Frédéric Albrecht
Chairperson of the Chamber of Cement Manufacturers, Ghana (COCMAG), Frédéric Albrecht, has stated that the proposed fixing of cement price by the government would do little to address the main cause behind the increment.
According to him, about 80% of local production costs linked to cement manufacture are related to the local currency exchange rate.
Mr. Albrecht was speaking at a stakeholders’ forum organised by the Ghana Chamber of Construction.
The meeting was convened to discuss the government’s proposed Ghana Standards Authority (Pricing of Cement) Regulations 2024 that was formally presented to Parliament in early July 2024.
The association argued that the cement sector has not been consulted properly over the proposal, stressing that introducing it could have negative consequences for the construction sector as a whole.
It says that imported clinker is subject to numerous taxes, and that the average price of cement has actually lagged behind the rate of inflation.
The government is dealing with an economic crisis that forced it to default on its external debts in 2022 and ask the International Monetary Fund (IMF) for support. This has led to depreciation of the local currency and high inflation.
Minister of Trade and Industry, Kobina Tahir Hammond, said in late June 2024 that the government wanted to intervene in cement pricing to protect consumers from what he described as the ‘haphazard’ increment in cement prices by manufacturers.
A legislative instrument doing just that was presented in Parliament on July 2, 2024.
When the Ministry of Trade and Industry started a consultation on regulating the cement sector in late 2023, it calculated that the country produced 7.2Mt of cement in 2021 and that the country had an overcapacity of 3.5Mt. This gives the country an estimated cement production capacity of just below 11Mt/yr.
Some sense of the growing costs that the cement sector in Ghana is facing can be seen in the Ghana Statistical Trade Report for 2023. Clinker was the country’s third biggest import by value at US$206m. It was only exceeded by diesel and other automotive oil products.
The Ghana Statistical Service (GSS) reported that most of the country’s imported clinker in 2023 came from Egypt, South Africa and its neighbours in West Africa. Both Dangote Cement and Heidelberg Materials flagged up the country’s economy as being hyperinflationary in their respective annual reports for 2023.
Argument and counter-argument over cement pricing is prevalent around the world, especially in Africa, an article first published on globalcement.com said. Fellow West African country Nigeria, for example, has endured plenty of very public dialogue and debate about the price of cement.
In Ghana’s case, it seems more likely than not that factors beyond the control of the local cement companies are driving the prices given the grinding-dominated nature of the sector with lots of different companies involved.
Negative currency effects and inflation look more likely to be driving cement prices than anything else, although one should always be wary of the potential for cartel-like behaviour by cement producers.
The economic crisis in Ghana certainly fits the bill for the conventional introduction of price controls on selected commodities, but getting the fine tuning right could be difficult in practice.
Fixed prices will reassure consumers in the short term provided supplies hold. Beyond this, the actual causes of the high cement prices should emerge in time.