National business competitiveness should form the basis of Ghana’s AfCFTA strategy

A study commissioned by the Business Sector Advocacy Challenge Fund (BUSAC Fund) concluded, among other things, that the government should ensure that the national competitiveness of Ghanaian businesses forms the basis of the overall competitiveness strategy of Ghana’s AfCFTA.

Indeed, if Ghanaian companies cannot compete in the AfCFTA domestic market, they will find it difficult to compete in the AfCFTA external market.

The report, titled “Ghana’s Competitive Potential in AfCFTA: A Country Competitiveness and Opportunity Assessment Report”, was produced by research and consultancy firm Konfidants.

The objective of the study is to provide a broad understanding of Ghana’s trade competitiveness in the continental market, to map the markets with the greatest potential within the AfCFTA for key industries and products in Ghana and to make recommendations to improve the country’s performance in the AfCFTA.

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

The country’s competitiveness was analyzed in two main segments: competitiveness in the African export market (external competitiveness) and competitiveness in the domestic market (domestic competitiveness).

Konfidants’ lead consultant, Mr. Michael Kottoh, presenting the findings and recommendations, said that Ghana’s ranking of the value of intra-African exports (out of 54 countries) in the seven products studied is generally impressive.

He said the analysis showed that Ghana had a low comparative advantage in most of the seven export products, agro-processed products, plastics, pharmaceuticals, mineral oils, textiles, metal products and cosmetics.

The consultant said that on the pure basis of the productivity differential between Ghana and its commercial competitors, Ghana revealed a comparative advantage in only two of the seven product groups analyzed, which were plastics and mineral oils, although it ranks in the top ten out of four products.

“The results show that the overwhelming majority of Ghana’s most potential export markets are in West Africa,” he said.

Regarding external competitiveness, Mr. Kottoh said that the ECOWAS market was too concentrated and that he should use the AfCFTA to diversify from ECOWAS to other sub-regional markets.

He said this was necessary as it would allow ECOWAS markets to face increased competition from non-ECOWAS member states due to AfCFTA.

The consultant said the good thing, however, was that Ghana was currently exporting to around 33 African markets, which offered a large export footprint on which to build for market diversification and deepening.

“Outside of ECOWAS, North African markets have more export potential for Ghana than East or Southern African markets, in terms of value-added products,” he said. he added.

He said the estimated potential for value-added products in East, Southern and North Africa, however, was very low, although the AfCFTA naturally needed to improve Ghana’s potential in these markets.

Mr Kottoh said analysis of the use of export potential reveals that Ghana is currently under-utilizing a significant portion of its export potential in some key markets.

For domestic competitiveness, he said the cost of credit was Ghana’s weakest point, with the country ranked low on the list compared to major African exporters.

He said the key interest rate of 14.5% in the country in January 2021 was double the African average of 7%, and was also compared unfavorably to 1.5% in Morocco, 3.5% in South Africa, 4.5% in Côte d «Ivoire.

Mr Kottoh said the country’s 15% domestic credit to the private sector (as a percentage of GDP) was one of the lowest compared to South Africa (146.5%), Tunisia (82, 4%) and Morocco (63.6%). ).

He said Ghana’s current average of 12.9 cents per kilowatt hour for industrial consumers in December 2020 was less competitive compared to countries such as Zimbabwe, Tanzania, Malawi, Botswana, DR Congo, Mozambique, Zambia and Ethiopia, all of which had lower electricity costs. of 10 cents per kilowatt hour in 2016.

“It should be noted that Ethiopia in 2016 charged consumers 2.4 cents per kilowatt hour,” he said.

On recommendation, he called on the Ministry of Trade and Industry to accelerate the completion of a clearly defined SMART strategy for the implementation of the AfCFTA and the maximization of 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; an approach of market expansion and diversification to find new destinations for existing products.

It said it should also introduce new products to existing destinations and introduce new products to new destinations, both anchored in a cost-competitiveness approach to ensure that production and export costs at the Ghana are at the same level as the lowest in Africa.

The consultant said there should be an industry partnerships approach that ensures that Ghanaian companies work together through consortia and alliances to increase their competitive advantage and avoid unhealthy competition against each other in the markets of Ghana. the AfCFTA.

He said the government needs to 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 that meets transparent criteria. well defined.

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