Business News of 2014-07-07

Mahama criticism hits crescendo

Pressure on President John Mahama to tackle deteriorating economic conditions has built up to a crescendo, after Tuesday’s public protest was followed by a statement from the Trades Union Congress (TUC) reprimanding government for its inability to ease the hardships of Ghanaians.

The TUC lamented the continuous slide in the cedi, unpaid salaries, rising inflation, energy shortfalls and high taxes, which it said have increased the pain of workers and their families and fuelled a perception that “nothing is working” in the country.

“The economic situation is getting worse by the day. The cedi continues to depreciate in spite of the exchange rate controls,” said the TUC statement signed by Secretary-General Kofi Asamoah.

“As prices keep rising, nominal incomes stagnate, leading to a drastic fall in real incomes. Workers are losing their jobs as businesses fold-up. In the mining sector, nearly 3,000 workers are being sent home. Unemployment among university graduates keeps rising. The energy crisis is worsening, and the taps are not flowing as potable water continues to be rationed.”

President Mahama, engaged in a difficult balancing act of controlling spending while securing economic growth, income and jobs, has given public sector workers their lowest wage rise in the Single Spine era in a bid to manage a wage-bill that devours more than 50 percent of tax revenues.

Workers received a 10 percent cost-of-living allowance calculated on their basic salary -- meaning the overall pay rise is less than 10 percent -- despite 14.8 percent annual inflation, a 27 percent fall in the cedi, huge hikes in utilities prices and a spate of new taxes.

An acute shortage of fuel and the apparent leadership failure during the Black Stars’ participation in the World Cup in Brazil have added to public disenchantment.

Earlier last week, protesters calling themselves Concerned Ghanaians for Responsible Governance marched to the Flagstaff House to submit a petition that listed a whole array of complaints, from corruption to rapid economic decline, to the President.

The protesters cited electricity shortages, poor roads, high taxes, unfunded public schools and hospitals, and corruption among issues requiring the urgent attention of the President.

The petition they presented to Valerie Sawyerr, the Deputy Chief of Staff at Flagstaff House, also questioned the transportation of US$3million in cash by air to Brazil to pay appearance fees for the Black Stars, who had threatened to boycott the tournament if the money was not delivered physically.

The private sector has also been haranguing government over concerns similar to those ventilated by the TUC and the protesters -- and business confidence is at its lowest since the second quarter of 2010.

The government’s announcement that it will spend part of a World Bank education loan to provide free sanitary pads to girls has also triggered a public backlash, with many opining that the government has misplaced its priorities.

An education group, the Coalition of Concerned Teachers, said the decision is a “big joke” and questioned why government would supply sanitary pads when schools can’t afford chalk and other teaching materials.

International ratings agencies have meanwhile been slashing their creditworthiness assessments of Ghana due to the large fiscal deficit and aggravating public debt situation, which they warned raises the risk of debt distress if not reined-in.

Following in the steps of Fitch Ratings, Moody’s Investors Service lowered Ghana’s rating to B2 from B1 and maintained a negative outlook on the rating to signal the likelihood of a further downgrade in future.

Despite the mounting pressures, government has insisted it will not seek financial assistance from the International Monetary Fund to solve its problems.

But despite its benefits, an invitation to the IMF is not likely to assuage negative public sentiments as there is concern that the Fund’s typically austere financial-support conditions would deepen the economic pain of the public.

Source: B&FT
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