The recent cement crises that hit Ghana a couple of months ago, as a result of the temporary shutdown of the production plant of West African Cement (WACEM), producers of Diamond Cement, and which shook the entire construction industry to its foundation, seems to have taken an ugly twist, following what observers see as a needless attempt by Ghana Cement Company (GHACEM) to engage World Bank in what observers say could lead to a media war over the root cause of the incessant high cost of cement in the country.
The response, given by the Strategy and Corporate Affairs Director of GHACEM, Dr. George Dawson-Ahmoah and captioned in the local media thus: ‘GHACEM Replies World Bank On Cement Production Monopoly Allegations’, may not only be seen as rather confrontational, but also in a way demonstration of insensitivity to the plight of the millions of Ghanaian consumers, who virtually went through ‘hell’ during the height of the crises.
Thankfully the situation is abating and things are expected to fall in their places very soon, but honestly the attempt to place records where they may not be needed may not be the best for the future of the nation’s fragile industry.
While this piece is not an attempt to in any way to hold brief for the global financial institution, the response attributed Dr. Dawson-Ahmoah, would likely attract series of other responses, a development that would not serve his employers any good.
It is recalled that following a lightning that struck the transformer of Diamond Cement Company on April 26 this year, the Aflao-based cement manufacturing company had to shut down production for about four weeks. The temporary shortfall of some 3 million bags of cement over the period on the local market led to an overall retail price hike of 85% from GH₵14 to GH₵25.
In the heat of the crises, both the President of the Ghana Real Estate Developers Association (GREDA), Dr. Alex Tweneboah, and The Chairman of the Technical Committee of the Association of Building and Civil Engineering Contractors of Ghana (ABCECG), Mr. Rockson Dogbegah, expressed grave concerns, especially in the light of the fact that a number of construction companies were consequently laying off workers. The leaderships of both associations were also quoted by the media as linking the unfortunate development to the monopoly in the cement industry and expressed similar misgivings on the matter.
For its part, The World Bank, feeling uncomfortable with the continuous dominance of the two manufacturing companies (GHACEM and WACEM) in the production and sale of cement in the country, called for urgent steps that would liberalise the market to engender competition and drive down prices.
In a June 19, 2012 under the headline: Break Duopoly On Cement Production, a World Bank lead economist Mr. Sebastien Dassus, reportedly told financial journalists in Accra that the nearly 90% hold on the market by the two companies suppresses competition in the sector and has attendant consequences on supply and price of the product to the building and construction industry, describing it as ‘nonsensical’.
I do not see any justification for a monopoly in the cement market in Ghana. It makes no economic sense,he said.
According to him, having a de-facto duopoly in the manufacturing and sale of an essential commodity like cement is not good for the country, especially given the rising housing and infrastructural deficit.
He noted further in the publication that with Ghana’s status as a developing nation that is currently undertaking a lot of infrastructural projects, “liberalising the cement sector will help drive down prices and create more jobs for the teaming youth. The more there is competition in the sector, he said, the better for consumers”.
As if that was not enough, the Association of Building and Civil Engineering Contractors of Ghana noted that the government needed to break the de facto duopoly rather than leave the nation’s construction and building sector to the whims and caprices of the two companies.
We need a conscious effort to get other cement factories into the system because where you have only Diamond Cement and GHACEM controlling the market, it means that we (builders and contractors) will continue to be at their whims and caprices,it stressed.
The reaction continued: “Currently, GHACEM comfortably controls close to 60 per cent of the market share. Diamond Cement, on the hand accounts for about 35 per cent of total cement sale and production bringing to over 90 per cent the stake of the two companies in the industry.
Fears are that the dominance of the two companies in the sector, however accidental it was, makes it possible for them to ‘technically’ determine prices of the product nation-wide.
Then out of the blue came this ‘bombshell’ from GHACEM posted on the internet on June 26, 2012 with the caption: ‘GHACEM Replies World Bank On Cement Production Monopoly Allegations’.
It read inter alia: “The Strategy and Corporate Affairs Director of GHACEM, Dr. George Dawson-Ahmoah stated emphatically that the company does not have total control in the building and construction industry as portrayed. According to him, the monopoly of GHACEM was broken 12 years ago by the emergence of other production companies like WACEM, producers of Diamond Cement who operate from Aflao in the Volta region.
GHACEM do not enjoy monopoly in the cement industry, monopoly is a thing of the past now especially because there are other players in the cement market. There is the Greenview International Limited operating in Tema community 2, Savanna Cement, operating from Buipe in the Northern Region, and Fortress International which imports bagged finished cement among others, he noted.
“Dr. Dawson-Ahmoah reiterated that Ghana has a trade liberalization policy which allows business entities interested to import any product or establish manufacturing units to do so, provided they go through the right procedures. He said GHACEM is open to any fair and equal terms competition so far as the manufacturing and supply of cement in Ghana is concerned, adding that GHACEM is not interested in sabotaging other competitors because the company will continue working hard to maintain its position as the leading manufacturer and supplier of cement in the country”.
And this is where the response erred. Even though it is not GHACEM’s making that for the past 45 years the market has been slanted in its favour, Dr. George Dawson-Ahmoah threated that “GHACEM is not afraid of competition but will resist any unfair competition imposed on them”.
This in a way gives the company away, more so when he had earlier on in the same story admitted that back in 2010 both GHACEM and WACEM jointly raised a strong petition against the concessionary rate of 5% import duty which they claimed was beneficial to a Nigerian-based Cement importer, Greenview International Limited for packaging 50kg bags, and stood their grounds till the Government of Ghana amended its decision.
What again seems not right in the eyes of many Ghanaian observers in the diaspora is the attempt to make mincemeat of the duopoly claim and thereby insinuating that all is well with the production and marketing pattern of cement in Ghana.
They argue that if, with its 30% hold on the market, a four-week production shutdown of WACEM could prompt 85% price hike, one wonders what would have happened if it was GHACEM, with over 60% hold on the market that had to shut down.
Secondly, they wonder how Dr. Dawson-Ahmoah would describe an economic situation where just two people control a particular raw material, assuming monopoly, or duopoly, are not the right words.
We should not forget that when we talk of monopoly (as was done by the World Bank official) it doesn’t mean there are no other minor competitors in the system, otherwise where do we place oligopoly?
At any rate, assuming without admitting that Mr. Dassus erred in his monopoly claims, in what way does that threaten GHACEM to the extent that a whole Strategy and Corporate Affairs Director would have to ‘reply’ the way it was captured in the media? And by the way who does not know that for close to half a century there had not been any meaningful competition in the sector?
Much as the so-called ‘reply’ is of little relevance to the consumer (as prices of cement are yet to reverse to what they used to be before the crises), it is clear that it woefully failed to tell the public what the root cause of the problem is, if is not due to monopoly.
Finally, increasing the production-base of GHACEM to meet demands, as was promised by the doctor does not take away the question of monopoly.
If anything at all, the GHACEM ‘spokesman’ could simply have denied the suggestion that the company suppressed competition in order to hike prices, but for him to have gone ahead to postulate that there was no monopoly (or duopoly) whatsoever in the industry is close to insulting the intellect of the entire Ghanaian business community.