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Opinions of Sunday, 9 March 2014

Columnist: Adjimah, Harrison P.

Can Promotion of Made in Ghana Goods Do the Trick

Can Promotion of Made in Ghana Goods Do the Trick for the Ghanaian Cedi?


Harrison P. Adjimah

This year’s state of the nation address has generated a lot of discussions from all angles. The spin doctors of the government insist it is comprehensive and touches on all that matters to Ghanaians. The critics blare “it is empty, copied and repetitive and at best a PR and campaign gimmicks”. Some experts say it was too comical. Some even say they either didn’t get it or the president got it wrong, as it didn’t address the current challenges of rising government debt, rising wages bills, the falling value of the cedi and so on. Others cried out “it is diversionary” as the president introduced the controversial free Senior High School debate to distract and divert peoples’ attention from the current economic problems”.

Depending on where one stands you will certainly have a different view of the presidential address. As economists some of us have heard one thing new from the president’s economic lecture –as he himself put it-- the need to promote Made in Ghana Goods (GH goods), if this is new at all. At least it was not highlighted to this level in previous addresses. The president, at least, quite clearly expressed his vision for promoting made in GH Goods, even if he added a bit of theater. His commitment seems undoubted as he carried the crusade to his next speech to the nation, on Independence Day. Nonetheless, it is right to demand that the government quickly come out with specific policies and strategies to pursue it, if the president really means business.

The downward pressure on the Ghanaian cedi is mounting every day. The 4% circa depreciation of the cedi, in January alone, nearly created a currency crisis. The Bank of Ghana had to come up to shore up the cedi with millions of dollars, call an emergency MPC meeting, raise the prime rate and introduce stringent exchange rate control measures. Indeed the cedi’s woes may be coming from many sources. Yet, there is general agreement that the root cause of the instability and volatility of the currency is the strong and permanently rising import demand in the presence of weak and fragile exports. Over the years the economy has failed to build the local capacity to produce the modern goods the country requires and therefore has to heavily rely on imports. Policy efforts to promote and expand exports are not working. Moreover, with such a high dependency ratio--sum of the country’s exports and imports exceeding the value of GDP---the economy faces double whammy risks. Thus the cedi is hard hit, either when there are global shocks and export values fall; or the country’s expansionary policies to stimulate activities is rather leading to excessive import demand with resultant excessive and unmanageable pressure on the cedi.

The country has for far too long over relied on import and export and paid less attention to non tradable sectors of the economy. Export led growth strategies are not working for Ghana, and may not work at all. While 1970s style import substitution strategies and boorish import restrictions would be counterproductive in the current global environment, steps to expand the domestic subsector and reduce dependency on trade, could reduce the fragility of the economy.

This is why the president’s calls to promote GH Goods, if taken serious, could do the trick and strengthen the cedi. Nevertheless, promoting the use of domestically produced goods in a globalized economy with sophisticated taste and demand is a challenging task. Ghanaian economists, researchers and public officials should all come on board and support the president.

One of the most cost effective ways to boost the demand of locally manufactured goods is moral suasion, appealing to peoples’ conscience to chose and use local goods rather than imported goods, as the president has began. This, though, can only work in some sectors of the economy and requires other supporting policy incentives and disincentives to make much impact. While such a crusade can influence taste, it may not be able to do anything about other factors. The main reasons for the high demand for imported goods are changing technology, changing tastes, non availability of domestic substitutes, high cost and poor quality- particularly finishing of GH Goods. The president dramatized his point by showing off with his pair of Made in Ghana shoes. The limitation is the perceived low quality of made in Ghana shoes. The industry has to be supported to improve quality and standards. Related to the shoe and leather industry is the textile industry, for which to be fair, one can say the country has made some progress. Yet, competitiveness in terms of costs of inputs and products is still a constraint for the textile and garment industry.

Other subsectors of the economy where moral suasion can be influential are the food, drink and beverage industries. Most Ghanaian fruits and foods are natural and organic, something the Western World would wish to have, yet the consuming Ghanaian public is now rather switching taste to imported junk foods. There is a need to do more research on local produce and support TV programs which would show and compare the benefits of common Ghanaian products and imported substitutes.

For the “Let Us Use Made in Ghana Good Crusade” of the president to be effective, moral suasion has to be complemented with more radical policies such as local content requirement and special tariffs. Beyond foreign investors, all contractors, beneficiaries of government funded projects and public officials executing government projects should all be made to demonstrate local contents of their material inputs. Even supermarkets should be compelled or made to sign up to deals to stock and promote GH goods. Ban and embargo may be out of place in the current global environment but special specific tariffs can be used. For example if we want to promote the use of local chicken, which is actually more healthier and taste better, we can impose specific tariffs on frozen chicken and channel the revenue into grants to support the poultry industry.

Another effective way is the use of income support and wage top up coupons. Throughout the developed world, companies have successfully used coupons to promote products and drive sales. Some institutions in Ghana also use fuel coupons to top up the income of their employees and these concepts can be used to promote GH goods. When annual salaries of public sector workers are increased the increment could be partly paid in coupons, redeemable only on some selected GH goods at accredited shops.

The Entrepreneurship Development Unit of Ho Polytechnic is currently doing a research on GH goods and the Polytechnic can be of help with design programs and strategies to promote Made in Ghana goods.

Harrison P. Adjimah is a lecturer and economist at Ho Polytechnic.