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Importers and players in Ghana’s Food and Beverage sector are sounding the alarm, warning that their businesses are on the verge of collapse, with the threat of massive layoffs looming.
The primary cause of this impending crisis, they say, is the heavy burden of taxes and levies imposed on their imported products. The situation is making it exceedingly difficult for these businesses to sustain operations and maintain their workforce.
In a statement issued by the Executive Chairman, John Awuni, the association stressed that “businesses in the Food and Beverage sector have been hit hard by the fiscal year 2023, as a series of new taxes and levies have increased operational costs dramatically. Sales have plunged, often falling up to 50% below initial expectations, pushing companies into uncharted territory.
Layoffs have become an unfortunate necessity for many firms as they strive to stay afloat, and the threat of further staff reductions remains an ongoing concern.”
Importers in this sector are grappling with a host of financial challenges. The instability of exchange rates and the regular upswing in utility tariffs have added to their woes.
Furthermore, changes in benchmark values, heightened Port and Harbor charges, surging fuel prices, and the weight of high interest rates have all combined to reduce business profitability and stymie growth and development.
The compounding effect of elevated VAT rates, the retention of the 1% Covid-19 levy, substantial increases in fees and charges imposed by Municipal and District Assemblies (MMDEs) – often reaching over 60% – and rising global commodity prices have all contributed to the industry’s struggles.
The introduction of excise duty rates on various products, including sweetened beverages, fruit juices, and alcoholic drinks, has only served to exacerbate the already difficult situation. Importers in this sector find themselves paying a staggering 70% of their profits to the government in taxes, levies, and fees.
In response to these dire circumstances, the Food and Beverage Association of Ghana is urgently appealing to the government to reconsider the tax measures implemented in 2023.
The association is calling for the rollback of taxes, specifically the excise tax on sweetened beverages, fruit juices, and alcoholic beverages.
FABAG also highlights the detrimental impact of the growth and sustainability tax, which essentially taxes profits before the standard corporate tax, leading to what businesses see as double taxation.
The statement emphasises the need for the government to address other challenges faced by importers in the sector, such as escalating costs of electricity and water quality for manufacturing operations. These issues are exerting considerable pressure on the industry and stifling growth.
The cumulative effect of these burdens and levies has led to shrinking businesses and the imminent risk of layoffs. This not only has implications for the private sector but also spells long-term trouble for employment levels and government revenue.
The association underscores the urgency of the situation, emphasising that the government must either remove or revise these tax policies promptly. It is also imperative to combat the influx of smuggled goods, which is undermining legitimate businesses.
The association calls on the government to empower regulatory bodies, including customs, the Food and Drugs Authority, and the Standards Authority, to counter the flow of substandard products through porous borders.
They also insist that revising or withdrawing these tax policies will not only safeguard the health of businesses within the sector but will also foster a business-friendly environment across the board, ultimately promoting significant growth and development in 2024 and beyond.
