The Ghana Union of Traders Association (GUTA) has sounded the alarm on the devastating impact of the economic downturn on businesses, with a staggering 56% loss of working capital in just six months.
Charles Kusi Appiah Kubi, Head of the Business and Economic Bureau at GUTA, revealed the dire situation in an interview. He attributed the capital depletion to the rapid depreciation of the Cedi, which has driven up costs and stifled economic activity.
“Within six months, businesses have lost over 56% of their working capital without doing any other business. It’s not that they ran into a bad deal, but it’s because of the current economic situation,” Kubi explained.
The weakening currency has also led to higher Cost, Insurance, and Freight (CIF) values at the ports, further straining businesses. “As businesses, there is a limit to the costs we can absorb. Beyond that limit, it must be passed to the consumer,” Kubi noted.
However, with consumers struggling to cope with skyrocketing inflation, businesses are experiencing a sharp decline in sales, leading to economic stagnation. “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,” Kubi said.
The resulting financial strain has left businesses struggling to meet their financial obligations. “Right now, there is economic stagnation. This is when people are no longer buying, and as a business, when you are not making sales, how do we then retire our loans?” Kubi questioned.
