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Press Review of Tuesday, 3 April 2007

Source: Statesman

Editorial: What must be done on cement price crisis?

The Statesman notes with concern the rising price of cement in this country, and the implications this could have and is already having on our construction industry.

Ghana's economy is supposed to be liberalised, with market prices largely allowed to respond to the dictates of demand and supply.

There is some government interference, but this is usually limited to intervening in the prices of such essential commodities as fuel and utilities - water and electricity.

However, the current astronomical, and disparate, increases in the price of cement have raised a lot of concern among Ghanaians, and rightly so. Among other important indicators of a country"s development, efficient energy supply, and the pace of construction rank quite high.

Ghana Cement, who hold a de facto monopoly in the cement industry in Ghana, controlling about 97 percent of the market, says it has no hand in the current price fluctuations.

Factors beyond their control have influenced the steady increase in market prices, and look set to continue pushing the cost of cement still higher. Indeed, ex-factory prices, at Tema and Takoradi, remain the same at ¢59,225 per bag, tax inclusive; it is the mark-up on these prices in the various depots around the country which is costing the customer, and the construction industry, so dearly.

The three northern regions of Ghana have long been the country’s poorest; the least developed, and the most in need of development.

Little hope of persuading construction companies to take up the challenge, however, with the cost of transporting cement several hundred miles from the southern production plants, along often poorly-surfaced and slow roads. Indeed, cement prices are higher in the North than any other part of the country. In Wa in Upper West, a bag of cement costs ¢79,800; in Bolgatanga in Upper East, a bag is ¢77,800; and in Tamale in the Northern Region, a bag costs ¢74,600, according to Ghacem’s projections. In reality, they are ¢20,000 to ¢40,000 higher.

Clearly, the area has little chance of developing if the cost of development remains so high.

Further south, and especially in the metropolises of Accra and Kumasi, the construction industry in Ghana had been booming. Urbanisation and escalating population growth has seen our urban areas multiplying manifold in recent years, with fresh houses and commercial buildings springing up along highways and pushing city boundaries constantly further into the country.

Indeed, demand for housing far outstrips supply in many parts of the country, making property development a lucrative enterprise for both local and foreign investors, who are gradually coming in to take up the mammoth task of housing Ghana’s people.

Now, however, cement prices threaten to quell that growth, with production costs, and the price of cement, making property unaffordable for all but the very few. Government targets on homeownership, on tackling the country’s mounting homelessness problem, will go unmet.

Targets on business and industrial development will fall by the wayside; the drive to attract economic development to the country from outside will come to nothing, as investors chose instead to go to cheaper destinations elsewhere. The cost of cement price increases will be paid by far more than just those within the construction industry; it will be felt by us all.

The problem demands an imaginative solution, which brings a shift within that industry towards developing more local materials, which will not be subject to the fluctuations of a worldwide distribution change, and which will not be subject to massive freight costs into and around the country.

In January, The Statesman carried a series of special reports and investigations into the property market in Ghana, both residential and commercial. We reported how, in areas of Central Accra, it is now virtually impossible to find a family house for less than half a million dollars – with real estate developers and property experts citing the cost of construction, as well as the cost of land, as major explanatory factors.

Kojo Addo-Kufuor, Chief Operating Officer of Ghana Home Loans, pointed to the reluctance of buyers and of property developers to explore alternative building materials.

"Most builders and buyers are set on a traditional brick-and-mortar house, but people have to be prepared to consider other options,” he said at the time. The major problem with cement is that the basic materials such as lime have to be imported from outside the country, he explained. Attempts to harness new building materials in Ghana are still in their early stages, but include the introduction of hydroform blocks – a South African technology which is fast taking off in other parts of the continent.

The bricks can be interlocked and dry-stacked, making them quick and easy to assemble and, most importantly, they are made of only 10 percent cement and 90 percent laterate soil, which can usually be found within the vicinity of the building site rather than shipped hundreds of miles at the cost of thousands of dollars.

Today, The Statesman calls on Government to take seriously these new methods, and to take seriously the development of other new technologies.

It does not make sense for a country in need of so much, and such rapid, construction, to be so heavily dependent on imports from abroad and so vulnerable to the unpredictably of the market.

The only solution to the cement price crisis will be to develop a construction industry which is not dependent on cement at all.

The Building and Road Research Institute under the Council for Scientific and Industrial Research was set up by Government as commercial-oriented research and development organisation in the construction industry.

Its mission is to profitably provide research and development products, processes and services to the building and road sectors and for the socio-economic development of Ghana – a laudable goal, if only it was equipped to deliver.

The current crisis in the cement industry highlights the need for more serious investment in the area of science and technology, and more sustained efforts to fund sustainable local solutions for the building industry.

Such progress must be made in order to reduce construction costs; to make the price of property in this country a building brick rather than a stumbling block to the nation’s development.