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Is Kufuor A Free Marketer or ....

Mon, 21 May 2007 Source: Bannerman, Nii Lantey Okunka

IS KUFOUR A FREE MARKETER OR AN ECONOMIC ARM-TWISTING GENTLE GIANT ??

The NPP, like any other political party, is not short on slogans and epitaphs. Lately, it is not unusual to hear NPP blowhards spouting slogans like “property owning” or “free market” democracy. Hurray! Indeed, the NPP, a true vanguard of the Danquah-Busia tradition, is known for its rhetoric on private industry. Is it time to match rhetoric to deeds? “Reality is a bitch”, quipped one gentleman I share a forum with. I am here to test his assertion that seems to have a nice ring to it. I want to, through constructive criticism, question how the deeds of this government jive with its high sounding rhetoric. Let me confess that there are times when I doubt if the NPP is true to the free market values it trumpets. For example, why would a free market government want the government to fund political parties? What about its mass housing musings? Then there is the resurrection, if not a quite surge, of the same projects for which socialist Nkrumah was unrelentingly vilified. Don’t get me wrong, I am not and will never be against efforts that help the suffering poor. I just don’t think that we have a good record when it comes to government run activities or monopolies. We have to help the poor but in a more enabling way! Also, I contort and convulse when the shriek does not match the act. So, lets go dancing!

To set the inquisition in motion, here are a few background facts to keep us all appraised. “Accra, April 25, GNA - Government on Wednesday warned that it would not hesitate to institute price controls to protect the interest of consumers if distributors and retailers continued to sell cement at arbitrarily high prices. Speaking at a meeting with stakeholders in the industry, Trade and Industry Minister, Mr Alan Kyerematen said although the government would not want to return to the days of price regulation because of the ideals of the market economy, it would have no choice in taking such a drastic action when cheating of consumers persisted.” Since when has this cheating been going on in Ghana? Since when did demand and supply mean cheating Mr. Kyeremanten? We don’t seem to learn from our own history! How has price controls helped us? Every secondary school kid in my day had to learn demand and supply in economics. If and when there is a decrease in supply, with a corresponding increase in demand, price can only go up if all things remain equal (Ceteris Peribus). So, I expect to hear such threats from military dictators not free market paragons! Reality must be a flaming bitch indeed!

As if the above temptation is not enough, the president of Ghana topped his minister’s act by dragging into the castle, a delegation, led by the Chairman of the Board of Directors of GHACEM, Mr Jean-Marc Junon, who is also the Chief Operating Officer of Hiedelberg Cement in charge of Africa. Why is the president of Ghana so ticked off to the extent that he directly goes after a particular company in a free market economy as his party wants us to believe? Is this the resolve of a principled and tough president or just a frustrated man? Is our president’s action, the solution to the spiraling rise in prices of cement in a free market economy? Which other non-performing companies will have their executives face the wrath of our gentle giant in our evolving free market and property owning democracy? Can you imagine socialist Nkrumah doing something like this and getting a pass from our sword bearing free market gladiators? Since when has our president called in decadent CEOs of our own Ghanaian companies and warned them about cheating, non-performance or being ungrateful partners? Ohh, what if such warnings were issued to our moribund Ghana Airways? Could we have saved it? The problem with Ghacem, as seen by Kufour, is common with almost all state monopolies operating in our dysfunctional economic and political system. So, why not call in the CEOs of ECG or Ghana Water Corporation and give them the same warnings? No? Are they not state monopolies? The president probably has more power over them than this Norwegian company!

My friends, let us continue on the facts trail and see what else there is to this interesting plot. The fact is that, Ghacem, is a monopoly in Ghana. According to Nehemia Owusu Achiaw’s report that appeared in the Daily Graphic dated April 2nd 2007, “Ghacem Limited was founded by the Government of Ghana in collaboration with Norcem AS of Norway, on August 30, 1967.” This means that Ghacem was founded by the NLC, a military junta, which was inspired and fully supported by the Danquah-Busia tradition. Nehemia goes on to tell us this: “In 1993, the government of Ghana sold 35 per cent of its shares to Scancem (formerly Norcem). As a result of the sale, Scancem had 59.5 per cent shares leaving the government with 40 per cent and 0.5 going to a local investor. In 1997, the government sold five per cent of its 40 per cent shares holding to workers of the company. Two years later, the government sold the remaining 35 per cent to Scancem, bringing the shareholding of the Norwegian company to 93.1 per cent with the workers having five per cent with the remaining 1.9 per cent going to a local investor. In 1999, Heidelberg Cement in Norway took over Scancem and made GHACEM a subsidiary of the company.” As we can see from this narration, it was dictator Rawlings, whose social democracy sloganeering P(NDC) government, sold off Ghacem to foreigners. The least said about such misguided and mischievous miscalculations by Rawlings and his coterie, the better! What did we do with proceeds from the sales anyway?

My first instinct, barring the current cement crises, is to question why Heidelberg Cement of Norway continues to enjoy a monopoly in Kufour’s free market Ghana. It may be understandable if our government is socialist and the company is owned by the state or red book toting workers. I can also understand if the monopoly status is designed to help an infant company grow. So, when Rawlings inherited this company, there may have been no need to discontinue its monopoly status. Even so, I would modify its monopoly to relatively exclude only foreign companies. In the same breath, I will encourage other Ghanaian companies to compete in the local cement production arena. What mystified me about the president’s behavior was his knowledge that this foreign company enjoyed an underserved monopoly. Instead of asking for parliamentary oversight and conjuring a long lasting solution that should include the immediate revocation of monopoly status, the president rather, behaving like a benevolent dictator, used the monopoly status of Ghacem as leverage to force this private enterprise to lower prices. This act defies economic sense! Is the president within his right to order a private company to reduce prices? I don’t mind a president who uses the bully pulpit to champion national causes but I am not convinced that this is one such opportunity. No! Not if the president believes in free market as heralded by the NPP.

My friends, as a Ghanaian who is also trying to build a house, I stand to gain if cement prices are lowered immediately. These undue price hikes continue to throw a wet blanket our efforts of own property in Ghana. However, I am not going to allow my selfish interest to animate or addle my support for what I think is a gross overstep of presidential powers. Besides, I am more interested in systemic solutions with enduring bite than the ephemeral bullying tactics of an angry gentle giant. Notice that this is not the first time the president has done this. According to Nehemia, “President Kufuor recounted a personal appeal he made to Heidelberg Cement in Norway in 2004 to reduce the price of cement, which consequently led to the reduction in the price of cement by $2 by GHACEM.” So, what punishment did this company suffer for price gouging Ghanaians? Is it not crime to price gouge? All they get is an angry presidential request to lower prices? In my book, this amounts to cuddling irresponsible economic behavior. We are tired of being fleeced by foreigners!

We need these foreign companies to play fair instead of dancing to the whims of an angry president. This dance between the president and Ghacem is very troubling. Again, the motive surely is a good one but the creeping power abuse or arm-twisting is a distorting of the market and true free marketers and democracy lovers must be concerned. Another troublesome concern is the deaf ear that the president turns on the concerns of the company. While the executives share the concerns of the president, they did not hesitate to tell him in no uncertain terms that the loss of production that led to price hikes is directly linked to the energy crises that he watched balloon. So, the rising cement price is party due to Kufour’s own negligence of our energy situation. This is among other causes like hikes in freight cost due to increase in energy prices worldwide and spiking clinker cost. These are bald face economic facts that the president and his free market amen choir cannot deny.

PROBLEMS SOLVING: Reality is a flaming bitch and the NPP is learning on its feet. Sometimes, not fast enough for some of us. Sometimes the cost of such mistakes is overwhelming as we’ve seen from the energy crises. When did the NPP notice the spiraling cement prices and what did they do quickly enough to put a kibosh on the situation? If you think the monopoly situation is bad enough, think about the 40% import duty that existed up until this nagging cement itch. Why on earth do we have a 40% duty on imported cement in an underdeveloped country? Is this part of the effort to keep a foreign monopoly regime in place? Just think about this for a minute! Do you believe a Ghanaian company will be given a monopoly in the sale of lets say Kente cloth in Norway? Why do we always have to stoop like some flaming or blistering idiots to foreigners? The least we can do is to see them as partners. What really is the need to protect a foreign owned company from competition in our current economic arrangement? Don’t they have competition in Norway?

As a first step, the government must move with God’s speed to revoke the monopoly status of this Norwegian company and any such companies! Ghacem is not owned by Ghanaians and there is absolutely no reason for the monopoly status. What is the reason for protecting Ghacem from foreign competition in Ghana? Why should cement from Togo, a neighboring African country attract a 40% import tax so that a Norwegian company can run roughshod in Ghana? Why do we hate our brothers and self so much? What we need in the cement industry and many others in Ghana, is healthy and pro-growth competition. The people of Ghana need price breaks resulting from vigorous competition so that they can not only get a bang for the cedi but also save whatever savings they accrue from such. Get rid of the monopoly situation permanently and invite other investors to compete. This is what free marketers do in real life! Secondly, the government and private investors must partner to hasten research and extraction of limestone deposits in Ghana. This will not only help save cost in the transport of raw material from overseas but also create jobs locally. The latter will require leadership in the settlement of chieftaincy addled land disputes that continue to hinder work in this direction. You would think the president would personally either appoint mediators or get involved to help make progress in this direction instead of ordering private companies to reduce prices in a free market system. The president must note that his effort to woo investors will suffer serious consequences if he continues to flout and insult the forces of the free market by threatening private investors to reduce prices in the face of mounting production challenges.

Folks, I cannot hide my dismay when it comes to the performance of parliament. I am terribly disappointed that this arm of government has been neutered by the executive. The more I look, the more I think a skirt no blouse or a blouse no skirt vote may just help invigorate our toddling democracy. Parliament must be quick to exercise its oversight when situations like this arise. Parliament should be the organ of government asking questions about the price hikes and how we can avoid such in the future. How can our parliament sit and watch the president usurp its powers? This is not just about solving the current crises but also learning the hard lessons so as to inform what we do going forward. We need a parliamentary inquiry into what led to the rise in cement prices now. In this instance, parliament abdicated its duty and the president, who is part of the problem, is acting up a storm in the wrong direction. How can the average Ghanaian afford a 50 kilo bag of cement for $10 or more in a country where people earn less than $1 dollar a day? A property owning democracy indeed!!!

Lastly, let me say that the NPP has enjoyed the goodwill of Ghanaians. They were voted into power to solve problems not make them worse. The days of high-sounding rhetoric are over. The NPP must deliver or face the consequences! Yes reality is a bitch but this is one flaming bitch they claim to own. Free market is not like a shirt which you wear one day and take it off the next. Free market is a way of life. Free market has its challenges and distortions. True market democracies do not jump ship when there is a distortion in the market. Instead, free marketers roll up their sleeves and deal with such distortion. Let us refrain from supporting foreign monopolies and economic arm-twisting. Instead, let us shore up the structures and institutions that come together to make a free market work seamlessly. Let us put real freedom in free market. Lets call the NPP on its own turf! Ghana’s interest must always get the first ride!

Nii Lantey Okunka Bannerman
(Also known as the double edge sword)


Views expressed by the author(s) do not necessarily reflect those of GhanaHomePage.

Columnist: Bannerman, Nii Lantey Okunka