Underpinning all kinds of industry, light or heavy is one of the heaviest industries of them all – the iron and steel industry.
Crucially, Ghana is arguably the best positioned country in the West African sub region as a whole in this regard. As at June this year, Ghana’s steel industry had total installed capacity of some one million metric tonnes and this has since been significantly increased further by the commissioning of a US$80 million production facility – the largest single steel manufacturing plant in the sub region – by B5 Plus at Tema. Meanwhile local demand for steel products is only about 350,000 metric tonnes
Conversely, demand in most of Ghana’s sub-regional neighbours significantly outstrips local demand. This gives Ghana the potential to be a major exporter of steel products.
Indeed, in 2018 Ghana’s exports of iron and steel circles, rods, sheets and billets increased by 106 percent with these products accounting for 3.08 percent of the country’s total non-traditional exports, almost matching the 3.35 percent contribution of cocoa powder.
Curiously however, current data reveals that importation into Ghana of iron rods and steel coils in particular are on the rise, indicating a totally unnecessary use of direly needed foreign exchange.
To correct this absurd situation this newspaper calls on government to urgently take deliberate steps towards curbing the importation of steel products that local industry already has excess capacity to produce and at the same time introduce measures to support the increase of Ghana’s steel product exports around the continent under the new dispensation created by the commencement of the African Free Trade Area Agreement.
To be sure, Ghana’s steel industry is facing problems of two distinct types, but both of which ultimately translate into problems of cost competitiveness.
One is the cost of power. The steel industry is heavily power intensive and the cost of electricity in Ghana is inordinately high compared to that in competing countries with regards to steel products production. Here the passing on of the cost of take or pay contracts adds to the well documented technical and financial inefficiencies in the electricity generation, transmission and distribution value chain. Indeed, the effect of this in curbing the growth of Ghana’s steel industry vividly illustrates the real cost of Ghana’s lack of energy cost competitiveness.
The other is the failure of the state to create a level playing field for steel industry players; for instance income tax and import duty evasion by importers of steel products is rife. It is the basic responsibility of the state to plug such loopholes that penalize genuine businesses and reward illegal practice that cost both their law abiding counterparts and the Ghanaian economy as a whole.
This newspaper however wants the state to go even further and adopt an outright protectionist stance for Ghana’s steel industry by placing a complete ban on the importation of steel products that the country has excess productive capacity in. Here enlightened national self-interest should over ride the principles of international trade liberalization which other countries willingly abandon whenever it suits them.
Ghana signed up to those principles on the assumption that they would be beneficial; where they clearly are not, as in the case of the steel industry they should simply be done away with.
This is simple common sense.