Does it make economic sense to ban cement imports?

On Wednesday, the Association of Cement Manufacturers of Ghana (CMAG) wanted the trade minister, Dr Ekwow Spio Garbrah to apologize for allowing a foreign cement company to import their products to Ghana.

In response the minister said that the 500,000 bags imported by the Korean company, Fujian, is a quarter of what is being imported into the country and does not threaten local producers.

Digging deeper, I discovered that the government had limited cement imports in the country to only one million metric tonnes in March this year. The statement announcing the ceiling revealed that Ghana has a cement production capacity of 9 million metric tonnes while the quantity demanded is less than 6 million metric tonnes per annum. The statement also referred to the imports as low-priced and refused to totally ban imports in order that manufacturers do not take undue price advantage of Ghanaians.

I have a few questions. Firstly, what is the quality of the imported cement? We are only told that it is low priced, with no information about if it is low priced because it is of low quality, or because foreign manufacturers are subsidizing costs in order to penetrate our market and hurt local producers or because foreign manufacturers can produce at much lower costs and can therefore sell to us at cheaper prices.

This is important because low quality or unfair pricing are good reasons to place a ceiling on imports. But if it is the third reason i.e. foreign manufacturers can produce cement the quality of Ghana cement at lower costs then I disagree with the ceiling.

Ghana has a housing deficit of 1.7 million housing units and an infrastructure deficit that will require spending $1.5 billion annually. One can deduce from these figures that the quantity of cement demanded annually by the domestic market has much more space to grow. If we do have a glut of cement, then why were there cement shortages and price hikes when the power crisis affected local cement producers? Keep in mind that this was before the ceiling on imports.

Cement is used for construction. Having lots of cement at reasonable prices will (all things being equal) increase infrastructure development and create demand for construction workers. It may also allow more people to build on their own and avoid the outrageous prices charged by some real estate developers in the country.

I understand that CMAG directly employs 3,000 people and creates 10,000 indirect jobs and protecting those jobs are important. But it does not necessarily follow that Ghanaian manufacturers will be all out of business if competition becomes keener. They can be given preferential treatment for all government projects, for example. But having reliable supply of cement at cheaper prices will create more construction jobs, improve infrastructure (thereby cutting the cost of doing business) and allow more Ghanaians to own a home. And that is an outcome few will be against.

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Jerome Kuseh

Accountant | Economist-in-Training | Private Investor
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