Norvan Reports, August 19, 2021
The Consumer Unity and Trust Society of Ghana (CUTS Ghana), as part of nine (9) policy recommendations to government in view of the African Continental Free Trade Agreement (AfCFTA), has called for the implementation of a national strategy and action plan for Ghanaian businesses.
According to the Group, the national strategy and action plan to be developed should provide systematic, uncut and inclusive processes for businesses.
The call by CUTS Ghana has become necessary given that Ghanaian businesses particularly SMEs which make up 90 percent of businesses in the country based on an analysis of the readiness for the AfCFTA on a five-point Likert scale scored within 1-2 [Not Ready] indicating that the sector is not ready to trade under the continental-wide trade pact.
This, therefore makes it more difficult for Ghana to compete with countries like South Africa, Egypt, Morocco, and Kenya which scored higher in the AfCFTA readiness assessment analysis by CUTS Ghana.
Among the policy recommendations made by CUTS Ghana to government include;
- There is the need for a national implementation strategy and action plan that provides systematic, uncut, inclusive and processes towards measures to ensure AfCFTA implementation
- There is the need to intensify education on the AfCFTA most especially the Rules of Origin. Whilst meeting with leadership of trade associations and some few trade practitioners at the national level is necessary for the purpose of engagement, it is not sufficient if such encounter does not cascade to the regional and probably the district level. We recommend MoTI to draw up a comprehensive Stakeholders Sensitisation Programme to cover the entire 16 Regions in Ghana to update the general public on the First Phase of the AfCFTA negotiations and solicit their inputs for the outstanding issues and the Second Phase of the negotiations. However, there is a need to expedite this since official trading begins in January 2021. Moreover, to get inputs and buy-in from the private sector, this same process must be adopted to involve the private sector right from the beginning of trade negotiations.
- The government should consider involving the leadership of private associations and academia (Business Schools and Economics Departments) during negotiations. Admittedly, it is the private sector that does business and every negotiated agreement will have much bearings on their operations and survival. For this reason, government should consider engaging private sector before and during a negotiation
- There is the need to address the high cost of production arising from high utility charges, high cost of raw materials, high government taxes and charges, high cost of machinery and equipment. Reorganize the utility companies to improve their management efficiencies and reduce their operational losses. In this way, they can supply utility to firms at a low rate. Government taxes should be restructured to favour firms, especially those who are into value addition. The high cost of raw material and machinery should be addressed by reducing or minimizing imports duties on such inputs that support processing, manufacturing, or value addition. Alternatively, there should be a policy direction that promotes the domestic provision of inputs. For example, industrial starch development under the strategic anchor industrial product is a good initiative and should be expanded to other areas.
- The issue of poor packaging and finishing should be addressed by encouraging investment in industries that offer such services. For example, the government industrial development agenda should partner with the private sector to invest in firms that provide state of the art packaging services.
- There is the need to address the high cost of credit by introducing policies to better the operational and managerial efficiency of banks, minimize lending risks, strengthen regulation and ensure sturdy macroeconomic stability. This will go a long way to enable financial institutions to offer credit or loans to firms at a reduced and sustainable rate. More practically, Ghana, Exim Bank should increase support to firms that undertake value addition. It may also consider establishing a specific credit facility to support SMEs that focus on exports under the AfCFTA. Moreover, the Government should increase resource allocation to the Exim Bank
- The Ghana Export Promotion Authority (GEPA) needs to intensify education and training to SMEs, especially on potential export market and market access requirements.
- Government should restructure educational institutions to reflect the human resource needs of industries. Moreover, there is a need for knowledge transfer from transnational corporations to local firms. This could be done by creating knowledge networks among firms. For example, the formation of a congress of manufacturing firms where a delegated person from the group can seek out international best practices in terms of management and working practices of firms in their member industries and make that available free of charge to their members
- There is the need for an administrative and regulatory environment that is transparent, simple, predictable, and business-friendly to help reduce high transaction cost and delays involved in the acquisition of documentations and certifications.
The AfCFTA will bring together all the 55-member states of the African Union, covering a market of more than 1.2 billion people, including a growing middle class and a combined Gross Domestic Product (GDP) of more than US$3.4tn.2 In terms of numbers of participating countries, the AfCFTA will be the world’s largest free trade area since the formation of the World Trade Organisation.
The main objectives of the AfCFTA are to create a single continental market for goods and services, with free movement of business, persons, and investments and thus paving the way for accelerating the establishment of the Customs Union. It will also expand intra-African trade through better harmonisation and coordination of trade liberalisation and facilitation instruments across the Regional Economic Communities (REC) and across Africa in general.
The AfCFTA is also expected to enhance competitiveness at the industry and enterprise level through exploitation of opportunities for scale production, continental market access and better reallocation of resources.
Hence, businesses especially those across the continent need to draw on the great opportunities presented by this continental free trade agreement.
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