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Opinions of Wednesday, 30 May 2012

Columnist: Anim-Mensah, Alexander

Motor Vehicle Importers’ and Ownership Dilemma

- Is it in Ghana’s Development Interest?

Motor vehicles are very important means of transport and a key component for running a nation’s economy. With this perspective, motor vehicles are basic necessity for a nation’s economic growth. They create jobs and bring home revenues. Revenues from import duties, shipment costs, vehicle and parts sales, jobs for repairers, sale of fuels, oils, and other vehicular products. Also, they provide jobs such as road constructions and maintenance, commercial motor vehicle driving and washing. Finally, motor vehicles speeds up economic activities and save lives.

Despite the said benefits, motor vehicles are rather considered luxury, however small the engines horse power or the age in the light of Ghana’s urge to develop. This luxury classification puts the motor vehicle owners’ into higher tax brackets, putting more economic burden on the owners. Many importers, prospective buyers and owners are thus faced with dilemmas in relation to vehicle importation, the vehicle type to buy, and the cost of ownership. Some explanation given for the luxury classification of motor vehicle includes the high cost of the vehicle and hence considered expensive. Others say the low income of Ghanaians, coupled with the high cedi to dollar exchange and inflation rates are contributory. In addition, some believe that some of our policies and procedures, exorbitant importation cost, high vehicle operating and maintenance costs, states of the roads as well as traffic are among some of the obstacles preventing Ghanaians from enjoying the benefits of vehicles.
This article highlights some of contributions to the high cost of vehicle ownership in Ghana. It is known that ownership cost of a motor vehicle imported into Ghana is comprised of the vehicle cost and, operating and maintenance costs. The vehicle cost in turn is comprised of the actual vehicle cost, profits, import duty and other fees. The operation cost is affected by the fuel consumption and cost per gallon, tolls, etc. The operation cost could also be high because of the high cost of fuel, high fuel consumption from the slow paced traffic as well as the low engine efficiencies. The maintenance cost includes the cost of oils, tires, cost of repairs, servicing, and others. Also, the maintenance cost could be high, because of the bad nature of the roads which attracts regular maintenance and shortens vehicles life. Other issues include finding seasoned mechanics for repairs, cost of repair, finding the right spare parts and cost, use of appropriate diagnosis, etc. The import duty is a substantial part of the actual vehicle cost and depends on the year of manufacture, the engine capacity, the make/model and accessories such as power windows, sunroof, and air-conditioning; the purpose of the vehicle -private or commercial, or belonging to an exempt group, etc.
What are some of the dilemmas of the vehicle importers and people who purchase these imported vehicles? While some new vehicles with more efficient engines, less gasoline consumption, less pollution and lower relative operational cost attracts lower duty; the high vehicle cost, the nature of the roads (i.e. unmotorable, potholes, red roads), slow traffic pace, repair cost, finding the right parts, finding a seasoned mechanic, etc becomes the dilemma. Large engine capacity such as the V6s and V8s, known to reflect vehicle longevity often attracts high duty and has high operational and maintenance costs not to consider the slow paced traffic and nature of the roads. Commercial vehicle generally have lower duty however the high fuel consumption, high fuel cost, slow paced traffic makes their payback time or return on investment not very attractive. However, large capacity engines consume more fuel which increase government earning from fuels.
Depending on the purpose of the vehicle being private or commercial, one has to make a conscious analysis on which vehicle to buy to make the ownership economically feasible. The bad state and nature of the roads, low efficiency vehicles, high fuel cost, environmental pollution, slow paced traffic, poor road safety, etc make citizens of developing countries not benefit from the advantages of vehicles.
The dilemma of importers include how to raise money to pay the exorbitant duties and other importation fees to avoid possible delays to attract fines or auctioning of their imports if they are unable to pay the duty, fees and/or storage charges. The dilemma of prospective buyers are on the cost of the vehicle after the duty and profits, nature and state of the roads, operation cost, slow paced traffic, finding of a seasoned car repair shops, repair cost, general maintenance, life of car, etc. If the plan is to use the vehicle for commercial activities; the question becomes how economically feasible is the ownership if the money was borrowed from a bank? When will the vehicle be paid off and start making profit?
Note that, the high duty may attract lower efficiency vehicles, inferior vehicles, as well as older vehicles for importer to afford the duty and be able to sell these vehicles. Low efficiency, older and some inferior vehicles reflect possible high vehicular pollution which Ghanaians have to pay for any associated pollution disease. With the above said the following are some questions;
• What will happen if vehicles of the same type i.e. the base model and ones with accessories such as sun roof, power doors, etc. attract the same duty?
• What is the reason behind vehicles with accessories being charged more duty than the base if the cost of the vehicle already reflects the cost? It appears as if importing a car with accessories is considered as an “abomination”. Don’t we want us to enjoy current technologies while vehicle repairers in Ghana get exposed? Is handling the issue?
• What will happen if the duties are reasonably lowered for very current vehicles in addition to increasing the efficiencies of the procedures and processes at the harbours? I believe the government will still earn the expected monetary target since that will attract neighboring countries importation through Ghana reflecting on more imports, more jobs and more revenue money for the government.
• What is the main purpose of the imports duty? Is it to target dollars from importers from abroad or to make life bearable for Ghanaian’s? Is part of the revenue for road construction, pay harbour workers and revenue for the government for the habour upkeep, etc? Note that the duty reflects substantial part of imported product selling prices in Ghana. In addition, the import duty is tied to the current dollar exchange rate and most Ghanaians have very low incomes in the light of the depreciating cedi. Moreover, most imports are sold to or purchased by the locals who are the majority. With the cedi depreciating the purchasing power of Ghanaians decreases making the economy and life unbearable if the cedi is not stabilized. The high duty cost will make vehicles expensive affecting transportation and national development.
• What will happen if most of the slowest procedures in harbours are automated? Will it not increase the clearing efficiency and possibly dimmed low system tempering and promote clearance fairness?
• What will happen if systems and procedures are put in place to deal with the laborious processes at the harbours to make processes more efficient and effective?
• What will happen if importers who delay to pay their duties be given a second chance with collaterals to pay other than auctioning their import over about 1000% lower than the actual cost excluding transportation? Are these auctions open to the public?
Subsequently, the state of the roads as well as their capacities could be among some of the limiting factors making us not enjoy the benefits of vehicles; however there are several places in-land where transportation is a big problem. If the government is not rich enough or slow at executing some of these functions because of finances and procedure; I believe policies can be instituted to attract local investors to adopt some of the poor existing roads or franchise new roads at attractive packages including investment paybacks. I believe the government in addition to other local agencies could propose specifications, and monitoring to suite Ghana’s future plan. I believe Ghanaians investing in Ghana will assist the economy rather than them investing outside.
Better roads and networks at this time of Ghana’s development should not be used as a political tool rather Ghana’s development should be considered as key to improving our standard of living among others. It appears as if increasing vehicles in Ghana could make transportation impossible at the existing state of the roads, capacities and its networks. However, what plans are in place for the roads to meet the growing populations if we ought to develop and enjoy the benefits of vehicles?
From the above, it appears that whatever happens at the harbour affect the government, and inhabitants of Ghana (i.e. vehicle ownership). I believe promoting made in Ghana goods should go with promoting policies and procedures to suit the lives and situations of the people of Ghana. I believe there are a lot more benefits in vehicles if we pursue better roads and its networks as well as policies to enhance the life style of the ordinary person. It is so surprising to know how some developed countries depend on vehicles and transportation. I believe pursuing activities related to vehicles could enhance Ghana’s economy while we enjoy the benefits. I believe systems and policies can be put in place such that it is a win-win situation in Ghana. God bless Ghana.

Alexander R. Anim-Mensah, PhD
Chemical Engineer
Cincinnati, OH USA