About 400 workers of the Rider Steel Company Limited in Tema risk losing their jobs by March 15 if the company does not resume operations.
Located within the Tema Export Processing Zone, the company halted operations in October 2016 in protest against unfair electricity tariffs being charged by the private power generation company – the Enclave Power Company (ECP). ECP is the only company authorized to supply electricity to the companies operating within the enclave.
Managing Director of Rider Steel Company, TP Patnaik told Starr Business his company pays 250% more than other steel manufacturing companies which depend on the Electricity Company of Ghana (ECG) for power. This, he said, pushes the cost of production up making it difficult for the company to compete effectively with others on the market.
Background
Rider Steel Ghana is a registered Ghanaian non-free zone Steel factory with a capacity of 80,000 Metric tons pa. The company, a subsidiary of Rider Glass Company in China is worth $15 million in investment and began operations in 2013. Like other steel factories in Ghana, it is registered with the Energy Commission as a bulk consumer due to their heavy load factor. This gives the factories the authorization to negotiate preferential purchase price and to enter into individual purchase contract with the independent/ government power producers for their power needs.
ECG has since 2010, negotiated a preferential price of GHC 0.2185/Kwh on behalf of the steel companies. However, since the introduction of new tariffs by the Public Utilities Regulatory Commission in December 2015, the ECG was instructed by the PURC not to charge the companies the revised rates in a bid to prevent them from struggling under the prevalent global macroeconomic environment for the steel industry.
But the private power distributor, ECP, continued charging the PURC rates which is close to 250% more than what is being charged other steel factories. The other steel company within the enclave, United Steel Company Limited has also stopped the production of steel as a result of the high cost of production.
According to Mr. Patnaik, ECP is unwilling to agree on credit arrangement with the company. “On an average we were paying close to a million dollars every month and we didn’t have any credit arrangement. We paid the entire amount every month and this being a private and new company you have to pay within the stipulated time. We could only delay for seven or ten days else there would be a power outage. In October the bill was due to be paid in November, which we didn’t pay protesting about the high tariff. Our lights got disconnected”, he explained.
Demands
Management of Rider Steel is asking for equitable treatment in terms of tariff charges. They want to pay the same tariffs as other players in the industry since they pay same taxes, operate in the same and are bound by the same rules for doing business in Ghana as other companies outside the Zone. The company is yet to receive any favourable feedback from government after assurances that it would be provided with a level playing field.
“We have been talking to everybody, Energy Commission, PURC, Ministry of Energy, and Ministry of Trade but nothing has come out of that. We also met the Economic Management Committee and they have been very helpful and have been trying to sort out the issues with the new government”, Mr. Patnaik lamented.
Deadline
The Jordanian investors in the company have given its management up to March 15, 2017 to resume operations or they pull out of Ghana completely. This is coming at a time when government is seeking foreign investment to boost local production and reduce the high unemployment rate in the country.
Currently, all 375 local staff of the company have been sent home, pending a possible resumption of operations at the factory.
“Right now we are not operating and so if by the end of March we don’t get any response to this problem, we will close down and move out of the country completely. This will make us lose all the investments we have in Ghana, almost $20m”, the frustrated MD said.
Moving out of the enclave is not an option open to the company as it would cost it more time and money.
Mr. Patnaik explained that’ “moving out of this place will give us another cost of 5 million dollars and at least a year and half to build up because steel works are heavy industries that need a lot of civil work”.
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