Storm brews in Ghana’s construction sector over new cement pricing regulations

Ghana’s construction industry faces a potential crisis as the Chamber of Cement Manufacturers, Ghana (COCMAG), voices strong objections to the newly proposed Ghana Standards Authority (Pricing of Cement) Regulations, 2024 (L.I.). Despite the Director-General of the Ghana Standards Authority (GSA), Prof. Alex Dodoo, and certain Parliament members advocating for the L.I. as a measure to ensure industry transparency, COCMAG argues it represents an overreach into price control.

Unilateral Power and an Unclear Process

The contentious issue centers on regulations 3(4), 3(5), and 3(6) of the L.I., which grant a government committee at the Ghana Standards Authority the authority to reject a cement producer’s reported price without explanation or opportunity for appeal. Moreover, cement producers cannot sell their product without the committee’s price approval, and non-compliance can result in license suspension. The regulations state:

“The Committee shall, where the Committee is not satisfied that the price of cement submitted by the cement manufacturing entity or any entity involved in the cement industry conforms to the factors stated in sub-regulation (1) of this Regulation, request that cement manufacturing entity or any entity involved in the cement industry to review the price submitted in order to conform to the factors stated in sub-regulation (1) of this Regulation.”

Questionable Expertise for Price Setting

While the goal of price transparency is commendable, there are concerns regarding the composition of the price control committee (PCC), which is primarily made up of six scientists led by Prof. Dodoo, a pharmacist. While their expertise in quality standards is undeniable, the cement industry questions whether a committee dominated by scientists can effectively balance production costs, market dynamics, and the long-term health of Ghana’s cement sector better than the free market.

Industry Questions Lack of Consultation

COCMAG emphasizes that these regulations were drafted without meaningful consultation. Although some claim a meeting was planned, the facts suggest otherwise. Cement companies received a last-minute WhatsApp message on a Sunday evening for a meeting the following morning, with no agenda provided. CEOs were surprised to find media present, raising concerns about transparency and potential misrepresentation. Ultimately, the CEOs were informed that the Minister was unavailable to meet them.

Fairness Amidst Challenges

Despite accusations of profiteering, the cement industry faces significant challenges. The cedi’s depreciation by 104% since 2022 has drastically increased production costs, with 77% of cement inputs being dollar-denominated. Nevertheless, the industry has only raised prices by 48% during the same period, absorbing much of the increased costs. Without this absorption, the price of cement would be $2.30 (GHS 35) higher per bag.

A Model of Competition

Ghanaians should know that their cement industry is one of the most competitive in West Africa, boasting 14 individual producers compared to Nigeria’s 12 and Togo’s five. Additionally, Ghana’s cement prices are among the lowest in the region, although 30% of the cost build-up is paid to the government in taxes, levies, and service charges.

Unfair Targeting and Unintended Consequences

COCMAG argues that the Minister’s actions unfairly target the cement industry. While other sectors have seen far higher price increases, the cement industry faces price control measures that could lead to several negative outcomes:

• Reduced Production and Shortages: Government-imposed prices that do not cover production costs may force manufacturers to reduce output, hindering construction projects.
• Job Losses: Reduced production could lead to job losses within the cement industry and related sectors.
• Discouraged Investment: Investors may be less likely to expand production capacity if they cannot determine a fair market price, potentially leading to future shortages.

Industry Solidarity Against the Regulations

COCMAG is not alone in opposing the L.I. Several professional bodies, including the Ghana Chamber of Construction Industry, GREDA, the Importers and Exporters Association of Ghana, and the consumer protection organization CUTS International, have all expressed concerns about the proposed regulations’ impact on the industry and Ghanaian consumers.

The Way Forward: Collaboration, Not Coercion

COCMAG urges the government to reconsider its approach and engage in constructive dialogue with the industry. Transparency in cost structure, a focus on long-term solutions like promoting local sourcing of raw materials, and open communication are essential for ensuring a sustainable and affordable cement supply for Ghana.