“Within six months, businesses have lost over 56% of their working capital” -GUTA
Businesses in Ghana have experienced a dramatic 56% reduction in working capital over the past six months due to the worsening economic conditions, according to Charles Kusi Appiah Kubi, Head of the Business and Economic Bureau at the Ghana Union of Traders Association (GUTA).
Speaking on Accra-based Joy FM’s Super Morning Show, Mr. Kubi highlighted the severe financial challenges faced by the business community, attributing the capital depletion primarily to the rapid depreciation of the Cedi.
“Within six months, businesses have lost over 56% of their working capital without engaging in any additional business activities. This is not due to poor business decisions but the current economic situation,” he stated on Wednesday.
Mr. Kubi explained that the declining value of the Cedi significantly affects businesses by depleting their capital. Furthermore, the weakening currency drives up the Cost, Insurance, and Freight (CIF) values at the ports, increasing the costs for businesses, which inevitably leads to higher prices for consumers.
“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 struggling with high inflation, the purchasing power of consumers has diminished, leading to a stagnation in the economy as businesses see a sharp decline in sales.
“The moment inflation goes that high, the purchasing power of the consumer 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. This has resulted in economic stagnation,” Mr. Kubi observed.
This economic stagnation has strained businesses’ ability to meet their financial obligations, particularly in repaying loans, as the decline in consumer spending leads to reduced sales.
“When people are no longer buying, and as a business, when you are not making sales, how do we then retire our loans?” Mr. Kubi of GUTA questioned, highlighting the precarious financial situation faced by many businesses in Ghana today.
