The Food and Beverages Association of Ghana (FABAG) has issued a stern warning to the Ministry of Finance and the Ghana Revenue Authority (GRA) over the recent reclassification of sugar as a “dual-purpose,” product, in a high-stakes industry briefing recently held in Accra.

The association cautioned that the current tax trajectory is pushing local manufacturing toward a breaking point. Under the new fiscal framework – part of the VAT Act, 2025 (Act 1151) and recent excise amendments – industrial sugar used as a raw material is now being taxed at the same rate as retail sugar intended for direct household consumption.

This policy shift has triggered a cost surge across the light manufacturing sector, with local producers of beverages, confectionery, and baked goods reporting skyrocketing overheads. FABAG General Secretary, Mr. Samuel Aggrey, noted that this lack of tax differentiation is effectively penalizing value addition.

“By taxing industrial sugar at the same rate as retail sugar, local manufacturers say production costs are skyrocketing… making Made in Ghana products like locally produced drinks and foods increasingly uncompetitive against cheaper, untaxed imports”
Mr. Samuel Aggrey, FABAG General Secretary

The dual-purpose classification is a major departure from previous industrial policies that provided tax rebates or exemptions for raw materials imported for manufacturing. According to FABAG, treating a metric tonne of sugar destined for a bottling plant the same as a small bag on a supermarket shelf, the state is significantly increasing the cost of production at the factory gate.

This move comes at a time when the President John Dramani Mahama administration is pushing for a 24-hour economy driven by industrial expansion. However, FABAG argued that the current tax regime acts as a “direct disincentive,” to the very factories the government hopes will run three shifts a day.

Mr. Aggrey noted that the immediate consequence of this fiscal policy is a “price pass-through,” to the Ghanaian consumer, as manufacturers grappling with 15% to 20% increases in raw material costs, are being forced to adjust their wholesale prices to maintain thin margins.

This market impact is already visible on retail shelves, where the price of locally produced fruit juices, soft drinks, and biscuits has seen a marginal but steady climb over the last quarter. FABAG warned that if the dual-purpose tax is not reviewed, the festive seasons of 2026 could see record-high food inflation driven by these artificial input costs.

Furthermore, the association highlighted that this tax structure creates an unlevel playing field. While local manufacturers are compliant with the GRA’s rigorous tracking, the market is being flooded with grey imports – finished goods smuggled across the borders that bypass the sugar tax entirely.

These products are often sold at prices far below the production cost of a legitimate Ghanaian factory, giving birth to an economic sabotage that is threatening thousands of industrial jobs, as companies consider downsizing their operations to survive the liquidity squeeze.

Value Chain Disruption

The crisis extends beyond the factory walls and into the Agribusiness sector, where many local food processors have entered into forward contracts with Ghanaian farmers to supply fruit and other ingredients.

With the cost of the sugar component in their recipes rising, these processors are finding it difficult to honor their financial commitments to the farmers. This value chain disruption threatens the stability of the rural economy, particularly in regions where out-grower schemes for pineapple, citrus, and mango are the primary sources of income.

FABAG argued that if the secondary cost of processing becomes too high, manufacturers may be forced to reduce their intake of raw agricultural produce, leading to post-harvest losses for farmers. This contradicts the government’s aim of boosting local production.

For the pivot to production to be successful, “the tax environment must distinguish between consumer staples and industrial feedstock.” Without this distinction, Ghana’s agro-industrial revolution risks being strangled in its infancy by fiscal bureaucracy.

In response to the crisis, FABAG is proposing a tiered tariff system that recognizes the specific needs of the manufacturing sector. Mr. Samuel Aggrey suggested that the GRA implement a “Verified End-User,” program, where legitimate manufacturers with certified factories are granted a lower excise rate on bulk sugar imports.

This would ensure that the state continues to collect revenue from the retail market while protecting the industrial backbone of the country. He noted that this model has been used successfully in other emerging markets to foster a competitive manufacturing environment.

The association also called on the Ministry of Trade, Agribusiness and Industry (MoTAI) to intervene as a mediator between the private sector and the revenue authorities, as there is a growing sense of policy inconsistency among business owners, who feel that the drive for domestic revenue mobilization is being conducted at the expense of industrial growth.

FABAG noted that while they support the government’s need to expand the tax base, it must not be done through predatory classifications that stifle the 24-hour production cycle and Ghana’s economic ambitions as a whole.