Businesses in Ghana have experienced a drastic reduction in their working capital, losing over 56 percent in just six months due to the deteriorating economic climate, according to the Head of the Business and Economic Bureau at the Ghana Union of Traders Association (GUTA).
Charles Kusi Appiah Kubi, who was speaking on Joy FM’s Super Morning Show, shed light on the severe financial challenges confronting the business community.
According to him, the rapid depreciation of the Cedi has been a significant factor contributing to this capital depletion.
“Within six months, businesses have lost over 56% of their working capital without doing any other business. It is not that they ran into a bad deal, but it is because of the current economic situation.
“So the first thing that affects us when the Cedi depreciates is capital depletion,” he said on Wednesday.
He further noted that the weakening currency also drives up the Cost, Insurance, and Freight (CIF) values at the ports.
These are all costs, he believed, would drive up the price of the product or commodity that the businesses are trading in.
“As businesses, there is a limit to the costs we can absorb. Beyond that limit, it must be passed to the consumer,”he noted.
However, with the local market also struggling with skyrocketing inflation, Mr Kubi noted the economy has become stagnant since consumers are cutting back on spending and businesses are experiencing a sharp decline in sales.
“The moment inflation goes that high, the purchasing power of the consumer also starts diminishing. So as a business, we’d pass on the cost, but the consumer doesn’t have the purchasing power to absorb the extra cost so they are not buying. So right now there is economic stagnation.”
He noted that this situation has left a financial strain extending to businesses’ ability to meet their financial obligations.
“Right now there is economic stagnation. This is when people are no longer buying, and as a business, when you are not making sales, how do we then retire our loans?” he questioned.