Mr Speaker, I am grate- ful for this opportunity to make a Statement on the high and rising ce-
ment prices and their impact. Mr
Speaker, given present technology,
cement is the most popular and uni-
versally accepted binder material in
construction. The reason for this is
found in the following characteris-
tics of cement:
1. It gains sufficient strength very quickly relative to other materials;
2. It is able to withstand com- pressive stress;
3. It is easy to mix and compati- ble with local materials;
4. It is easy to transport; and
5. It makes construction quicker and cheaper.
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As a result, it is extremely rare
to come across any form of con-
struction without some amount of
cement used in the process. It is
therefore not surprising that cost of
cement forms a very important
component of construction. Indeed,
my research reveals that as a rule of
thumb, cement constitutes about 16
per cent of total construction cost.
What this means is that changes in
cement prices impact construction
and people directly.
Mr Speaker, the impact of ex-
treme cement price increases on the
construction industry, the State and
individuals is unbearable and pro-
found. Specifically, for construc-
tors with ongoing projects, this im-
mediately affects project cost. For
instance, in 2019, the President cut
sod for the construction of the mili-
tary housing project at a cost of
US$100 million. At that time, ce-
ment sold at about GH₵32.00 per bag. Today at over GH₵50.00 per bag, the cost of this project will au-
tomatically go up by an extra
US$10 million.
Mr Speaker, in such a situation,
a contractor is forced to undertake
immediate remedial measures.
Such measures will involve either
the utilisation of margins to meet
the increased cost or a demand for
renegotiation of contract terms to
cater for the higher prices. In the ab-
sence of Government's willingness to renegotiate the economic terms
of such contracts, you would likely
see inferior execution of projects
through adjustment of quantities.
There is also the likelihood of de-
lays in delivery and in the extreme,
abandonment of projects.
Mr Speaker, at the individual
level, the transmission of high ce-
ment prices to high cost of living is
easily traceable. In this respect,
people who are currently construct-
ing homes would have to adjust
their budgets upwards while their
incomes remain unchanged or sus-
pend their projects, altogether. For
example, if it would cost you
GH₵100,000 to build your home, you would need GH₵108,000 if ce- ment prices increase by 50 per cent.
For those who rent, it would not be
surprising to witness higher rents as
a result.
Mr Speaker, this Statement is
triggered by the recent dramatic
change in the trend of cement price
increases. Between 2012 and 2019,
prices increased at 7.5 per cent per
annum. However, since 2019, they
have risen by 50.4 per cent cumula-
tively. In March 2019, cement sold
Statements
for GH₵33.00 per bag. It sells be- tween GH₵52.00 and GH₵55.00 today depending on where you are.
Mr Speaker, this does not augur
well for a nation with a huge infra-
structure deficit. The Hon Minister
for Works and Housing at the Home
Ownership Series in April this year
stated that our housing deficit cur-
rently stands at over 2 million hous-
ing units. Similarly, there are 88
districts without district hospitals;
2,417 schools under trees; 2,986
schools in deplorable condition
across the country. This is accord-
ing to a 2nd June, 2021, Graphic
Online report. Mr Speaker, accord-
ing to the Minister of Roads &
Highways, as reported by ghana-
web.com, 55,733 kilometres, repre-
senting 77 per cent of the total road
network is unpaved. This huge in-
frastructure deficit already requires
huge financial outlay.
Mr Speaker, at the 2021 Sus-
tainable Development Goals
(SDGs) Investment Fair, it was re-
vealed that Ghana's annual infra- structure investment will need to
reach US$9.3 billion by 2030 and
cumulate to US$96 billion by 2040
if we are to achieve the SDGs. With
cement prices almost doubled in the
last year, we will need some
US$15.4 billion more, assuming we
arrest the current situation and pre-
vent further increases in the price.
Mr Speaker, juxtapose this finan-
cial requirement with our capital
expenditure—which in the last 10 years has averaged just over US$1
billion per annum, according to
data from Bank of Ghana. When
you do this, you will note that it is
in Government's interest to put in place some quick measures to pre-
vent further increment in the prices
of cement.
The question, therefore is, what
has caused this dramatic rise in the
price? Mr Speaker, while it has be-
come fashionable to blame all our
woes on the Covid-19 pandemic, an
objective analysis of this particular
situation should tell us that it is ra-
ther internal factors that are respon-
sible. Or at best, the effects of
Covid-19 have been exacerbated by
internal factors. Yes, Mr Speaker, I
am not oblivious of the disruption
in international trade occasioned
bythe pandemic. Nonetheless, my
position is informed by a quick
comparative research of cement
prices in neighbouring markets.
For instance, Mr Speaker, in Ni-
geria in 2019, cement sold for
₦2,550 per bag. Currently, it sells for ₦2,800 signifying a less than 10 per cent cumulative rise within the
period. In April this year, the Chief
Statements
Executive Officer of Dangote Ce-
ment Plc in Nigeria granted an in-
terview in response to consumer
complaints about its discriminatory
prices across the different countries
it operates. Among other things, he
said:
“While a bag of cement sells for an equivalent of US$5.10 including
VAT in Nigeria, it sells for
US$7.20 in Ghana and US$5.95 in
Zambia ex-factory…”.
Mr Speaker, my research shows
that three factors account for this
significant difference:
Firstly, there is a US$0.50 per
ton fumigation levy that has been
imposed on imported clinker.
Clinker is the main raw material for
cement production, forming up to
80 per cent of the total output. Ac-
cordingly, any tax imposed on it
would automatically translate into
higher cost of production. Govern-
ment's decision to leave this levy in place at this time, when the Covid-
19 pandemic has already driven im-
port cost upwards, has aggravated
the situation.
Secondly, the Ghana Ports and
Harbours Authority (GPHA) has
barred vessels carrying clinker
from berthing at terminals 1 and 2
thereby restricting them to only one
berth. This, the Authority explains,
is to prevent pollution in case of an
accident. However, the distance be-
tween the terminals makes this rea-
son untenable because any pollu-
tion within one terminal would
reach the others within minutes.
Restricting these vessels to just one
berth creates delays at the port. Ac-
cording to the Chamber of Cement
Manufacturers, Ghana, each day a
vessel is delayed at the port, the im-
porter, the cement manufacturer,
pays between US$35,000 and
US$45,000. This obviously adds to
the cost of production, and has to be
borne by the cement consumer.
Lastly, cement prices are also
affected by a myriad of taxes: im-
port duties on raw materials; VAT
as adjusted through the one per cent
Covid-19 Health Levy; as well as
the many taxes on fuel prices in-
cluding the recent Energy Sector
Recovery Levy of 20 pesewas per
litre, and the Sanitation and Pollu-
tion Levy (SPL) of 10 pesewas per
litre.
Mr Speaker, the cumulative ef-
fect of these factors is responsible
for the phenomenal hike in the
prices and as noted, the impact of
this spans the length and breadth of
this country. I, therefore, use this
platform to recommend the follow-
ing. That Government:
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1. removes the US$0.50 per ton fumigation levy on imported
clinker. It makes no scien-
tific sense to impose fumiga-
tion levy on clinker anyway;
2. orders the GPHA to allocate additional berths to clinker-
carrying vessels, even if tem-
porarily, to prevent delays at
the port;
3. adds cement retail to the ex- emptions list for the one per
cent Covid-19 Health Levy.
4. rethinks the Energy Sector Recovery and Sanitation and
Pollution Levies on fuel
prices. Nothing can justify
their imposition in a pan-
demic era especially when
every other country is doing
the opposite.
In conclusion, Mr Speaker, we
have a long way to go to address our
current infrastructure gap. This
journey is made longer if cement, a
major component in construction,
becomes too expensive to buy. This
current rate of price increases has
become a crisis and requires imme-
diate crisis-response from our
Government. Anything but that will
be devastating especially given the
recent threat by the cement manu-
facturers to increase prices further
to GH₵60 per bag by year's end.
Mr Speaker, I thank you once again, for
the opportunity.
