The Chief Executive Officer of the AGI, Mr Seth Twum-Akwaboah, said although Ghana’s macroeconomic indicators have improved and lending rates have declined, the country’s financial system remains poorly structured to support industrial expansion because manufacturers continue to rely on short-term commercial loans rather than long-term development finance.
Speaking on Channel One TV’s Quarterly Economic Review on Ghana’s mid-year economic performance, Mr Twum-Akwaboah argued that sustaining industrial growth would require deliberate reforms to financing, energy pricing and production costs to make local manufacturers globally competitive.
24-hour economy needs patient capital
Mr Twum-Akwaboah explained that manufacturing investments require long-term financing because factory projects involve land acquisition, construction, installation of machinery, testing of production lines and market development before they begin generating adequate revenue.
He said manufacturers therefore require medium- to long-term facilities of between five and 10 years, supported by lower interest rates and sufficient moratorium periods to allow businesses to become fully operational before loan repayments begin.
According to him, the proposed 24-hour economy will require significant investment in new factories and expanded production capacity, making patient capital indispensable.
“The government is doing a 24-hour economy; for you to set up a factory, go through the process, raise funds, the factory construction alone will take you six months, one year, even if you are fast,” he said.
Credit still bypasses industry
While acknowledging that lending rates have fallen considerably from levels above 30 % in recent years, Mr Twum-Akwaboah said the bigger challenge remains the allocation of available credit.
He noted that banks continue to direct a significant share of lending to commerce and services, while manufacturing, despite its greater job creation potential, receives comparatively little financing.
“Our banks are largely commercial financial institutions. Their facilities have short tenures and short moratorium periods, making them unsuitable for industrial investments,” he said.
He therefore called for a review of Ghana’s development finance architecture to ensure institutions such as Development Bank Ghana (DBG) and the Ghana EXIM Bank are effectively providing manufacturers with the long-term capital needed for expansion.
According to him, reducing lending rates alone will not transform industry unless financing is structured around the realities of industrial investment.
Electricity costs undermine competitiveness
Beyond financing, Mr Twum-Akwaboah identified electricity tariffs as the biggest challenge confronting manufacturers.
He disclosed that bulk industrial consumers recently experienced a 48 % increase in electricity tariffs following changes in their billing arrangement by the Electricity Company of Ghana (ECG).
According to him, electricity costs have ranked as the number one challenge in the AGI Business Barometer over the past two quarters.
He explained that bulk consumers previously benefited from lower unit costs because of their high consumption levels, but changes in ECG’s pricing structure have sharply increased production costs.
Mr Twum-Akwaboah warned that manufacturers have little control over utility costs because electricity tariffs are regulated, adding that higher energy costs inevitably feed into inflation, increase consumer prices and weaken the competitiveness of locally manufactured products.
Ghana can compete globally
Despite the challenges, Mr Twum-Akwaboah maintained that Ghanaian manufacturers have demonstrated they can compete internationally when production costs are reduced and reliable infrastructure is available.
He cited local ceramic manufacturers, including Twyford and other tile producers, as examples of companies successfully exporting to Europe and the United States.
According to him, the sector’s competitiveness has been strengthened by direct access to natural gas supplied through dedicated arrangements with Ghana Gas, significantly reducing production costs.
He argued that extending similar cost advantages to other manufacturing sectors would boost exports and strengthen Ghana’s industrial base.
“There is enormous export potential, but we have not fully harnessed it because our value chains remain weak and production costs are relatively high,” he said.
Mr Twum-Akwaboah stressed that unless more credit is deliberately channelled into productive sectors and the cost of doing business reduced, manufacturers would continue to struggle to expand despite improving macroeconomic conditions, potentially undermining the success of the government’s 24-hour economy agenda.
