Rivalry between govt, BoG retarding growth of business

Policy inconsistencies between the government and the Bank of Ghana (BoG) have been the major drawback to the growth of businesses in the country over the past five years, a report by IMANI Ghana, a policy think tank, has indicated.

The report, which was made public in Accra yesterday, urged the government to take urgent steps to improve the business environment through proper planning, coordination, and implementation of relevant policies and create effective enforcement regimes.

In that regard, IMANI recommended the enactment of a fiscal responsibility act and the institution of a fiscal responsibility council (FRC) to develop and implement a strong regulatory regime that would pave the way for businesses to thrive.

Details of report

The report, which was conducted between 2011 and the first quarter of 2016, sought to examine the key challenges to the growth of businesses in the country, analyse the effectiveness of policies outlined by the government to address those challenges and to make workable suggestions to boost the business environment.

It highlighted five key indicators as having an overwhelming impact on the stifled business environment within the period under review.

The Business Leader of IMANI, Mr Aboagye Mintah, indicated that the five indicators on which the report was hinged were access and cost of credit to the private sector, exchange rate volatility, inflation rate, cost and availability of power supply, and tax rates and administration.

According to him, an assessment of the five factors had revealed that incoherence in the policies of government and the BoG had created an unfavourable environment which had prevented most businesses from making the desired growth.

Power supply

On the impact of power supply on businesses within the period, Mr Mintah said the overconcentration on generating installed capacity without a corresponding increase in the inputs to increase generation capacity was a major bane to businesses.

“We cannot run an economy on hydro power alone as has been the case with this country within the period of this report. The government continues to send power to all parts of the country, thereby increasing the demand for power. But there is no adequate supply due to the generation gap, so this calls for investment in other areas of power supply”, he said.

He added that the report revealed that metropolitan areas where more industries were concentrated suffered more power outages during the period of load shedding as compared to residential and rural areas, adding that the trend was a drawback to the growth of businesses.

Taxes

Touching on taxes, he said the high tax regime within the period in the wake of the high cost of power had demotivated and discouraged most entrepreneurs from exploring business opportunities.

He added that the country had not done enough to mobilise tax revenue due to poor policies, thereby putting pressure on the business community.

“There is no tracking system to ensure the robust collection and payment of tax. The country has an estimated tax potential of GH¢6 million, but only GH¢1.5 million was paid due to a weak tracking system that has left many people outside the tax net,” he added.

Inflation

Highlighting the inflation trend, he observed that inflation increased from 8.6 per cent in 2011 to about 17.7 within the period under review, adding that the trend increased the cost of doing business, the effect of which had been transferred to the final consumer.

He said in 2012, for instance, the government overborrowed and further aggravated the trend of inflation. 

He said the way forward was for the BoG and the government to work together to ensure that the policies on inflation were coherent rather than “blackmailing each other by their actions.”

Collaboration

The Founder and President of IMANI, Mr Franklin Cudjoe, asked policy makers, politicians, civil society organisations (CSOs), and the business community to collaborate in order to build a strong and robust business environment.

He urged politicians to be circumspect in the promises they made in this period of campaigning for electoral victory, saying that all policies ought to be thought through and implemented in a manner that would boost businesses.