2024: A Turbulent Year For Businesses
– Plagued by high inflation, steep interest rates & a volatile exchange rate regime
Story: Isaac AIDOO, Accra
GHANAIAN businesses faced a turbulent year in 2024, grappling with high inflation, steep interest rates, and a volatile exchange rate regime, according to Chief Executive Officer of Dalex Finance Joe Jackson.
Speaking on ZED 101.9 FM, Mr. Jackson lamented how the economic challenges severely hampered business operations and strategic planning across various sectors.
Mr. Jackson identified high interest rates as a key issue, noting that while businesses could access funds, the cost of borrowing remained prohibitively high. This stifled growth and made it increasingly difficult for businesses to expand or set up operations.
Inflation, another major hurdle, disrupted business planning and drained working capital. “Inflation made life uncomfortable in two ways. Prices kept increasing, making it hard for businesses to plan, and it eroded purchasing power,” Mr. Jackson explained.
He added that workers also felt the brunt of inflation, with stagnant wages struggling to keep up with soaring prices, leading to growing dissatisfaction among employees.
The impact of the exchange rate regime was particularly dire, exacerbating the economic strain. Mr. Jackson pointed out the rapid depreciation of the cedi, which dropped from GH₵6 to the dollar in 2022 to over GH₵17 in 2023, before stabilizing in recent months. He illustrated how this depreciation significantly reduced working capital.
“For instance, if you had GH₵6 million in 2022, it was equivalent to $1 million. Today, the same amount is worth just $300,000. This has been a major setback for businesses,” he stressed. The scaling effect trickled down to small businesses as well, severely limiting their ability to import goods or maintain operations.
Although government interventions managed to lower inflation from 50% to approximately 22%, Mr. Jackson emphasized that this relative improvement offered little relief to businesses.
Using an example, he explained that inflation rates apply to compounded prices rather than initial costs. “If an item was GH₵100 in 2022 and inflation was 50%, it increased to GH₵150.
A further 30% inflation in 2023 means it rises to GH₵195, and by 2024, with 23% inflation, the price jumps to GH₵240. So, while inflation has slowed, the prices remain much higher than two years ago,” he explained.
Looking ahead to 2025, Mr. Jackson cautioned that economic uncertainty, particularly in the first quarter of the year, remains a challenge. He described the period as “unpredictable,” citing lingering economic pressures and the transitional dynamics of a new government.
Despite efforts to stabilize the cedi’s performance, which has strengthened to around GH₵14.5 to the dollar, Mr. Jackson urged caution. Businesses, he advised, should prepare for continued volatility and remain strategic in their operations.
The Dalex Finance CEO’s analysis paints a sobering picture of Ghana’s economic landscape, highlighting the urgent need for sustainable policies to address inflation, reduce borrowing costs, and stabilize the exchange rate. These measures, he stressed, are critical for alleviating the plight of businesses and restoring investor confidence as the nation enters a new fiscal year.
