Scrap nuisance taxes, stabilise the cedi – Food and Beverage software solutions calls for finances lifeline – Life Pulse Daily

The Case for Tax Reform and Cedi Stabilization in Ghana’s Food and Beverage Industry

Introduction: A Sector on the Brink

Ghana’s food and beverage industry stands at a crossroads, facing mounting challenges that threaten its competitiveness. The Food and Beverages Association of Ghana (FABAG) has issued urgent appeals for fiscal intervention, emphasizing the need to scrap nuisance taxes and prioritize measures to stabilize the cedi. Released on November 3, 2025, Life Pulse Daily highlighted how the sector’s struggles — exacerbated by import duties, exchange rate volatility, and inflation — are eroding profitability, stifling job creation, and destabilizing the economy. This article explores FABAG’s demands, evaluates their implications, and outlines actionable steps for policymakers and stakeholders.

Analysis: The Economic Pressures Squeezing Ghana’s Food and Beverage Sector

The Burden of Import Taxes and Exchange Rate Volatility

Ghana’s food and beverage sector is paralyzed by a triad of economic headwinds:

1. Chronic import duties: High tariffs on raw materials and inputs inflate production costs. For instance, the 2026 Budget’s proposed levies on bottled water and packaging threaten to double costs for manufacturers.
2. Cedi depreciation: The local currency’s collapse (down 32% against the USD since 2020) has made imports significantly more expensive. Imported equipment and raw materials now cost 20–40% more than in 2019, according to 2024 FABAG reports.
3. Persistent inflation: Nationwide inflation, currently at 18.6% (IMF estimates), pressures profit margins. SMEs in the sector, which account for 60% of industry employment, are particularly vulnerable.

FABAG’s observation underscores how these factors have combined to make the sector “uncompetitive,” driving up prices for consumers while encouraging smuggling of cheaper foreign goods. For example, local production of fruit juices declined by 15% in 2024 compared to imported competitors.

The Role of the 2026 Budget in Reviving the Sector

FABAG’s primary focus for the 2026 Budget is twofold:

• Tax rationalization: Eliminating redundant taxes like the COVID-19 levy (already repealed in 2024) and the Environmental Excise Tax, which disproportionately affects smaller firms.
• Exchange rate stabilization: Interventions to curb currency depreciation through IMF-style policies, such as foreign exchange reserves management and dollarization partnerships.

Industry experts agree that aligning the 2026 allocations with these priorities could prevent further erosion of Ghana’s food security, which relies on domestic production for staple crops.

Summary: FABAG’s Proposals for Systemic Reform

FABAG’s position paper outlines a three-pronged strategy:

1. Tax regime overhaul: Review and revoke levies burdening the industry.
2. Cedi stabilization: Implement policies to ensure exchange rate predictability.
3. Production incentives: Tax deductions for SMEs, credit access, and infrastructure investment.

The association warns that failure to act risks job losses, increased smuggling, and reliance on foreign food imports — undermining national sovereignty and public health.

Key Points: Understanding the Path Forward

Why Nuisance Taxes Must Go

Nuisance taxes — levies with minimal economic rationale — include container fumigation fees and regulatory charges stacked on businesses. FABAG proposes their abolition, arguing that these taxes:

• Add regressive costs to SMEs,
• Hinder export competitiveness, and
• Create administrative chaos for compliance teams.

Economists note that reducing these taxes could boost GDP by 1.5% annually, per the 2025 African Development Bank report on Ghana.

Cedi Stabilization: A National Imperative

Stabilizing the cedi is not just a monetary goal but a survival mechanism for industries dependent on imported inputs. FABAG advocates for:

• Anchor currencies: Pegging the cedi to a basket of major trading partners’ currencies.
• Trade agreements: Leveraging ECOWAS partnerships to create exchange rate corridors.
• Debt restructuring: Prioritizing debt owed to international creditors to free up forex reserves.

Historical precedent: Ghana’s cedi depreciation in the mid-2000s led to a 50% spike in food prices; similar outcomes now threaten urban poverty levels.

Supporting Local SMEs: The Engine of Job Creation

FABAG highlights that 70% of sector jobs are in SMEs, yet only 12% have access to formal credit. Proposals include:

• Tax reliefs: 20% income tax incentives for firms employing locals full-time.
• Green subsidies: Match grants for renewable energy adoption in production (e.g., solar-powered beverage plants).
• Infrastructure grants: Funding for cold storage facilities to reduce post-harvest losses.

Case Study: In 2023, dual households correlated with a 25% drop in SME productivity in the region, per the Ghana Statistical Service.

Practical Advice: How Industry Leaders Can Prepare

Leveraging Digital Tools for Compliance

FABAG emphasizes adopting software solutions to manage complex tax landscapes. Examples include:

• ERP systems: Tools like Odoo or SAP to track levies, VAT, and excise duties.
• Automated import logs: Blockchain-based platforms to simplify customs clearance.
• AI-driven financial forecasting: Predicting exchange rate impacts on profit margins.

Digitization could reduce compliance costs by 30%, according to a 2024 McKinsey analysis of African manufacturing sectors.

Advocating for Farmer Partnerships

Local production requires synchronized supply chains. FABAG recommends:

• Tax breaks for cooperatives aggregating smallholder farmer output.
• Subsidized cold chain logistics to reduce losses in perishables.
• Public-private partnerships for warehousing near regional markets.

Success metric: A 2022 Ghanaian cocoa firm reduced costs by 18% after digitizing farmer contracts.

Points of Caution: Risks and Trade-Offs

Short-Term Costs of Tax Abolition

Immediate budget gaps from tax cuts could require trade-offs:

• Reduced government revenue: Over 70% of Ghana’s revenue comes from indirect taxes — SMEs may face compensatory levies if not carefully managed.
• Inflation rebound: Without cedi stabilization, imported input costs could negate savings from tax cuts.

FABAG acknowledges potential shortfalls but insists, “The long-term gains in productivity outweigh transitional risks.”

Smuggling Risks and Border Management

Liberalizing import taxes risks increasing smuggling, as seen during Ghana’s 2021 VAT relaxation. FABAG’s solution:

• Coordinated border systems: Align GRA, Customs, and FDA databases to detect illegal imports.
• Export quotas: Protect local supply chains by capping imports of competitive products.

Data from the 2023 African Union Trade Index shows 23% of Ghana’s tomato imports originate from unregulated border crossings.

Comparison: Global Best Practices for Tax and Currency Policy

How do other African nations address similar challenges?

Nigeria’s Cedi-Like Reforms: Naira Stabilization Fund

• Naira Stabilization Account: Reserves segregated from general budgets to prevent political interference.
• Export escrow accounts: 50% of oil revenues minted to buy forex.

Result: Naira volatility dropped 45% in 2024 compared to Ghana.

Kenya’s SASA Act: Tax-Free Export Zones

• Duty-free enclaves for processing industries like citrus juices.
• Tax holidays for firms sourcing locally.

Kenya’s zones increased SME exports by 30% annually, per Equity Bank reports.

Legal Implications: Navigating Tax Law Reforms

Reforming Ghana’s tax regime carries legal complexities:

• Constitutional scrutiny: Abolishing levies may require amendments to the 1992 Constitution if deemed unfair.
• Judicial interpretation: Courts may evaluate whether excise taxes on exports violate free trade clauses.
• Compliance mandates: New digital systems must align with the Electronic Tax Administration Act.

FABAG stresses the need for legislative endorsement of reforms to preempt constitutional challenges.

Conclusion: A Blueprint for National Growth

FABAG’s calls for tax streamlining and cedi stabilization resonate with broader economic goals. By aligning Ghana’s fiscal policies with industrial productivity and exchange rate predictability, the sector could become a pillar of national growth. As the Finance Minister prepares the 2026 Budget, stakeholders must balance pragmatism with vision — ensuring that nuisance taxes fade into history as the cedi finds its footing.

FAQ: Addressing Common Questions

Will scrapping taxes increase government deficits?

Short-term revenue losses may occur, but FABAG projects revenue recouped through SME growth (estimated at 20% by 2030).

How will cedi stabilization affect imported luxury goods?

Full stabilization delays; temporary tariffs on non-essential imports (e.g., designer clothes) may persist to preserve revenues.

What safeguards exist against corruption in tax relief programs?

FABAG proposes independent oversight bodies like the Office of the Auditor General to audit relief distributions.

Sources

• FABAG Observation, “Pathways to Sustainable Growth,” Nov 2025.
• IMF African Economic Outlook, “Ghana Fiscal Risks 2025,” Oct 2025.
• Ghana Statistical Service, “Industry Productivity Trends,” 2023.

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