Cheap imports and government aloofness could push the manufacturing of energy-efficient
lamps from Ghana to Nigeria
It’s been a long journey from the dark, power crisis-laden
days of 2007 when poor quality and unreliable electricity supplies hit hard the
bottom-line of many energy-intensive industries whilst devastating most
marginal manufacturing enterprises.
Now the outlook is brighter, with Ghana
poised to become a regional power hub…except for an emerging uncanny lethargy
from government threatening to deflate the enthusiasm of local entrepreneurs.
Pragmatic measures, obviously driven by a sense of urgency
and aimed at energy-use efficiency and energy conservation, taken by government
which included the strict implementation of a raft of legislations banning the
importation, distribution and sale of inefficient incandescent electric bulbs,
as well as laws on standardisation of electrical products, led to stunning
outcomes including savings estimated at US$38.6million annually; a peak
electricity load reduction of 124 megawatts (MW)’ and a reduction of 116,000
tonnes of CO2 emissions per annum.
But perhaps the most outstanding development was the
opportunity identified and seized by some local entrepreneurs to move into the
production of highly efficient compact fluorescent lamps (CFLs), a product
promoted by the Energy Commission in its drive towards energy-use efficiency to
complement increased investments in electricity generation and distribution capacity
to ensure power supply security.
That, obviously, is the ultimate prize for all the efforts aimed
at pushing the country into a commanding position in the energy industry of the
West African sub-region -- a region notoriously deficient in electric energy supply
and use.
Generally, local manufacturing creates more new job; perhaps
more than any of the other broad economic activities. Additionally, and more
importantly, it provides an opportunity for the country to stay at the
forefront of technological developments; as Ghanaian workers stay on the
factory floor and hone their skills and gain more knowledge, they will drive
innovations; they will be emboldened to explore new frontiers in value addition,
and they will control the high value end of the industry.
Ghana, however, is on the verge of losing this ultimate
prize to its neighbouring economic juggernaut, Nigeria, which incidentally is Ghana’s
most serious competitor in the race for dominance in the energy industry in
West Africa.
Local producers of CFLs may soon
move manufacturing operations to Nigeria, a country that hosts about half of the
sub-region’s 300 million people.
At least two major reasons account for this. Firstly, the
Ghanaian market is increasingly being inundated by cheap CFL imports from China
and elsewhere; and secondly, Nigeria has succeeded in effectively blocking its
vast market to most Ghanaian manufactures. And worryingly, government’s attitude
toward these developments has not been aggressive and decisive enough to
inspire confidence among local manufacturers.
Data from the GCNet shows that CFL imports have been growing
significantly since 2008, following government’s ban on the importation and
sale of incandescent bulbs. The 2008 figure was 14.8 million pieces, increasing
to 20 million the following year and rising to 35 million in 2010.
Currently, Ghanaian manufacturers supply to just over one percent of
the domestic market -- though their products are of superior quality and their
installed production capacity means they could do better.
Locally manufactured CFLS are designed to withstand a wide
range of power fluctuation, between 110 and 270 watts, to accommodate the
Ghanaian power situation; but most imports, even the good quality ones are
manufactured to withstand only a narrow range of fluctuation.
Worse still, the inferior quality types from China are
usually not certified and their labeling is mostly falsified. A lamp labelled
30W, for instance, could actually be only up to 10W -- thus not producing the luminescence
expected.
To ensure that CFLs imported into the country are of the expected
quality, the Ghana Standards Authority (GSA) has taken delivery of a test
facility to facilitate enforcement of quality and standards regulations.
Either this is a bit late in the day, or unscrupulous
importers have found a way around this measure as the local market is being
flooded with sub-standard CFLs which get spent quickly. Tellingly, consumers
are beginning to complain about the wisdom in spending more on CFLs whose
retail prices are about five times but last only as long as banned incandescent
bulbs.
Even more worrying, the cheap imports are pushing local
manufacturers out of the domestic market.
“Though our products are superior, long-lasting and come
with a year’s warranty -- which means any of our lamps would be replaced or
repaired should it be spent within a year -- we’re still disadvantaged,” says
Mr. Raphael Felli, Managing Director of Wellamp, one of the two local
manufacturers of CFLs.
This disadvantage stems from, first, price undercutting.
Importers and distributors of cheap CFLs are able to retail at far lower prices
than local products. Secondly, consumers of imported CFLs try to take advantage
of Wellamp’s warranty policy by submitting spent foreign CFLs as Wellamp products
for replacement.
The second challenge confronting Wellamp is the difficulty that
the majority of local manufacturers generally face in exporting to the ECOWAS
market. An underdeveloped export infrastructure and especially cumbersome
administrative procedures greatly hinder intra-West African trade.
For instance, Nigeria -- justifiably or otherwise -- has
placed an import ban on more than 70 of Ghana’s non-traditional export
products, which include most of Ghana’s manufactured products. The Nigerians
argue that most of those products are being dumped onto the West African market
by Asian countries, notably China.
While every possibility exists that some
items could be exported to Ghana and re-exported to Nigeria as though they were
manufactured in Ghana, provisions could and should be made to distinguish
genuine Ghana-made products from those manufactured in Asia.
Of course, at the sub-regional level, measures have been
instituted to address such challenges. Under the ECOWAS Brown Card scheme, which
allows card-holding corporate bodies to export unhindered, Nigerian officials
will have to come and inspect the local manufacturers’ factories to ensure that
they are not indeed importing but actually manufacturing what they supply to
the Nigerian market.
This process is however fraught with administrative
bottlenecks, making it almost ineffective practically.
Yet another bottleneck is the payment system within West
Africa. The banks have difficulty coordinating their activities. The same bank
operating in a number of West African countries see their country operations as
independent of each other; therefore transactions by a Ghanaian exporter with a
bank in Ghana, for instance, would not automatically be picked up by the mother
company of the same bank in Nigeria, the destination of the Ghanaian exporter’s
products, and vice versa. For the exporter, therefore, transaction costs with
the banks are escalated.
Now, beleaguered Ghanaian manufacturers, confronted with an
ever-shrivelling domestic market may buckle under pressure from Nigerian
businessmen seeking to partner Ghanaian entrepreneurs to relocate their
manufacturing operations into Nigeria so as to have easy access to that
country’s huge market.
“Of course, as with most manufacturers in Ghana, we have
been approached by Nigerians encouraging us to enter into joint ventures with
the aim of moving our factory operations to Nigeria to enable us circumvent the
export barriers encountered by most Ghanaian exporters to that market.”
“We would expect government to play a more meaningful role
in preventing this from happening,” Raphael Felli said, explaining that
government agencies need to stringently implement standard regulations to
ensure that inferior products do not flood the domestic market and thus crowd out
local manufacturers.
While at it, government should also use its procurement
processes to purchase a substantial percentage of its CFL requirements for
public organisations and institutions from local manufacturers.
“We’re not asking to be pampered. We expect government to give us
quality and price targets within which local manufacturers produce and sell to
government and public institutions.
“Here, an added advantage to creating much-needed jobs and retaining
wealth in the country -- as against encouraging the importation of
energy-efficient lamps -- is that local manufacturers can give warranties that
are otherwise not available, or difficult to obtain, with the imported
products. Increasing local manufacturing could also help spawn a new industry
of recycling, which is relatively more difficult with imported products,” Felli
said.
Obviously Ghana, arguably West Africa’s most efficient
economy currently, has a lot more to do to ensure that it reaps the true
benefits of its efforts by preventing the migration of its manufacturing
enterprises from the country.
For while tackling the phenomenon of an influx of cheap,
sub-standard products from China and elsewhere may indeed be daunting, allowing
the few surviving manufacturing concerns to be persuaded to relocate outside
the country would be suicidal to an economy that is battling with extremely
high unemployment rates.
“Thankfully, Ghana enjoys a lot of goodwill in the
sub-region. It is now imperative for government to leverage on that to open up
the ECOWAS market to Ghanaian manufactures.
Government needs to intervene and
have bilateral arrangements to certify some Ghanaian goods that are easily
taken into Nigeria,” Felli opined.
While this may be easier said than done, it is the growing
belief among an increasing number of Ghanaian entrepreneurs that it is the
logical step toward ensuring a thriving, efficient economy. It is time for
Ghana to play hardball.
Source: B&FT
