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ManufacturingWed, 5 May, 21

Amidst Surge in Taxes and Fuel Prices, What to Expect from the Manufacturing Sector

Amidst Surge in Taxes and Fuel Prices, What to Expect from the Manufacturing Sector

The new month, May, was initiated in with increment in prices of some goods and services including fuel across the country as some central government taxes took effect.

The increase in fuel prices in particular was due to the 1 percent COVID-19 Health Levy which took effect on May 1, 2021.

It is obvious that an increase in fuel price affects every sector in the country, therefore, it will have a ripple effect on the real estate industry, especially the manufacturing sector.

Petrol and diesel are the most patronised gasoline merchandise in Ghana, and any growth generally impacts shipping fares and influences price of standard goods.

The National Petroleum Authority (NPA) instructed oil trading companies to impose new taxes on fuel (17 pesewas) effective May 1, 2021 and a subsequent reduction of same on May 4, 2021 by 8 pesewas.

This will increase the price of litres by about 9 pesewas. Prices may be higher than expected because, some merchants are expected to increase their profit margins by 3 percent as part of the weekly receipt for the second installment.

Importation cost in the country has always been on the rise which affects industry players importing raw materials for manufacturing such as; uncooked fabric referred as clinker that is used to produce building materials like cement in the country.

There has also been an upward push in cement prices due to high cost of imported clinker in recent times.

A bag of cement which was previously selling at GHS41 (US$7.02) is now being sold at GHS50.

With the prospects of rising demand and on-going input cost inflation, cement Manufacturing Companies are likely to announce another price hike.

It must be noted that, a bag of Dangote or Ghacem cement brands is now being sold at GHS50 (US$8.68) whilst Diamond Cement and different manufacturers on the other hand are presently around GHS48 up from GHS47 and GHS45, respectively.

Although there has been a rate hike in cement prices, yet there is corresponding high demand for same.

This high demand also culminates into high demand for more of the essential uncooked fabric referred to as clinker, that is used to manufacture cement.

The clinker is not produced large locally hence, it is imported for production.

Given the sequential rise in petroleum prices and a sharp spike in goods and services, materials such as; aluminum, woods, steels, iron rods and other manufacturing material will be affected. 

Speaking to some Block Factory Companies along Kasoa Road, “the increase in fuel price and cement will definitely affect the production of blocks for building. Same number of cement bags will be bought with a price increase which will affect our income hence, blocks produced price must also be increased to meet our income target. There are two types of blocks for building, the one called Sand goes for GHS2.80 to GHS3.5 and the other type- Quary, ranges from GHS4.80 to GHS6.0 depending on the cement quantity. Now due to the cement price increase, we will be forced to add not less than 50 pesewas to gain profit”, they lamented.

Some Manufacturing Company owners also added that, construction companies are expected to pay higher prices to complete their projects in the coming months.

 

Source: Nana Agyei Sikapa Ofosu-Manu (Real Estate Times Africa)

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