Ghana Lacks Almost All Indicators of Competitive Potential of AfCFTA – Report


The AfCFTA Secretariat is located in Ghana-West Africa

A study commissioned by the Business Sector Advocacy Challenge Fund (BUSAC Fund) and conducted by consultants from research and consultancy firm Konfidants revealed the yawning challenges the country faces with the Continental Free Trade Area Agreement African (AfCFTA).

Focusing only on value-added products, the analysis focused on seven product groups selected in consultation with industry players and government, namely: agro-industrial products, plastics , pharmaceuticals, mineral oils, textiles, metal products and cosmetics.

For each of the above product sectors, the report titled “AfCFTA Competitiveness and Opportunity Assessment” analyzed two main segments – external competitiveness and domestic competitiveness – which left much to be desired.

The study provided a broad understanding of the country’s trade competitiveness in the continental market, mapped the markets with the greatest potential in the free trade area for Ghana’s key industries and products, and made recommendations for improve the country’s performance in the AfCFTA.

Benchmarking of the operating environment – Ghana versus the most competitive countries

Cost of Credit: The cost of credit is Ghana’s weakest point – the country ranks at the bottom of the list compared to major African exporters. The key rate of 14.5% in Ghana in January 2021 is double the African average of 7%, and also compares unfavorably with 1.5% in Morocco, 3.5% in South Africa, 4.5% in Ivory Coast.

Ghana’s 15% domestic credit to the private sector (as a percentage of GDP) is one of the lowest compared to South Africa (146.5%), Tunisia (82.4%) and Morocco (63.6%).

Cost of electricity: Ghana’s current average tariff of 12.9 cents per kilowatt hour for industrial consumers as of December 2020 is less competitive compared to countries such as Zimbabwe, Tanzania, Malawi, Botswana, DR of Congo, Mozambique, Zambia and Ethiopia – all of which cost less than 10 cents per kilowatt hour of power in 2016. It should be noted that Ethiopia, in 2016, charged consumers 2.4 cents per kilowatt hour.

Production capacity: Ghana’s production capacity (quality of labor and availability of skills and use of innovation and production potential) compares poorly with many leading AfCFTA countries. According to data analyzed from the World Bank Business Surveys, Ghana’s total production capacity score out of a possible score of 10 is 4.75 – less than half of the total score and lower than the score average of the main African countries.

Customs efficiency: Ghana’s customs efficiency is not among the best in Africa, even though Ghana ranks above the African average. Customs time efficiency in Ghana is estimated at 197.3 hours – compared to 40 hours in Kenya, the fastest among border countries. As for the cost of documentary compliance and border compliance, it costs $ 645 in Ghana compared to $ 262.7 in Morocco, the cheapest among border countries.

Trade logistics, infrastructure and connectivity: Ghana is currently one of the best performing African countries in terms of linear transport connectivity in the global maritime transport network. However, Ghana suffers from poor transport and logistics connectivity with intra-African markets.

Dependence on foreign inputs: It is also worrying that Ghanaian businesses are the second most dependent on foreign inputs compared to the 12 border African economies – a situation that could undermine Ghana’s ability to take advantage of the rules of the economy. origin of the AfCFTA.

Recommendations

The report recommended that the Ministry of Trade and Industry accelerate the completion of a clearly defined SMART strategy for the implementation of the AfCFTA and maximizing opportunities. The strategy should combine a market share consolidation approach to maintain existing market share both in the domestic economy and in existing foreign destinations; a market expansion and diversification approach to find new destinations for existing products; introduce new products to existing destinations; and introduce new products to new destinations.

The report adds that the government must tackle the high cost of finance by immediately deploying, in partnership with the financial sector, a subsidized export finance window for actors in critical value chains of the AfCFTA and continuously reducing the rate. of policy interest at levels equivalent to those of the continent. 7 percent.

Regarding the cost of electricity and energy, the government, the report notes, must aim to reduce Ghana’s high industrial electricity tariff to around 5 cents per kilowatt hour for strategic industries and significantly reduce the current heavy reliance on foreign inputs and help Ghanaian companies achieve rules of origin under the AfCFTA.

The government should prioritize (and private sector actors should advocate) for the appropriate public agencies to develop the capacity required to protect Ghana’s market from dumping, in particular the institutional capacity needed to prove a justifications and also trigger complaints. defense mechanisms for imports within the boundaries of the AfCFTA.

Among other recommendations, the report called for prioritization of aggregators and export trading companies to deepen trade intermediation of the AfCFTA; an urgent need for partnerships to develop and implement a Ghana-AfCFTA logistics and transport connectivity plan; setting time-bound targets aimed at significantly improving the cost and efficiency of customs deadlines; and developing a plan to transform Ghana’s foreign missions and embassies across Africa.

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