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Opinions of Wednesday, 6 April 2016

Columnist: Attah, Maximus

Is someone listening to the sachet water producers?

By Maximus Attah

The National Association of Sachet and Packaged Water Producers (NASPAWAP) recently held a press conference at which they outlined a series of challenges facing the association following the implementation of the new utility tariff regimes. The press conference was so revealing and very interesting as it clearly demonstrated that the current tariff hikes clearly disadvantages purified water producers.

Growing up, drinking water was carried in buckets and earthenware pots and served to consumers in cups or in transparent polythene bags in the major cities and towns. It was then an interesting sight watching young, agile women carrying open pans filled with iced water roaming the lorry stations with very interesting call outs to prospective patrons. In fact, only one or a few steel or plastic cups were used by the drinking water vendors to serve many customers. The health hazards were obvious.

Emergence of Sachet Water
Although there have been a couple of purified bottled water producers in the country for quite a while, the concept of sachet water production as an industry emerged some two decades ago. They have become a saviour to many un-served or underserved communities, which did not have the privilege of enjoying the services of the Ghana Water Company Limited (GWCL). Until recently, the people of the Adentan Municipality for example depended heavily on sachet water and other unconventional means to obtain clean water for domestic use.

The sachet and packaged water producers have therefore become a major source of relief to the people. They provide direct employment to some 100,000 hands who would have otherwise been unemployed with its negative consequences for the nation. The multiplier effect of the direct jobs created by these companies is enormous. The public sector of the Ghanaian economy is believed to employ between 800,000 and one million people. This means that the NASPAWAP alone employs at least 13 per cent of the size of the total workforce in the public and civil services combined.

This is clearly a sub-sector of the economy that is ignored at our own peril. Apart from the economic gains from employment creation, the health benefits of drinking purified water have been given a further stamp of authority by researchers at the University of Ghana who in a recent research report indicated that “sachet water is much safer and has been identified as an antidote to child diarrhoea”.

Water Pricing Regime
In the recent utility price hikes, the Public Utilities Regulatory Commission (PURC) further categorised water consumers into six bands of domestic, government institutions, commercial, industrial, sachet water, and special commercial (bottled treated water) segments respectively. It is worth noting that the last two categories saw the highest increases in tariffs.

In the new six-tier water tariff categories, industrial consumers include companies in beer manufacturing and those engaged in the production of hard liquor. The commercial consumer rate jumped from GHS3.8 per cubic litre (or 1,000 litres) to GHS8.36, representing a 120 per cent increase. Industrial consumer tariffs moved from GHS3.8 per 1,000 litres to GHS10.7, representing a 165 per cent increase.

The new rate for the newly-classified sachet water category also increased from GHS3.8 to 11. 21 per cent representing a 195 per cent whereas that for special commercial (or purified bottled water) increased from GHs10.07 to GHS50.76, representing a whopping 400 per cent plus.
From the above statistics, something is clearly amiss. Majority of the over 4,000 members of NASPAWAP are owned by indigenous Ghanaian entrepreneurs who need to be encouraged. On the average, a 300 millilitre bottled water sells at GHS1.00 (one Ghana Cedi) on the retail market whereas the same volume of beer for example sells at an average of GHS4.00 (four Ghana Cedis).

It is a fact that many more raw materials are required in the production of alcoholic beverages than are required in the production of sachet and bottled water.

But the obviously discriminatory pricing regime seems to clearly weigh against the sachet and bottled water producers. In fact, it seems there is a deliberate or mistaken intent to encourage the production of alcohol. It is not illegal to produce alcohol. But given the health implications on the population of the uncontrolled consumption of alcohol, it is clear that something must be done to mitigate the destructive effect of flooding the market with more liquor, with this type of price differentiation in the water supplied by the GWCL.

Petitions to PURC
The association is believed to have made several representations to the regulatory authority the PURC. Indeed, documents cited showed that it wrote to the PURC on February 4, 2016 requesting for a meeting to present its position on the new tariff hikes. The PURC has however not responded to the request.

It would be prudent that the PURC gives audience to the association and hears the members out. The tariffs might have been gazetted but dialoguing with these local entrepreneurs could yield other benefits than an immediate reduction in the new tariffs.

One of the largest players in the industry claimed that they very much appreciate the need for upward adjustment in utility prices. But the rates are killing their businesses. This particular producer who is based in the Tema industrial enclave employs some 200 workers.

He claimed that the other debilitating factor militating against the continuous stay in business is the fluctuating nature of the power supplied to their enclave. “When we were getting 24 hours off and 12 hours of power supply, we could be assured that when the 12 hours came on, we could produce. But currently, the power is so dim that you are unable to produce at full capacity”, he claimed.

This particular producer noted that they had to purchase a step up transformer to boost the power supplied to the factory. Because according to him, the current at his factory is sometimes as low as 190 volts, which is hardly adequate to power the heavy equipment at the factory. He claimed that the fluctuating current had destroyed the step up transformer he bought with hard currency.

He indicated that all the members of the association were looking forward to meet with the PURC to lay all their cards on the table. “The environment has become so unfriendly that all the factors seem to be working against the local entrepreneurs, particularly in our sub-sector. We may go out of business within the next few months if the discriminatory pricing regime is allowed to stand”, he said.

These might seem like the musings of a pampered observer. But the reality of the situation is that the collapse of the sachet and bottled water companies would send massive shockwaves through the economy. Already, the unemployment rates are excessively high for a developing economy. Time to sit down with these companies is now.

We cannot afford to see thousands of our youth employed by these companies join the ranks of the teeming unemployed youth. The social cost will be dire for all of us.
When the financial crisis hit the USA, President Barack Obama put together a bailout package for some of the largest auto companies. That singular act revived America’s car manufacturing industry, which would have completely collapsed, if the authorities had not stepped in but allowed the market forces alone to determine the direction of the businesses.

Ghana must also protect its own when it matters most. If we can afford to provide generous tax reliefs to foreign businesses operating in the country under the guise of attracting foreign direct investments (FDIs), there is every reason we must provide a special dispensation to allow our burgeoning local industries to grow and be able to compete with international giants.

The over liberalized nature of the economy presently allows for the importation of all manner of items from used underwear to worn out water closet buckets. Another worrying sign on our streets and supermarket shelves is the variety of imported packaged water brands.

In the midst of all the fresh water bodies, we cannot afford to be importation drinking water. In fact, it is believed that the imported packaged water is cheaper than the locally produced ones. Offering the local entrepreneurs some minimal incentives may be the first step to making them competitive. Let us act now.