COVID-19 stimulus inadequate to save jobs – ICC Ghana

The government needs to make sufficient support available, not numerous taxes that would worsen businesses’ situation, industry leaders have suggested.

Executive Secretary of ICC Ghana, Emmanuel Doni-Kwame, wants more COVID-19 aid which “should be given to businesses that didn’t benefit from the initial stimulus package”.

His comments follow the 2021 budget presented to parliament on March 12, 2021.

The government had given a soft loan of GHC 1billion for small and medium scale enterprises and GH₵2 billion guarantee fund for over 100 large-scale firms to access more capital for operations.

But the ICC wants the focus of new interventions to preserve jobs and activity within the real economy, including measures to provide little or low interest bridging loans.

It should be more in terms of trade finance, working capital loans with flexible and deferred terms, tax relief, loan payment relief, rent/lease relief, grants, and wage subsidies for small and medium businesses, to help keep their workers in employment, ICC Ghana suggested.

Micro, Small & Medium Enterprises (MSMEs), which comprise 90% of companies and more than 50% of the country’s total employment, are both heavily exposed to the disruption and critical to the recovery.

“Given the cross-border nature of supply chains, such stimulus and safeguard measures should be taken in a coordinated manner,” Mr Doni-Kwame added.

The umbrella body for several local and international business want the measures to include a joint partnership between the government and MSMEs to transform production lines and operations to support health relief efforts.

In the wake of the African Continental Free Trade Area (AfCFTA), ICC Ghana has suggested government assistance to MSMEs by ensuring that access to justice is maintained.

Implementing remote-court solutions and encouraging the use of alternative means of dispute resolution, where possible, are two concrete examples of how this can be achieved.

Taxes will increase the cost of manufacturing

At least six taxes are on the table for parliamentary approval, which includes:

-Energy Sector Recovery Levy of 20 pesewas per litre on petrol/diesel under

-Sanitation and Pollution Levy (SPL) of 10 pesewas

-COVID-19 levy of 1% on National Health Insurance Levy (NHIL)

-COVID-19 tax of 1% on VAT

-Financial sector clean-up levy of 5% on profit-before-tax of banks

-Road tolls review

-Gaming tax

Some reliefs of 30% on corporate income tax was given to hotels, restaurants, education, arts & entertainment, travel and tours, most of whom recorded losses in 2020.

But ICC Ghana maintained these companies and institutions should be allowed to carry forward their losses to recoup losses made, otherwise taxes would be paid out of capital.

The chamber insisted, “any increment in petroleum prices directly or indirectly increases the cost of doing business and nullifies the benefits of the tax reliefs in the budget”.

They joined the call for the government to plug loopholes in the petroleum value chain resulting in the loss of GH¢1.9 billion annually through fuel smuggling.

Available research suggests that tariff barriers have a disproportionately heavy impact on MSMEs’ performance—eroding narrow margins or rendering them uncompetitive in price-sensitive markets.

“Any tit-for-tat escalation in tariffs in response to the crisis would further exacerbate the impact of MSME failure rates and associated job losses”.

Trade policies

ICC Ghana believes trade policy has a vital role in enabling MSMEs to weather the COVID-19 crisis and drive a rapid economic recovery.

By enabling MSME participation in international trade such as the AfCFTA, the chamber believes Ghanaian businesses have an opportunity to limit economic losses, protect jobs and set solid foundations for renewed economic growth.

Survey data shows that MSMEs frequently cite a lack of information about African and foreign markets’ workings as a central obstacle to international trade.

MSMEs typically have limited resources to monitor potentially complex changes in tariff and non-tariff restrictions—including changes to customs procedures.

It is therefore vital that governments take several important steps to promote easy access to information on new trade measures in a rapidly changing environment.