Wednesday, January 22, 2014

The Cost of a Bag of Cement in Ghana within the Last 3 Years

Cement is the most commonly used building material in Ghana. Many commodities, goods and services including petroleum products, have seen price hikes over the years with cement not being an exception. The price of cement within the last three years has been increased by almost 120%, causing controversies.

In 2011, a bag of cement was sold at GH¢15.00 ($6.35) and saw a dramatic increase to GH¢17.00 ($7.20) in the following year. The price then shot up to GH¢18.00 or $7.63 in 2013. Today, a bag of cement is sold at GH¢19.00 ($8.10) or even at higher price, depending on the shop from where it is being bought. Unfortunately, with the recent increase in petroleum products, the price of cement is equally likely to climb to GH¢25.00 ($10.63) by the end of January.

If fuel price instability is the main cause of the price increase in cement in Ghana, certainly there are other factors that can be cited, explaining the volatility in the cost of cement.
  1. High In Demand - Being the most commonly used building material; cement is much patronized in the construction industry in Ghana. Unfortunately, GHACEM, which is Ghana’s leader in cement production does not have proper infrastructure to meet customers’ needs. In 2007-08, the company was forced to shut down production for several days due to some technical problems. This triggered the increase in price. It is expected that as the demand of a product goes high, its price increases because the company is unable to provide for customers’ needs.
  2. Monopoly System - The cement industry in Ghana has been plagued by monopoly. Research shows that GHACEM, the government major share-holding company, had a market share of 97%, before the construction of the new cement factory in Buipe, a small town located in Northern Ghana. Since 2007, GHACEM dominance is diminishing slowing. Recently, other cement producing firms have emerged. They include Diamond Cement, Dangote and Sol cement. Nonetheless, GHACEM is yet to experience a major competition; customers are very much attached to the local brand and are yet to patronize the imported ones.
  3. Price Wars - In a bid to prove its superiority over its competitors, GHACEM escalated the price of its cement not only to distinguish itself from other cement producing companies, but also to put a value on its product. To prevent any inferiority tag placed on them, the other cement producing companies also increased their prices, leading to frequent increases. Over the years, the war of dimension of product quality between GHACEM and local cement producing companies has resulted in price competition.
The commercial competition characterized by the increase of prices rather is affecting the consumer. Cement price instability has made building of house very difficult and challenging for the ordinary Ghanaian. More often than not, people have to leave their buildings uncompleted for so many years due to their inability to come to terms with the drastic increase in the price of cement or simply have to opt for makeshift buildings and wooden structures, while some constructors are forced to build poor quality houses to beat down construction cost.

Undoubtedly, it is high time cement producing companies in Ghana adopted strategic measures to stabilize the price of a bag of cement – making it accessible and affordable for ultimate low cost housing. But judging by the current situation, the country will not experience any price depreciation anytime soon, at least not until 2016. Ghana remains one of the most expensive countries to live in.

If house building has become a less appealing activity for the average Ghanaian, the majority of estate developers, constructors, and proprietors will defy cement price increment by adopting new ways of building houses and doubling their annual earnings at the expense of the ordinary Ghanaian and expatriates who often complain about the low-quality but high-cost rental of houses.

For the time being, in anticipating of a ‘miracle,’ Ghanaian consumers would have to adjust themselves and suffocate a little bit more under high-cost of living, wondering how long they would have to muddle through unjustified frequent price increase.

Have you seen other Cement prices in Ghana lately? What are Cement prices in your country? Leave your comment or experience with Cement below or on our Facebook Page here.

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