Players in the import trade business have asked for the introduction of policies and regulations to curtail the repatriation of profits by multinational firms operating in the country.
They, subsequently attributed the depreciating cedi to the practice in which foreign companies repatriate profit and spend foreign exchange in the importation of capital goods for reinvestment.
The players, led by the Ghana Union of Traders Association (GUTA) and the Importers and Exporters Association (IEA), are unenthused about the flagging cedi, which has so far dipped nine per cent against the major foreign currencies in four months.
The Ghana Investment Promotion Centre Act, 2013 (Act 865) guarantees unconditional transferability in freely convertible currency of dividends or net profits attributable to investment made in the enterprise and the payments in respect of loan servicing where a foreign loan has been obtained.
The centre also guarantees the transfer of fees and charges in respect of a technology transfer agreement registered under the Act; and the remittance of proceeds, net of all taxes and other obligations, in the event of sale or liquidation of the enterprise or any interest attributable to the investment in the enterprise.
Keep a watch
However, the President of GUTA, Dr Joseph Obeng, in an interview with the GRAPHIC BUSINESS on February 20 in Accra, insisted that cedi woes was attributable to the practice in which foreign companies repatriate profit and spend foreign exchange in the importation of capital goods for reinvestment and, therefore, the laws must be reviewed.
He explained that the capital investment by foreign companies in the economy coupled with their reinvestment in capital goods was largely responsible for the abysmal performance of the cedi against the major foreign currencies.
Towards that end, he cautioned the government to keep a watch on the cedi, as it take steps to introduce measures to prevent repatriation of profit by multinationals.
This, he said was because the capital of its members have reduced significantly over the past one year as the local currency cedi continues to weaken on the trading market.
“The trend has made it difficult for our members to trade--as the quantum of funds needed to trade the same quantity of goods a year ago could not do so today, thereby putting pressure on their capital and reducing their profit margins.”
He, therefore, asked the government to deploy strong measures to stabilise the local currency to make business activities enjoyable for traders in the country.
According to him, traders lose millions of cedis when the dollar keeps appreciating against the local currency, adding that prices of goods automatically shoot up when the dollar keeps gaining more strength over the cedi.
“Traders are uncomfortable when prices of goods increase but have no option especially when they are losing millions of cedis,” he said.
Dr Obeng attributed the recent depreciation to the repatriation of dollars by the Chinese investors in Ghana who left to their countries to celebrate the Chinese New Year.
His views were, however, corroborated by the Executive Secretary of the Importers and Exporters Association, Mr Samson Awingobit Asaaki, who indicated that the impact of the depreciation of the cedi would trickle down from the importer to the final consumer in terms of price increases.
“The impact of this development is that from import clearance and the final consumer prices will increase while there will be an update at the customs clearance system, shipping companies would be pegging GHȼ6 to a dollar which will increase every payment at the ports,” he said.
He explained that at the end of the day, goods that were expected to be bought at GHȼ10 would now cost GHȼ12 because of the market indications.
Extend import duty calculation period
Mr Asaaki underlined the need for the government to review the date used in calculating the exchange rate for duty on imported goods at the country’s ports.
According to him, extending the period for which duty rate on imported goods were calculated against the dollars from one week to six months would help reduce the impact of the cedi depreciation on their operations.
“The cedi situation has overshadowed our concerns for the high import duties, which is beginning to be a source of worry for our members and the business community in general.
“A major challenge currently confronting importers is how to get more cedi to buy dollars for their business. This is primarily due to the rising cost of imports as a result of the continuous fall in value of the cedi against the dollar,” he said.