Import substitution before import restrictions

The Minister for Trader and Industry is expected to lay a Legislative Instrument (L. I) on the restrictions of some essential imported goods. The L.I. will compel importers of 22 restricted items, including poultry, rice, sugar, diapers, and animal intestines (yemuadie) to seek licenses from a committee to be set up by the minister.

Import restrictions to enhance productivity in the domestic market. Without qualms, no nation develops meaningfully without import restrictions on products that are abundantly produced locally. It puts checks on inflation, and stability of the local currency and creates jobs. Indeed, restrictions on imported goods boast economic growth only when there is import substitution to meet demand.

However, if there is no import substitution industrialization in the life of an economy, how then do restrictions on some imported goods that the country lacks can help to meet the demand of consumers, and also, the stabilization of the Cedi which positively affects inflation?

Breathtakingly, you have a situation where about 80% of goods Ghanaians consume are imported, yet much is not done in our local manufacturing industry to produce more to meet demand and automatically minimize consumption of foreign products. Then we hear that about 22 essential goods will be restricted by the Ministry of Trade and Industry when the country is faced with huge challenges over import substitution.

According to J. Polit. Econ. 34 (1) Mar 2014. First half of the 1960s, Tanzania, Zambia, and Nigeria began to implement the import substitution industry on a large scale; afterward, the implementation of this strategy was noted, among other countries, in Ghana and Madagascar and up to the 1980s import substitution was observed in the other Sub-Saharan countries.

Furthermore, “ the way in which that process occurred in the Sub-Sahara is much less clear than that in Latin America, for most countries of that region in the African continent gained independence only in the late 1950s and 1960s, and little attention was given to them in the literature at the time. Although those countries were the last ones to embark on the strategy of import substitution, they followed Latin American countries' steps, and as structural domestic and external constraints were stronger, the policy of import substitution soon failed, having a more profound impact on their economies.” J. Polit. Econ. 34 (1) Mar 2014.

The pragmatic intervention policy Dr. Kwame Nkrumah envisaged over import substitution had been the only reference point of a significant industrialization of Ghana, henceforth. He saw the need to build the Akosombo Dam because, without a safe and reliable supply of electricity, the industrialization drive would have been meaningless. And so, many State-owned companies were established and operating during his time as president of Ghana.

The Komenda Sugar factory, Kumasi Shoe factory, Pwalugu Tomato factory, and many others were built to produce goods locally so that the concept of import substitution industrialization in this country could be realistic.

Unbelievably, all these companies have been left to rot, even though the NDC government under H. E John Mahama had revamped the Komenda Sugar factory and Kumasi Shoe factory. If the sugar factory was operating, the idea of import restriction on sugar would have been meaningful because the factory was producing Sugar. However, it is being eaten up by the sea breeze. Moreover, if the Pwalugu Tomato factory was operating, restriction on the importation of tomato paste would have been equally useful. However, it is at the mercy of suffering to the point of dilapidation.

Mesmerizing, my checks have revealed that the kind of sugar we import to eat is so much that, and thinking about the mere fact that, the Komenda Sugar is made to rot makes me shed tears as I type this.

As per Volza’s Ghana Import data, Sugar import shipments in Ghana stood at 25.8K, imported by 3,068 Ghana Importers from 2,701 Suppliers.

Ghana imports most of its Sugar from India, Brazil, and the United States.

The top 3 importers of Sugar are the Netherlands with 546,917 shipments followed by the United States with 427,858 and Germany at the 3rd spot with 370,679 shipments.

This is the current data on the sugar we import to eat in Ghana. 31st, October 2023.

Furthermore, the alarming rate at which tomatoes are imported in Ghana is heartbreaking, when you see our Tomato factory sitting idle and rotting.

The Trade data from the Ghana Vegetable Producers and Exporters Association (Ghana Vegetables) indicates that “annual tomato import from neighboring Burkina Faso has hit a staggering US$ 400 million from an estimated US$ 99.5 million in 2018.”

I worry that you have hundreds of Ghanaian businessmen who do the importation of these 22 essential products who contribute to taxes and also employ people to contribute to GDP growth. Unfortunately, the new LI when passed is very likely to kick almost all these people out of business and employment because these businessmen may fail to get licenses to operate due to bureaucracies, unfairness, favoritism, and corruption.

Ideally, what this government should have concentrated on was for the 1D1F policy to materialize before even thinking about import restrictions. However, after abysmally failing, they are here to impoverish many importers and create many more job losses.

Is it the right way to run an economy? This government has had enough of loans, Euro-bond, and financial bailouts, unlike any government, yet ever worse off inflation, exchange rates, interest rates, and GDP growth. So appalling that the debt to GDP ratio is over 66%. And all that they do is churn out draconian measures to further aggravate the plight of Ghanaian businessmen through import restrictions when there is non-existent import substitution.

But for the minority in parliament, this LI would have been passed. We entreat the minority side to remain resolute against this poorly induced LI. It is sheer wickedness, bureaucratic, unfair, and corrupt inducement proposal.