Ofori-Atta's 20% Tax Threatens 24-Hour Economy

Ghana’s ambition to industrialise through agriculture, create jobs, stabilise the cedi, and build a 24-Hour Economy is facing a quiet threat: a 20% excise duty on natural fruit juices. The policy, intended to boost revenue and promote health, is reportedly having the opposite effect, weakening local industry and hindering economic growth.

Introduced recently, the tax is said to be discouraging healthy consumption, destroying jobs within the agricultural value chain, and blocking Ghana’s progress towards import substitution and increased exports.

Industry experts argue that natural fruit juices, particularly 100% juice, not-from-concentrate (NFC), and fibre-rich blends, should not be categorised with ‘sin’ products like alcohol and tobacco. These juices are produced from locally grown fruits such as pineapples, oranges, coconuts, mangoes, and passion fruits, offering vital vitamins, fibre, and antioxidants.

“Taxing these products as if they were unhealthy sends the wrong signal. We should be incentivising value addition to our agricultural produce, not penalising it,” a local juice processor, who wished to remain anonymous, told JoyNews.

The excise duty adds to the already high production costs faced by local processors, including expensive energy and water, imported packaging materials, and high interest rates on industrial finance. This increase in shelf prices makes Ghanaian juices less competitive against imported concentrates and artificial beverages.

As a result, factories are reportedly operating at significantly reduced capacity – between 30% and 45% – instead of the efficient 70% to 85% needed for sustainability. This under-utilisation has a ripple effect, leading to losses for farmers, fruit spoilage, factory layoffs, and stressed bank loans.

Economists estimate that Ghana spends between US$350 million and US$450 million annually importing beverage concentrates. A supportive tax regime, they say, could enable local juice processing to achieve 30-40% import substitution within 3-5 years, retaining US$120-180 million in foreign exchange annually.

“Instead of retaining foreign exchange, this duty is protecting imports and increasing forex leakage, putting further pressure on the cedi,” explained Dr. John Mensah, an agricultural economist at the University of Ghana.

The potential for export is also being undermined. Global demand for natural and functional beverages is growing at 6-8% annually. Ghana, with its favourable climate and agricultural resources, is well-positioned to capitalise on this demand.

With 6-8 scaled juice factories, Ghana could potentially generate US$700 million to US$1.0 billion in annual export revenue from pineapple juice, citrus concentrates, coconut water, and functional juices. However, the excise duty is reportedly discouraging long-term export contracts.

Perhaps the most significant impact is on employment. A medium-scale juice factory supports between 600-900 direct jobs and 8,000-20,000 indirect jobs, encompassing farmers, transporters, and suppliers. At a national scale, 6-8 factories could sustain 65,000 to 127,000 jobs, particularly for youth and women.

“The reduction in factory throughput due to the excise duty is wiping out thousands of these livelihoods,” lamented Mr. Kwasi Amoah, a representative of the Fruit Juice Producers Association.

Furthermore, higher juice prices are discouraging consumers from choosing natural fruit nutrition, potentially leading to increased health problems like diabetes and hypertension. This could ultimately increase healthcare costs and offset any short-term revenue gains from the excise duty.

The policy also appears to contradict the government’s 24-Hour Economy initiative. Agro-processing, particularly juice production, is ideally suited for continuous operations and multiple shifts. However, the suppressed demand caused by the excise duty is reportedly leading to factory closures and the elimination of night shifts.

Advocates for a policy change suggest zero-rating or exempting 100% natural fruit juices, applying excise duties strictly to sugary and artificial beverages, and providing support for export-oriented agro-processors.

The 20% excise duty on natural fruit juices, critics argue, is a structural impediment to Ghana’s development. Reversing or restructuring this tax could unlock significant growth, protect public health, and secure up to US$1 billion in annual export earnings. The choice, they say, is between taxing away a promising industry or fostering its prosperity.

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