourthly, If the Chinese and other countries work twenty four hours a day in factories, whilst the vast majority of our population are increasingly  spending  the same hours  in churches, then  the  opportunity cost is that   not only  are they causing demand  inflation but also  contributing  to the deterioration of our balance of payments and  depreciating  the value of the cedi.

·         Above all, they pave the way for poverty, squalor and armed robbery in our society.

CONCLUSIONS

The reversal of the fall in the value of the cedi cannot be solved by all night or marathon prayers: it the critical use of divine wisdom which God has bestowed on man (Sir Thomas Aquinas–Suma Theologica 14thcentury England). It is an excruciating diversion of the dollar into    activities which earn and save   foreign exchange for the country, based on efficient land use planning.  It is   a rational and judicious use of time, space and land for the achievement of the same objective.

‘it is important to be practical but it is impractical to ignore ore theory, says an adage. It is the application of theories which saved Great Britain from catastrophic economic depression in the early thirties.

. Mentioning a formula I have propounded and dedicated to the memory of the late Dr kwame Nkrumah I say, K=f(t+cl+Ga)

Meaning knowledge is a function of time (t) plus constant learning (cl) subject to the support and direction of the government (Ga)

Assumptions:

·         That the learner understands what he or she learns; and

·         That the time of 24 hours and land are fixed by God.

Thus, if most people in a country spend most of their time (t) in the study of things which will increase her economic and technological development constantly (cl); supported and directed by the Government (Ga), her economic development and technology will in increase by leaps and bounds.  The converse will make them poor, ignorant, superstitious and technologically bankrupt.

Thus the suggestions or postulations   made in this paper must not be taken with a grain of salt and displeasure: they must be tested by all and sundry.

WRITTEN BY

MOSES ABOAGYE FORSON

MANAGEMENT AND INDUSTRIAL CONSULTANT

Email: mosesforson @ yahoo.com

MOB. TEL, 024 103 7029

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