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Business News of Thursday, 7 February 2013

Source: Daily Guide

Business Environment Not Competitive – AGI

The Association of Ghana Industries (AGI) has described the current business environment as non-competitive, noting that it only favours businesses with strong financial backing.

According to the Association’s Business Barometer for the fourth quarter of 2012, difficulties in accessing credit and high interest rates topped the list of challenges hampering the growth of businesses in the country.

Describing the situation as worrying, the report stated that “the prevailing rigid requirements demanded by commercial banks in the country have resulted in low access to credit by the private sector, thus compelling most small and medium-scale enterprises (SMEs) to resort to non-banking financial institutions that also tend to charge high interest rates on their loans.

“This development renders businesses operating in the country non-competitive,” the association indicated.

It therefore recommended a system where “government would give tax incentives to commercial banks to entice them to allocate greater proportion of their credit portfolio at competitive rates to the private sector.”

With regards to challenges facing major sectors of the economy, access to credit, high cost of raw materials and cost of credit maintained first, second and third positions respectively as the topmost challenges restricting growth of firms in the agricultural Sector.

Delayed payment, lack of contracts and access to credit were ranked first, second and third respectively by the construction sector.

The report noted that “the appearance of delayed payment as the topmost challenge in the sector is disturbing since contractors may find it difficult to service their loans on time. This development could lead to increased cost of doing business as interest rates paid on their loans increase geometrically.”

Inflation and bureaucracy, which featured in the 2012 third quarter, did not appear in the 2012 fourth quarter result.

In the manufacturing sector, operators identified poor power supply as the single most important obstacle in increasing their costs of production.

High cost of raw materials and high level of taxation were also ranked second and third respectively by CEOs of the sector while low purchasing power was ranked 10th.

The high level of taxation, poor power supply and difficulty in accessing credit were the three topmost challenges confronting the service sector.

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