President of Ghana Union Traders Association (GUTA), Dr Joseph Obeng, has disclosed that traders in the country cannot “overprice” their goods in a bid to remain competitive.
According to him, despite the increment in prices of goods, the constant nature of the purchasing power of consumers makes it impossible to put high stakes on goods.
“The problem is that for the importing community and trading community is the fact that you can also not overprice yourself out of competition. So, nobody is even deliberately going to increase his prices; it is not possible. So, you see that you are losing… and you cannot overprice yourself. The purchasing power of the consumer is limited.
“Cable used to be GHC90, now they are selling it almost GHC170. Look at the quantum difference; how much more can you go for a consumer whose purchasing power is just constant? So, if you do that, it means you’re surcharging unnecessarily; because you cannot sell and your businesses are going to collapse”.
Increment in prices of goods
That notwithstanding, Dr Obeng explained that, “we have to pass on the cost to the final consumer but is that the solution?”
“Because the consumer too, his purchasing power is limited. Not that his purchasing power increases along [with] the price increase. So, if they become fatigued, it also translates into our turnover and suppresses our turnover, thereby, leading to collapse of our businesses”.
He explained the “two fold” nature of the price hikes globally, where commodity prices have gone up “astronomically”.
By this, almost all raw material used for production have gone up quite high, thereby, “affecting our FOB prices”.
“The production of our goods itself is now prolonged. If you used to produce your goods within one month, now… it will come to about three months before the goods are produced”.
Explaining the reason, Dr Obeng cited “challenges with logistics” as reasons for delay in production.
Furthermore, the GUTA President situated high freight and shipping line charges as reasons for the surge in prices of goods.
Weak raw material supply
Commenting on the hikes, Professor Peter Quartey, an economist, noted that the surge in prices of goods and services is to be “expected”.
He explained that some variables such as the increment in VAT levy have led to the current phenomenon.
“So, certainly your import duty, how much you pay will certainly go up. Obviously, that will be passed on to consumers. Then we have supply sides constraints as well in terms of how much is being supplied to the market. Raw materials now is not as easy as it used to be to sourced because we import a lot of raw materials. We use very few local [substitutes]; we import quite a lot of them. Now, you realize that some are running shifts because of COVID-19, so you cannot operate at full capacity”.
Additionally, Prof Quartey indicated that “we are not at full capacity and therefore raw materials supply is not at its peak”.
Moreover, the economist maintained that when the current demand outstrips supply, “you’ll find prices also going up”.
“Then also freight cost… these days we are told that even some of the direct routes that the containers used have changed because of import restrictions. So, that again translates to higher prices for consumers, of course we’ve imported inflation. A lot of the goods we consume are also imported and once prices go up in the western market and we import them, we are importing inflation”.
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