Ghanaian businesses are grappling with a significant reduction in their working capital, facing a staggering loss of over 56 percent in just six months due to the challenging economic conditions, as highlighted by the Head of the Business and Economic Bureau at the Ghana Union of Traders Association (GUTA).
In an interview on Joy FM’s Super Morning Show, Charles Kusi Appiah Kubi shed light on the dire financial challenges confronting the business community. He pointed out that the rapid depreciation of the Cedi has been a major factor contributing to this depletion of capital.
“Within six months, businesses have lost over 56% of their working capital without engaging in any other business. It’s not because of a bad deal, but it’s due to the current economic situation,” he explained.
Kubi further emphasized that the weakening currency also leads to increased Cost, Insurance, and Freight (CIF) values at the ports. These added costs, he believed, would inevitably drive up the prices of goods or commodities that businesses trade in.
“As businesses, there’s a limit to the costs we can absorb. Beyond that limit, it must be passed on to the consumer,” he noted.
However, with the local market grappling with soaring inflation rates, Kubi observed that the economy has hit a standstill as consumers curtail spending and businesses witness a sharp decline in sales.
“When inflation rises significantly, the purchasing power of consumers diminishes. So, while businesses pass on the costs, consumers lack the purchasing power to absorb the extra expenses, resulting in decreased spending. This leads to economic stagnation,” he remarked.
This economic scenario has created a financial strain for businesses, impacting their ability to meet financial obligations. Kubi raised concerns about the challenges businesses face in repaying loans when sales are stagnant due to reduced consumer spending.
“In such circumstances of economic stagnation, where consumers are not purchasing, businesses struggle to generate revenue. This, in turn, affects their capacity to repay loans,” he highlighted.
