Rice Smuggling

Ghanaians have read with horror about the seemingly unchecked smuggling of rice from the Ivory Coast. What are the causes and implications? And is there more to this than meets the eye? Follow this unfolding story here.

Some background reading on this issue can be found here >>>

Chronology of Events

• 2 September 2010 – Massive rice smuggling – Response from Ghanaians >>>
• 2 September 2010 – Dealing with rice smuggling >>>
• 1 September 2010 – Massive rice smuggling: $40m down the drain >>>
• 13 August 2010 – Government Policy Causes Smuggling And Hardship >>>
• 27 June 2010 – Mills tells CEPS: I have seen and heard of your corrupt ways >>>
• 14 June 2010 – Loss of revenue to the State is artificially created >>>
• 7 April 2010 – Prez Mills Lashes At CEPS…There’s Too Much Corruption Within Service >>>
• 10 December 2009 – Cross-border rice smuggling – A big hole in Ghana’s revenue kitty >>>
• 30 May 2009 – CEPS And Cross Border Crimes Management >>>
• 9 May 2009 – Rice smuggling escalates >>>
• 5 May 2009 – CEPS officials aid smugglers defraud Ghana of millions in revenue >>>
• 5 August 2008 – Global Integrity 2008 Notebook on Smuggling >>>

Rice Smuggling – A tale of hardship through government inaction

After studying the events that lead to the latest exposure of losses in revenue to the Government of Ghana – “Massive Rice Smuggling – $40m down the drain” -  one can only wonder why the government has not taken decisive action on this matter. The causes and implications seem to be so clear, yet little action has been seen on policy and security issues.

What causes smuggling?

A study of the smuggling exposures and other literature indicate that their are a few reasons.

• Import tariff differences between Ghana and its neighbours;
• Corruption;
• Ineffective border control, and
• Greed.

Import tariff differences between Ghana and its neighbours

Since the days of Adam Smith there has been little doubt that if Ghana levies taxes and duties of 37 percent while the Ivory Coast only charges 12.5 percent – a 24.5 percent difference – a gap for smuggling has been created. As long as that massive differential exists greedy businessmen seeking excessive gains will be lured to find ways of smuggling rice from the Ivory Coast to Ghana. There is still a risk, but the potential gain due to the difference in taxes and duties makes the risk worthwhile.

If the difference in taxes and duties is removed, the potential gain is removed and the risk outweighs the potential gain by far. The probable outcome will be that the smugglers may then choose to rather import the rice legally through Ghana’s ports.

This fact has been highlighted on more than one occasion, yet the government has not acted on it? Why?

Corruption

Both the exposures on the Eastern and Western borders have clearly indicated involvement of CEPS officials in the smuggling rings. The President has growled at CEPS, yet prosecution of these corrupt officials have not been pursued (?).

The latest rumours have it that the corruption may go well beyond just a few corrupt CEPS individuals. No prove has as yet been provided to substantiate the rumours and it is a matter for an “Anas” to properly investigate.

Ineffective border control

Both Ghana’s Eastern and Western borders are long and a bit porous. However, through the undercover investigations it is clear that the smuggling routes go through the border posts.  Due to inaction by the government to address corruption of officials, the border controls are totally ineffective.

Modern technology is available to “see” exactly what is on any truck entering the border posts. It is also understood that suggestions have been made about introducing mobile scanning units to address this problem. Once again there is silence from the side of government on how to address this issue.

Greed

There will always be those who seek gain by illegal ways in order to enrich themselves and to fund their lavish lifestyles. However, if the greedy are not shown that there practices will not be tolerated they will continue to exploit the system. Organised crime in America still exists, but it was dealt a severe blow when America found creative ways to bring the criminals to book. These greedy individuals have been identified and named, yet no prosecutions have been seen. Why not?

The Consequences

The causes leading to smuggling seem to be ignored. What then are the consequences of this?

• Higher consumer food prices;
• Increased corruption and smuggling;
• Decreased revenue.

Higher consumer food prices

Let us face the fact. The smugglers peg their prices to market prices as charged by legal importers in order to maximise their gains. While the criminals flourish the Ghanaian consumer is probably paying up to 20 percent more for a staple food than the consumers in neighbouring countries. This all amidst a new food crisis looming in 2010 as warned by the WTO and FAO. Consumers therefore pay the price to keep smuggling and smugglers healthy and happy.

Increased corruption and smuggling

While border controls are ineffective and high tariff differentials exist the vicious circle of corruption supported smuggling will grow and grow. The net result will be that legal importers will look for other destinations that will create another vicious circle of reduced imports and thus reduced income for Ghana.

Decreased revenue

As the percentage of  smuggled rice as percentage of “imported” rice become bigger and bigger and the percentage of legally imported rice become smaller and smaller the money flowing into government coffers will become smaller and smaller. Corruption, smuggling, import mechanisms and many other factors are making Ghana a very unattractive “Gateway to West Africa.”

Quo Vadis, or whereto from here?

It looks as if the ball is in the hands of the Government of Ghana. It will be interesting to see if the latest bombshell will be ignored, or if it will be met with silence.

In the words of Haile Selassi:

“Throughout history, it has been the inaction of those who could have acted; the indifference of those who should have known better; the silence of the voice of justice when it mattered most; that has made it possible for evil to triumph.”

Will the indifference and inaction of government be the cause for evil to keep winning in Ghana?