Businesses Lost Over 56% Working Capital In 6 Months: GUTA
Ghanaian businesses are facing a significant challenge in managing their working capital, with a staggering 56% depletion in just six months.
According to Charles Kusi Appiah Kubi, Head of the Business and Economic Bureau at the Ghana Union of Traders Association (GUTA), the rapid depreciation of the Cedi has been a major contributing factor to this financial crisis.
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Speaking on Joy FM’s Super Morning Show, Mr. Kubi emphasized that the situation is not unique to individual businesses but is a collective problem affecting the entire business community.
He highlighted that the depreciation of the Cedi has led to capital depletion, which has resulted in significant losses for businesses.
“The first thing that affects us when the Cedi depreciates is capital depletion,” he stated. “So the first thing that affects us when the Cedi depreciates is capital depletion.
Within six months, businesses have lost over 56% of their working capital without doing any other business.
It is not that they ran into a bad deal, but it is because of the current economic situation.”
The weakening currency has also driven up the Cost, Insurance, and Freight (CIF) values at the ports, resulting in increased costs for businesses.
According to Mr. Kubi, these costs would be passed on to consumers, but with inflation rates skyrocketing, consumers are cutting back on spending and businesses are experiencing a sharp decline in sales.
“The moment inflation goes that high, the purchasing power of the consumer also 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. So right now there is economic stagnation,” he noted.
The economic stagnation has resulted in a financial strain on businesses, making it difficult for them to meet their financial obligations.
As Mr. Kubi asked, “When people are no longer buying, and as a business, when you are not making sales, how do we then retire our loans?”
The situation highlights the need for immediate intervention by policymakers to address the economic challenges facing Ghanaian businesses.
The Ghana Union of Traders Association (GUTA) has urged the government to take steps to stabilize the economy and restore confidence in the business community.
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