A former President of the Association of Ghana Industries (AGI) and Chief Executive Officer of Tropical Cable and Conductor, Mr Tony Oteng-Gyasi, says domestic manufacturers are still losing out to their foreign counterparts following the unwillingness of mining firms and other companies to procure their raw materials locally.
The development is in spite of the availability of world-class substitutes in the country and a local content regulation that make it mandatory for these firms to source their produce from domestic producers, he said in an interview.
Speaking on how cheap imports, lax regulations and trade malpractices were undermining the growth of local industries, Mr Oteng-Gyasi said the disregard for the local content regulation was rampant in the mining sector, where the firms were largely allowed to import their raw materials, including cables, duty-free.
“Because the local content regulation is not strictly enforced, the mining companies only buy a fraction of what they should be buying from local manufacturers.
“And this is because the local content rules are not strictly enforced. What makes it even worse is that many of the mining companies have agreements with the government that allow them to import things duty-free.
“So if they can bring things duty-free but we pay duty on our raw materials and everything, then it means that when they import, it can be cheaper than what they will get locally and that is why they have the inclination to import rather than buy locally,” he added.
He said the reluctance of the firms to procure from local manufacturers was an affront to the regulation, which is meant to boost the manufacturing sub-sector by creating a market for local goods.
The Nigerian example
Beyond the mining sector, Mr Oteng-Gyasi also wondered why contracts for infrastructure development allowed contractors to import their goods duty-free, knowing very well that such an action would discourage local consumption.
“It is important that when we are doing these foreign transactions, either for building airports or extending electricity, we make sure that the local content is reflected in all aspects of the agreement, right from the finance and loan negotiation stage.
“If you do not put it in there at the loan negotiation stage and the loan is approved, then you make your local content rules useless because the loan and the agreement will say that the contractor can import whatever he/she needs,” he said.
Given that loans are repaid by the country, he noted that contractors should not be given the latitude to choose where they would procure their raw materials from.
Using an example to buttress his point, Mr Oteng-Gyasi said sometime back when Nigeria was building its floating, production, storage and offloading (FPSO) vessel for oil production, the government at the time decided that although it was to be built in Singapore, cables to be used would be procured from Nigerian manufacturers.
“At least, I know one company that had to build a brand new factory to produce those kinds of cables, medium voltage (MV) cables. They produced the cables, shipped them to Singapore and installed in the FPSO.
“This is when you see a government that is serious with local content and that is the only way to develop your country,” he stated, adding that although the production of the FPSO was long completed, the new factory was still available, contributing to development.
Although a plus to the companies, Mr Oteng-Gyasi said the trend was hampering the growth of the manufacturing sub-sector and constraining growth in individual companies.
This translates into limited job creation, he added.
He blamed the practice on the inability of implementing agencies and the government, in general, to strictly enforce the local content regulation by whipping companies in line.
He, therefore, called for proactive measures to help reverse the trend to boost manufacturing.
“The Minerals Commission and the Chamber of Mines should strictly enforce local content rules,” he said.
He was confident that such an action would help inspire domestic manufacturers to invest for increased production.