- Government has on several platforms and fora assured the business community that AfCFTA is a game changer and can transform the country’s economy. There has been improved macroeconomic indicators, ...
Written By Yaw Ohemeng Kyei - The African Continental Free Trade Area (AfCFTA) is a novelty by the Africa Union to encourage intra Africa trade. Phase one of its protocol was negotiated in the area of trade in goods; services; working groups and procedures for settlement of disputes. AfCFTA is in line with the vision and targets of the Sustainable Development Goals (SDGs). Intra African trade is 16 percent whilst Africa’s share in global trade is two-point six percent. This means Ghana’s share of intra African trade and global trade are approximately 0.3 percent and 0.04 percent.
Government has on several platforms and fora assured the business community that AfCFTA is a game changer and can transform the country’s economy. There has been improved macroeconomic indicators, consistent drop in inflation and the uncertainty around the banking sector clarified. The fact that the economy has been able to withstand Covid 19 and is still robust and resilient justify the location of the AfCFTA Secretariat in Accra.
Government over the years has made significant strides aimed at supporting Ghanaian entrepreneurs to maximize fully the potential of AfCFTA. Among these are the establishment of Ghana Exim which has over the past three years assisted businesses in the Pharmaceutical, Agri- business, Poultry industry among others. Nine companies have for instance received 60 million dollars from Ghana Exim to boost their businesses. Government has embarked on a one District one Factory initiative to create jobs and add value to raw materials for local consumption and export to rake in more foreign exchange and correct the balance of payment challenges. Government has also set up the Ghana Commodity Exchange which has apparently solved three main problems facing farmers. There are access to warehouse, market and finance through the warehouse receipt system. AfCFTA was expected to commence operations last month but they have been deferred to January next year due to the Covid 19 pandemic.
Notwithstanding the keen interest of government to ensure Ghanaians benefit from AfCFTA, analysts and market watchers are ambivalent and cynical about the extent to which Ghanaian businesses can reap maximum gains from AfCFTA when it commences next year. The first issue is that AfCFTA is supposed to ensure free movement of goods and services in line with SDG 17.10 which talks about Promotion of universal rules based on open non-discriminatory and equitable multilateral trading system under WTC. However less than six months into its commencement, government is still not clear about the extent to which Africans especially Nigerians can trade in the country. Also, the cost of debt in Ghana has the propensity to impede SDG 17.11 whose target is to significantly increase the exports of developing countries in particular with a view to doubling the least developed countries share of global exports by 2020.
Most businesses in Ghana rely on loans for their operations because the capital market has not been fully developed. Funds from institutions like Venture Capital Fund and Ghana EXIM are difficult for ordinary businesses to access. Eighty percent of businesses in Ghana are within the Small, Medium and Enterprises, SME category and may not qualify for loans at the capital market so the money market becomes the palpable choice. Interest rates in Ghana is one of the highest in Africa.
According to CEIC, a macroeconomic data provider, between November and December last year, Interest rates in Ghana was 30 percent higher than that of Nigeria, Kenya, Botswana, Egypt and Malawi. Furthermore, businesses in Ghana rely mostly on electricity for their operations. Members of the Association of Ghana Industries have on a number of occasions expressed concern about the high cost of electricity yet the situation is still the same. This will make products from Ghana uncompetitive when AfCFTA becomes operational next year. When products from Ghana become uncompetitive, the country will be a dumping ground for inferior goods. This will eventually lead to the collapse of indigenous Ghanaian companies and consequently increase unemployment. Government should therefore take pragmatic measures to reduce electricity tariffs to save the companies from collapsing.
PREPAREDNESS OF GHANA TO AFRICAN CONTINENTAL FREE TRADE AREA (AfCFTA)
By Yaw Ohemeng Kyei, President- Commodity Brokers Association Of Ghana (CBAG)