The introduction of benchmark values into Ghana’s import and export sectors a few years ago – with their implications for revenue mobilisation and the future of local industries – was either seen as prudent or imprudent depending on how one analyses the policy.
Government introduced the benchmark policy in 2019, in accordance with the World Customs Organisation’s policy of regularly reviewing valuation databases. Under this policy, certain commodities were benchmarked to the prevailing world prices as a risk management tool to reflect the true market values of selected commodities. It also takes into consideration factors such as protection of health, the environment and security, as well as protection of local industries.
Government hoped that the policy would translate into lower prices of goods in the country, and reduce smuggling. But this expectation has failed to yield the anticipated results, as prices of foreign goods that enjoyed tariff reduction continue to get out of control. Some analysts even suggest that some political forces might be influencing the incessant increases in the price of some foreign goods. So, if the policy is not achieving its goal, why keep it; especially against the backdrop of local industries struggling to compete with foreign competition?
One district, One factory
In pursuit of the ‘Ghana Beyond Aid; agenda, government took a bold decision in the 2022 budget to reverse 50 percent of benchmark values for 143 items – including rice, poultry, sugar, toilet roll and palm oil – under three categories prescribed by the GRA. Implementation of the reversal was expected to take effect on Tuesday, January 4, 2022. But government indefinitely suspended its implementation last week in pursuit broader stakeholder consultation.
The question is, what was the level of consultation before the policy was formulated? Much as it is good for government to be sensitive to public opinion, the practice of bowing to stakeholder pressure on pertinent policy issues ‘for the benefit of the country’ should be critically reviewed.
With the current industrialisation drive, it is indefensible for the country to continue opening its market to goods that can be produced locally. Thus, the issue of our industries’ competitiveness can no longer be used as a justification to keep our market open to all kinds of shoddy foreign goods. All over the world, countries that have industrialised used policy frameworks to address this. Their industries did not just blossom out of the ordinary; it took policy guidelines, ingenuity and patriotism to get to their current levels of development.
GUTA and AGI debate
Two pressure groups or stakeholders – the Ghana Union Traders Association (GUTA) and Association of Ghana Industries (AGI) – are the protagonists, while government is supposed to be acting in the public interest. How this policy pans out will have significant economic and social consequences.
On face-value, the policy appears to be promoting the business interest of a group people. Naturally, every policy has strengths and weaknesses. While the strength of benchmark values is to boost imports, it negates local production and industrialisation. Since 1981, trade liberalisation and free market policies imposed by the World Bank and IMF have opened Ghana’s economy to extent of the country becoming a dumping-ground for goods which could have been produced locally.
Quite expectedly, GUTA was the first to openly kick against reviewing the benchmark value. GUTA President, Joseph Obeng, said on radio that the reversal is ill-timed.
“We stated and demonstrated by scientific research that the policy was a misalignment to the country’s economic paradigm. Benchmark came and brought about dislocation in the economic model. We think it is welcome news [that the benchmark value has been reversed], and we urge government to be bold and complete with its agenda of economic transformation. We ask government not to budge on its decision,” Mr. Obeng noted.
Equally significant was the AGI response. According to the AGI: “While a number of countries offer export rebates to their firms to develop export trade, Ghana’s benchmark discount policy offers a universal import rebate that only promotes importation. Without doubt, this policy has a tendency to distort Ghana’s micro and macro-economic fundamentals. In fact, there is no factor that promotes the creation of sustainable jobs and economic emancipation other than the right industrial policy decisions.
“AGI believes the benchmark discount policy in its current form negates government’s industrialisation agenda and the ‘Ghana Beyond Aid’ development paradigm. The AGI’s position is grounded on 1D1F initiatives – Planting for Food and Jobs, Fertiliser subsidy and Ghana’s export development agenda. In fact, over the last three years President Akufo-Addo commissioned more than 100 local factories under the One District, One factory policy to boost industrialisation and local production. Other industries are at the completion stage and will soon be commissioned. But without policy guidelines to protect these industries from unbridled foreign competition, the 1D1F policy is as good as dead. This why I strongly support AGI’s advocacy to remove preferential tariffs that promote more imports rather than local production and exports.”
As AGI notes, “Industrialisation is so central to Ghana’s economic liberation that we cannot afford to sacrifice our industrial initiatives for such short-term gains which serve the interests of a few importers. This policy is very regressive, and it will be most unfortunate if it is maintained in the current form. We wish to emphasise that it is the sustainability jobs that will boost economic empowerment and generate domestic revenue”. I couldn’t agree more with the AGI that it is local industries which have the potential to produce more jobs for the youth, unlike unbridled importation that sustains foreign companies.
AGI points out that the COVID-19 pandemic raised the stakes for every country to be purposeful in nurturing local industries. The combination of disruption in global supply chains, the high cost of raw materials and freight during the pandemic compelled government to challenge the local industries to raise their competitiveness. During the heat of the pandemic, President Akufo-Addo encouraged local industries to justify their relevance for the country, and they responded positively.
Undoubtedly, COVID-19 has taught us useful lessons – such as no country can overly depend on imports and develop a robust economy. AGI further points out that for Ghana to make economic gains from hosting AfCFTA, government must invest in local production to improve exports and create jobs. AfCFTA presents a strong case for Ghana to improve local industrialisation and productivity through providing incentives and effective policy frameworks.
Much in tune with the AGI’s stance, Deputy Finance Minister John Kumah justifies government’s reversal of the benchmark value introduced in 2019. Mr. Kumah underscored the fact that not only will the reversal afford government an opportunity to revive the economy, but it also presents diverse benefits for local businesses to become competitive. Mr. Kumah buttressed AGI’s assertion that the policy reversal was aimed at ensuring the youth are gainfully employed.
“The benchmark value policy is being reviewed because we think Ghana is losing more in terms of competitiveness for the local market. Because of the benchmark value, it is now easier for people to import goods that can be easily be produced in our country; and that means we are creating jobs in other countries at the expense of our youth,” he explained.
Against this backdrop, it came as a shock when President Akufo-Addo directed an indefinite suspension of implementing the benchmark value – which was supposed to start on January 4, 2022. It appears that government backtracked due to pressure from GUTA. Earlier, I emphasised that it is not every time that government must yield to the demands of pressure groups – only if the policy under consideration is in the national interest. In the past, GUTA benefitted from government policies such as the reduction of import duties on spare-parts and the withdrawal of some nuisance taxes. For these reasons, GUTA cannot have anything going in its favour to the detriment of local industrialisation.
For this reason, I back the AGI’s continuous calls on government to remain focused in its Industrial Transformation Agenda. Government must also keep its unwavering commitment to implement reversal of the benchmark discount policy. COVID-19 era economic recovery requires policy frameworks to cushion local products for which there is local production capacity. Boosting local production will no doubt help grow the real economy. According to AGI, manufacturers are currently finding it difficult to retain their employees due to the influx of imports at cheap prices that could best be described as ‘dumping’. Therefore, the benchmark discount policy in its current form could worsen the unemployment situation.
Patriotism and nationalism
The future of our country and our youth should guide us in our quest to promote policies that spur economic growth, industrialisation and sustainable job creation. The fact is that the more we patronise foreign goods, the more we boost their industries and jobs. Inversely, the weaker our local industries, the less jobs we create at home. As AGI indicates, and which I subscribe to, nation-building requires patriotism, nationalism, ingenuity and selflessness. “While a number of countries offer export rebates to their firms to develop export trade, Ghana’s benchmark discount policy offers a universal import rebate that only promote importation. This policy distorts our micro and macro-economic fundamentals,” AGI argued in a statement signed by it its President, Dr. Humphrey Ayim-Darke.
Indeed, nothing explains the creation of sustainable jobs and economic emancipation better than a progressive industrial policy decision to industrialise. The Chinese, Malaysians, Indians etc. used this approach to become emerging economies. We have come to a point in our development where we collectively need to make sacrifices for our country to achieve its economic and national vision of a ‘Ghana Beyond Aid’. Therefore, despite the opposition stance taken by GUTA and its affiliates, all interest groups need to rally round the policy in the national interest.
Unapologetically, I am in favour of indigenising our economy through local industrialisation. And this can be done through a commitment to promoting home-grown solutions to our problems. COVID-19 has taught us one critical lesson: In times of crisis, every country depends on local resources and promotes its own interests first before attempting to help others. The indefinite suspension of the benchmark value should be reconsidered. No turning back on benchmark values.