Withdraw the cement price regulation - CUTS urges trade minister

A leading Research and Public Policy think tank CUTS International Accra has called on the Minister for Trade and Industry, K.T Hammond to withdraw the Ghana Standards Authority (Pricing of Cement) Regulations 2024 from Parliament and rather pursue the Competition and Fair-Trade Practices Bill of 2022 as the later has the effect of not only addressing sector-specific issues but that the entire market from any unfair and anti-competitive conduct.

In a statement signed by the West African Regional Director of CUTS International, Appiah Kusi Adomako Esq, the consumer protection organization opined that while they appreciate the effort that the Minister intends to bring the prices of cement down, the approach for dealing with this must be grounded on evidence and not lead to market distortion.

“Whilst in the short term, consumers in the country may be able to see cement prices stabilizing or plummeting because of the tsarist effort by the government. We must equally be concerned about the medium and long-term implications of such an approach.

“When the government intervenes in a deregulated market and comes with price controls, it has the potential to scare industry players as well as potential investors.” the statement explained.

It further stated that “in the long run, some of the cement players may decide to exit the market because they do not find it profitable, deterring potential new entrants.

If care is not taken the fourteen cement companies in the country could be reduced to one or two or they may be emboldened to form a cartel or price-fixing gang. This can take us back to the antediluvian days of the GHACEM monopoly or the GHACEM-Diamond duopoly”.

CUTS International believes that Ghanaians must be worried about how regulations are crafted in this country without ministries and agencies undertaking a robust regulatory impact assessment to understand the potential of unintended consequences. Like the financial sector clean-up which ended up with the decimation of indigenous banks, and savings and loans from the banking landscape.

The Consumer Protection organization further explained that now, the majority of the high street banks in the country are owned by foreigners, who expatriate their profits and dividends leading to the depreciation of the cedi.

The Problem of the Cement Industry

Minister K.T Hammond in an interview said that the total installed capacity of the local cement producers in the country is about 11 million metric tonnes and the demand is not up to the supply limit.

The Minister believes that there could cement cartels in the country. But far from the issue of demand and supply, the Minister failed to admit macroeconomic factors like inflation, interest and exchange rates that conspire against cement producers. It is not only cement that the prices have gone up. The prices of almost all goods in the country have gone up: iron rods, nails, paint, used and brand-new cars, roofing sheets, clothing, and even plot of land.

The statement emphasized that “everywhere in the world, standards authorities like the Ghana Standard Authority (GSA) has a duty to set and enforce technical standards as contained in Act 1078. Nowhere in the world is a standard agency involved in price setting and price control.

The Cement Price Committee comprises six scientists headed by the Director General of the GSA Professor Alex Dodoo. Price regulations fall within the competencies of economists and mathematicians. Take for instance, the Energy Commission is a technical regulator of the energy sector whilst economic regulation of electricity falls under the competencies of the Public Utility Regulatory Commission (PURC).”

It further stated that whilst the LI may succeed in the short run to tame cement prices, the LI cannot resolve the issue of cartels, if any in the cement industry. Cartels can conspire to control the supply of essential goods just to cause the prices to go up.

The LI cannot resolve the issue of price fixing in the industry, if any. Currently, price fixing in Ghana is not an offence with the exception of Section 44 of the National Petroleum Act 2005, Act 691 which criminalizes the conduct of price fixing, cartels, market sharing and other restrictive trade conducts within the petroleum downstream sector.

CUTS hinted that there are lots of businesses and trade associations engaging in restrictive trade and anti-competitive conducts that tend to harm consumers and other businesses.

All of these conducts cannot be prosecuted because Article 19 (11) of the 1992 Constitution mandates that “no person shall be convicted of a criminal offense unless the offence is defined and the penalty for it is prescribed in a written law.”

CUTS believes that a Competition law and fair-trade law is the surest bet to addressing this problem. The law when passed will promote fair competition, protect consumers, ensure a level playing field for businesses, and foster innovation and economic efficiency.

It will also prevent the formation of monopolies and the abuse of dominant market positions, ensuring that no single entity can control a market to the detriment of competitors and consumers. Since 2006, Ghana has a draft National Competition and Fair-Trade Practices Bill, and the Consumer Protection Bill with the Ministry of Trade and Industry.

“It is through a functional competition regime that will safeguard the free market against the tyranny of unfair trading practices and to bring efficiency to the market.” the statement added.