GHACEM, World Bank At War

The recent cement crisis that hit Ghana a couple of months ago, as a result of the temporary shutdown of the production plant of West African Cement (WACEM), producers of Diamond Cement, which shook the entire construction industry to its foundation, seems to have taken an ugly twist, following what observers see as a needless attempt by Ghana Cement Company (GHACEM) to engage the World Bank. A response, delivered by the Strategy and Corporate Affairs Director of GHACEM, Dr. George Dawson-Ahmoah, and captioned by the local media as, ‘GHACEM Replies World Bank On Cement Production Monopoly Allegations’ may not only be seen as rather confrontational but also in many ways, a demonstration of the insensitivity to the plight of the millions of Ghanaian consumers, who virtually went through ‘hell’ during the height of the crisis.

Thankfully, the situation is abating and things are expected to return to normal soon, but honestly, the attempt to place records where they may not be necessary may not be the best for the future of the nation’s fragile industry. While this piece is not an attempt to, in any way, hold brief for the global financial institution, the response by Dr. Dawson-Ahmoah, is likely to attract a series of other responses; a development that would not do GHACEM any good. It can be recalled that following the incident where the transformer of Diamond Cement Company was struck by lightning on April 26 this year, the Aflao-based cement manufacturing company was forced to shut down production for close to about four weeks. The temporary shortfall of some three million bags of cement over the period on the local market led to an overall retail price hike of 85 per cent from GH¢14 to GH¢25.

In the heat of the crises, both the President of the Ghana Real Estate Developers Association (GREDA), Dr. Alex Tweneboah, and the Chairman of the Technical Committee of the Association of Building and Civil Engineering Contractors of Ghana (ABCECG), Mr. Rockson Dogbegah, expressed grave concerns, especially in the light of the fact that a number of construction companies were laying off workers as a result of the crisis. The leaderships of both associations were also quoted by the media as linking the unfortunate development to the monopoly in the cement industry and expressed similar misgivings on the matter.

For its part, The World Bank, feeling uncomfortable with the continuous dominance of the two manufacturing companies, GHACEM and WACEM, in the production and sale of cement in the country, called for urgent steps that would liberalise the market to engender competition and drive down prices. In June 19, 2012 under the headline “Break Duopoly On Cement Production”, a World Bank led economist, Mr. Sebastien Dassus, reportedly told financial journalists in Accra that the nearly 90 per cent hold on the market by the two companies suppresses competition in the sector and has direct consequences on the supply and pricing of the product to the building and construction industry, describing it as ‘nonsensical’.

“I do not see any justification for a monopoly in the cement market in Ghana. It makes no economic sense,” Mr. Dassus said.

According to him, having a de-facto duopoly in the manufacturing and sale of an essential commodity like cement is not good for the country, especially given the rising housing and infrastructural deficit.

He noted that with Ghana’s status, as a developing nation that is currently undertaking many infrastructural projects, ‘liberalising the cement sector will help drive down prices and create more jobs for the teeming youth. The more there is competition in the sector,’ he said, ‘the better for consumers.’ As if that was not enough, the ABCECG noted that the government needed to break the de-facto duopoly rather than leaving the nation’s construction and building sector to the whims and caprices of the two companies.

“We need a conscious effort to get other cement factories into the system because where you have only Diamond Cement and GHACEM controlling the market, it means that builders and contractors will continue to be at their whims and caprices,” he stressed.

He continued: “Currently, GHACEM comfortably controls close to 60 per cent of the market share. Diamond Cement, on the hand accounts for about 35 per cent of total cement sale and production bringing to over 90 per cent the stake of the two companies in the industry.

“Fears are that the dominance of the two companies in the sector, however accidental it may be, makes it possible for them to ‘technically’ determine prices of the product nationwide.”

Then out of the blue came the ‘bombshell’ from GHACEM which was posted on the Internet on June 26, 2012 with the caption “GHACEM Replies World Bank on Cement Production Monopoly Allegations.”

It read inter alia: “The Strategy and Corporate Affairs Director of GHACEM, Dr. George Dawson-Ahmoah, stated emphatically that the company does not have total control in the building and construction industry as portrayed. According to him, the monopoly of GHACEM was broken 12 years ago by the emergence of other production companies like WACEM, producers of Diamond Cement who operate from Aflao in the Volta region.” GHACEM does not enjoy monopoly in the cement industry; monopoly is a thing of the past now especially because there are other players in the cement market. There is the Greenview International Limited, operating in Tema community 2; Savanna Cement, operating from Buipe in the Northern Region; and the Fortress International, which imports bagged cement among others,” Dr. George Dawson-Ahmoah noted.

Dr. Dawson-Ahmoah reiterated that Ghana has a trade liberalization policy, which allows business entities interested in importing any product or establishing manufacturing units to do so, provided they go through the right procedures. He said GHACEM is open to any fair and equal terms competition so far as the manufacturing and supply of cement in Ghana is concerned, adding that GHACEM is not interested in sabotaging other competitors because their company will continue to work hard to maintain its position as the leading manufacturer and supplier of cement in the country.

However, GHACEM’s response was wrong when Dr. George Dawson-Ahmoah threatened: “GHACEM is not afraid of competition but will resist any unfair competition imposed on them” even though it has not been GHACEM’s making that for the past 45 years the market has been slanted in its favour.

This does not sit well with many Ghanaian observers in the diaspora who see this as an attempt to make mincemeat of the duopoly claim and thereby insinuating that all is well with the production and marketing pattern of cement in Ghana. They argue that if, with its 30 per cent hold on the market, a four-week production shutdown of WACEM could prompt an 85 per cent price hike, then one can only wonder what would have happened if the same circumstances had been experienced by GHACEM which has over 60 per cent hold on the market. Secondly, they wonder at how Dr. Dawson-Ahmoah would refuse to admit that the economic situation, where just two organisations control a particular raw material is monopoly or duopoly.

We should not forget that when we talk of monopoly, as was done by the World Bank official, it doesn’t mean there are no minor competitors in the system, otherwise where do we place oligopoly?

At any rate, assuming without admitting that Mr. Dassus erred in his monopoly claims, in what way does that threaten GHACEM to the extent that the Strategy and Corporate Affairs Director would have to ‘respond’ the way it did, captured by the media? And by the way, who is not aware that for close to half a century there had not been any meaningful competition in the sector?

As much as the so-called ‘‘response’ is of little relevance to the consumer, as prices of cement are yet to reverse to what they used to be before the crises, it is clear that it woefully failed to address the roots of the problem, if is not due to monopoly.

Finally, increasing the production of GHACEM to meet demands, as was promised by Dr. Dawson-Ahmoah does not take away the question of monopoly.