‘We don’t break even’ - Packaged water producers distress call on Akufo-Addo

The Sachet and packaged water producers’ association has called on President Nana Addo Dankwa Akufo-Addo to make a move to solve the cedi’s rapid depreciation. According to them, the packaged water industry depends heavily on imports therefore the constant depreciation of the cedi directly affects their ability to make a profit. They stated that the recent increase in the price of the commodity does not cover even their costs. “Obviously, the last price announced in September is nothing to even meet the break-even cost of the packaged water industry. As a result, the industry is accumulating debt in its operations to levels that are no more sustainable,” a release on October 20, 2022, noted. The association cited the increase in the prices of petroleum products, high taxes on imports and depreciation as the major factors causing the rate of increase in production. They want government to: 1. Reduce taxes on the packaging materials for the industry. 2. Review the import and customs duty formula for the raw materials imported for the packaged water industry. 3. Freeze payment of VAT, Excise tax, and other taxes on the packaged water industry. 4. Freeze government charges and fees for the packaged water industry and if possible, subsidize the Electricity and water bills of the industry. 5. Remove completely all taxes on reusable jar bottles used for the dispensing machines. 6. Call on the bank of Ghana to be circumspect in the adjustment of the policy rate which is increasing the cost of borrowing from the banks to the businesses. Read the full release below DISTRESS CALL!! PRESS RELEASE BY THE PACKAGED WATER PRODUCERS THE NATIONAL EXECUTIVE COMMITTEE OF THE NATIONAL ASSOCIATION OF SACHET AND PACKAGED WATER PRODUCERS (NASPAWAP) WISHES TO SEND A DISTRESS CALL TO THE GOVERNMENT ON THE EFFECTS OF THE FALL OF THE GHANA CEDIS TO ALL MAJOR TRADING CURRENCIES ON THE PACKAGED WATER INDUSTRY AND THE NEED FOR GOVERNMENT TO ACT FAST TO AVERT THE TOTAL COLLAPSE OF THE INDUSTRY. This press statement is a distress call to the government to as a matter of urgency to take strategic steps to stabilize the exchange rate between the Ghana Cedi and the major foreign trading currencies. The packaged water industry relies heavily on imported plastic pallets/granules used in the manufacture of Polythene films and pet bottle preforms, which are used to package the treated water for consumers. It is important to note that Packaging alone forms about 60% of the production cost for sachet and bottled water. Diesel fuel used for distributing the packaged water to market centers for consumers was around 15% of the product cost as of the third quarter of last year. Due to the high increase in Diesel and other petroleum products, Diesel fuel for distributing packaged water to consumer centers now exceeds 25% of the product price. Electricity cost which used to be around 15% of the product price has increased to 20% of the product price as a result of the recent increase in utility tariffs. All the above sums up beyond 95% per the last packaged water new prices announced in September 2022 without considering the cost of capital, Salaries and wages, taxes, bank charges, regulatory fees, machine and equipment cost/depreciation/parts replacement, distribution vehicles and its maintenance costs and other overheads. Obviously, the last price announced in September is nothing to even meet the break-even cost of the packaged water industry. As a result, the industry is accumulating debt in its operations to levels that are no more sustainable. In practical terms a year ago in October 2021, 1kg of Slf plastic roll was selling at 14.5 Ghc (Including Excise tax, VAT, NHIS, Get fund, etc). A Year on, the same 1Kg of Slf plastic roll is now selling at 29ghc Ghc (Including all taxes, ). The Slf roll is the film that is used to package sachet water, also known as sachet rubber. The outer bag was sold on average at 22GhP for printed bags last year in October 2021. A year on this October. 2022 each printed bag is selling at 45GHp. The PET preforms for producing bottles were sold at 17GHp for the 13 grams last year in October 2021. In October 2022, the same preform is selling at 35GHp. The reverse osmosis Membranes, used as the filtering medium, were selling last year in October 2021 at 2500 Ghc on the average for the 80/40 type. In October 2022 it is selling at 5500ghc. One could deduce from the analysis that the packaged water industry's producer price inflation is over 80%. The cost of Diesel and the continuous fall of the Ghana cedi against its major trading currency is taking a toll on the packaged water industry and we are calling on the government to take urgent steps to ; 1. Reduce taxes on the packaging materials for the industry. 2. Review the import and customs duty formula for the raw materials imported for the packaged water industry. 3. Freeze payment of VAT, Excise tax, and other taxes on the packaged water industry. 4. Freeze government charges and fees for the packaged water industry and if possible, subsidize the Electricity and water bills of the industry. 5. Remove completely all taxes on reusable jar bottles used for the dispensing machines. 6. Call on the bank of Ghana to be circumspect in the adjustment of the policy rate which is increasing the cost of borrowing from the banks to the businesses. The packaged water industry was at the forefront during the covid 19 outbreak, potable water is an essential product, and the industry goes to all lengths to ensure that it provides premium products to the public it is important that as we are in distress, the government comes in to provide the needed support to ensure good health of the citizens. We wish to call on the public to take a keen interest in all the analyses expressed above. Calling on the packaged water producers across the country to shut down production and distribution for a couple of days to press home our demands may have been the obvious thing to do but as an essential product provider, we are mindful of the repercussion of such action and the health hazards, it can pose to the citizens, more especially as most of the river bodies are highly polluted and most households depend on packaged water as the main drinking source, reported by the Ghana Statistical Service. It is important that the public, CSOs, the Head of faith-based organizations, NGOs, the Parliament of Ghana, Diplomatic missions, and Others, support the packaged water industry by calling on the government to heed the plight of the industry. The leadership of the packaged water industry will continue to update the public on the challenges, and if the government did not attend to the call by a week from today, we will have no option but to pass on the cost to the public and possible shutdown of production and distribution for a week across the country. Watch the latest episode of BizTech below: SSD/FNOQ