Cement Industry disputes Ghana Standards Authority’s new price regulations

The construction sector in Ghana is facing significant turmoil as the Chamber of Cement Manufacturers, Ghana (COCMAG) strongly opposes the newly proposed Ghana Standards Authority (Pricing of Cement) Regulations, 2024 (L.I.). The Director-General of the Ghana Standards Authority (GSA), Prof. Alex Dodoo, along with some members of Parliament, advocate for the regulations as a means to ensure industry transparency. However, COCMAG criticizes the regulations as a forceful attempt at price control.

Unilateral Authority and Lack of Recourse

Key points of contention are found in regulations 3(4), 3(5), and 3(6) of the L.I., which grant a government committee of scientists at the GSA the power to reject a cement producer’s reported price without explanation or an opportunity to appeal. Moreover, producers are forbidden from selling cement unless the committee approves their price, with non-compliance potentially leading to license suspension.

Questionable Expertise in Price Regulation

COCMAG questions the suitability of the price control committee (PCC), which is mainly composed of six scientists, including Prof. Dodoo, a pharmacist. While their expertise in maintaining quality standards is recognized, there is skepticism about their understanding of market dynamics necessary for fair price setting in the cement industry. Concerns are raised about whether they can effectively balance production costs, global and local inputs, and the industry’s overall health better than the free market.

Lack of Industry Consultation

The cement manufacturers highlight the lack of meaningful consultation during the drafting of these regulations. A last-minute meeting was called via WhatsApp on a Sunday evening for the following Monday, with no agenda provided. The CEOs were surprised to find media present at the meeting and were informed that the Minister was unavailable, raising concerns about transparency and the potential for media misrepresentation.

Challenges Faced by the Cement Industry

The industry emphasizes the difficulties it has endured, such as the cedi’s 104% depreciation since 2022, significantly increasing production costs as 77% of cement inputs are dollar-denominated. Despite these challenges, the industry has only raised prices by 48% over the same period, absorbing much of the cost increases. Without this absorption, the price of cement would be $2.30 (GHS 35) higher per bag.

Competitiveness of the Ghanaian Cement Industry

Ghana boasts one of the most competitive cement industries in West Africa, with 14 manufacturers compared to Nigeria’s 12 and Togo’s five. Despite the competitive landscape, Ghana’s cement prices are among the lowest in West Africa, although 30% of the cost is attributed to government taxes, levies, and service charges.

Potential Negative Impacts

COCMAG warns that the new regulations could lead to reduced production and shortages if the imposed prices do not cover production costs. This scenario could also result in job losses within the cement industry and related sectors. Additionally, investment in expanding production capacity may be discouraged if fair market prices cannot be determined, potentially leading to future shortages.

Broad Opposition to the Regulations

COCMAG is not alone in its opposition. Various professional bodies, including the Ghana Chamber of Construction Industry, GREDA, Importers and Exporters Association of Ghana, and CUTS International, have voiced their concerns about the regulations’ impact on the industry and consumers.

Call for Collaborative Solutions

COCMAG urges the government to reconsider its approach and engage in constructive dialogue with the industry. They advocate for transparency in cost structures, long-term solutions such as promoting local sourcing of raw materials, and open communication to ensure a sustainable and affordable cement supply for Ghana.