SMEs rail against fuel price hikes

Small and Medium-Scale Enterprises (SMEs) across the country have bemoaned government’s recent decision to impose a 27 percent tax on petroleum products, calling the move insensitive to needs of the business community.

Prices of various petroleum products have seen a 27 percent jump since last Monday, amid instability of the cedi and a continuous decline in world prices of crude oil.

The move is seen by many SMEs across the country as a potential threat to the survival of their businesses, coupled with the fact they have been plagued by many challenges in the past year.

In an interview with the B&FT, Yaganoma Baatuolku -- owner of Wanjo Foods, an SME that produces beverages and fruit juice -- said the fuel price hike is going to dwindle the company’s profit margins and push some of them out of business, as the current economic conditions do not allow room for increments in the price of their products.

“Obviously, it is going to affect businesses and entrepreneurs are going to suffer the most. It is going to be difficult for most of us to increase our prices and be competitive within the market. So either we are going to break-even constantly, or we are going to run at a loss.

“For instance, my business has seen a constant reduction in profit margins and it is going to get worse. So, I believe the fuel price hikes will push many SMEs out of business because they can no longer absorb the high cost of doing business in the country,” she said.

According to madam Yaganoma, she formerly spent GH?200 to transport the necessary raw materials needed for production of her beverages. In addition to this, she delivers her products free of charge in a bid to win more customers. But the fuel price hikes will push her to charge for deliveries in order to reduce the cost burden.

Another business owner, Baba Yabdow -- also a producer of fruit juice in the Northern Region, has lamented the utility tariffs’s effects and the accompanying hike in fuel prices on his business, adding it will take some divine intervention to save some small businesses from collapse.

“Before the price hikes, I used to spend an average of GH?600 on fuel daily in distributing my products to my customers. I also spent an average of GH?200 on electricity daily for production. All these plus water forms part of my critical daily expenses.

“So hiking these prices all in the space of one month is very insensitive on the part of government, and it is going to collapse some small businesses. It is only by divine intervention that some of us are surviving,” he said.

Commentary by some experts relates and agrees with the feelings expressed by the SMEs. Dr. Mohammed Amin Adam, Executive Director for African Centre for Energy Policy (ACEP), has labelled the move by government as a ‘punitive’ action at a time world market prices of oil are falling sharply – adding that the move cannot be justified.

“We have challenges understanding why apart from paying higher electricity tariffs consumers are also being asked to pay debts accumulated from inefficiencies on the part of VRA and ECG, as well as government’s negligence of its responsibility to the utilities through petroleum levies,” Dr. Amin said at a press conference in Accra.

In response to public dissatisfaction about the price hikes and reports parliament was misled by government that fuel prices would not go up more than 5 percent, Casiel Ato Forson, Deputy Minister of Finance, debunked such claims and said the new law is one of the best passed by the House.

“We did not deceive parliament. Parliament didn’t do a poor job, Parliament did a wonderful job. What Parliament did was to give approval to a law, and it is one of the best laws ever made in this country,” he said.