What Does AfCFTA Mean For The Private Sector In Ghana?
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What Does AfCFTA Mean For The Private Sector In Ghana?

The African Continental Free Trade Area (“AfCFTA”) promises a host of benefits for Africa at large, as signatory countries and the private sector proceed in rallying efforts.

Heads of State of the African Union (“AU”) have endorsed a seven-pillar programme for Action to Boost Intra-African Trade (“BIAT”) including trade policy; trade facilitation; productive capacity; trade-related infrastructure; trade finance; trade information and factor market integration. The implementation of activities under the BIAT is expected in each member country for coordinating the goals of AfCFTA.

As the host country of AfCFTA, Ghana is positioned to lead the way in implementing the programmes and activities required for a successful trade. In doing so, the country stands to gain a reported $82-million in trade creation, with trade diversion estimated at $66 million. This article examines Ghana’s attempts to harness AfCFTA’s benefits through trade-related infrastructure and trade finance.

Adequate trade-related infrastructure is required for reducing distribution margins, lowering prices, and raising consumer welfare. It is also necessary in lowering transaction costs, adding value, and increasing profitability for exporters, thereby encouraging more exports.[1] Four of such major infrastructure areas slated to support Ghana’s free trade agenda include road construction, railway development, air and land port expansion.

 

Transportation Infrastructure

The Tema Port Expansion Project (“TPEP”) is underway to add a new terminal to the port. When completed, it will result in a 1.4-km-long quay housing four container berths, container stacking yards, a 4 km rubble-mound breakwater, a 19-m-deep port access channel, and various supporting port infrastructure and services. Beyond improving the port’s physical infrastructure, investors and trade partners have a keen interest in the ease of doing business at the port. The newly Integrated Customs Management Systems (“ICUMS”) was deployed on April 2020, to hasten export and import business.

In addition to the Port’s expansion, the construction of approximately 1150 km of new main roads; the routine maintenance of around 42,500 km of trunk, feeder and urban roads; and the rehabilitation of 515 km of roads are expected to greatly improve the road transportation infrastructure of the country.[2] Despite the slow implementation of these road projects, the Ghanaian government is hopeful to complete some major works in the early years of AfCFTA.

A resuscitation of railway in Ghana is being made through the Tema-Mpakadan rail line, which is part of the 1,000 km Ghana-Burkina Faso Railway Interconnectivity Project that will link Tema, Ghana to Burkina Faso’s capital Ouagadougou.[3] On completion, the project will contribute greatly to trade between Ghana and its neighbouring countries.

The Kotoka International Airport received a facelift in 2018. The five-level, 48,000 square-metre terminal, can now process 1,250 passengers per hour, equivalent to 5 million passengers per year. A new national airline is also underway with Ghana signing various Memoranda of Understanding for the delivery of aircrafts.[4] When well implemented, these transportation infrastructural developments should essentially support successful trade.


Trade Finance

Limited options for financing has been a major hindrance to export development in several African countries.[5] Therefore, to elicit a positive response from Ghanaian exporters to the AfCFTA, widened availability and access to trade finance is required.

The Ghana Export and Import (GEXIM) Bank is presently the country’s most important institution for export development. With products and services such as a pre-shipment credit facility, post-shipment credit facility and export development finance, the Bank supports and develops trade between Ghana and other countries. Nearly all commercial banks in Ghana have products for the exporting community. Typical products offered by many banks include Letters of Credit, Marine Cargo Insurance, Transit Insurance and Trade Loans. Each bank presents different eligibility criteria for accessing their products, the usual components of which include robust financials, excellent credit score or landed property. Such criteria have been SMEs’ blockade to financing over many years.

Some international development partners most vital to Ghana’s export business in terms of trade finance are the World bank – involved in the Ghana Commercial Agriculture Project; GIZ – involved in the Market-Oriented Agriculture Programme; and USAID – involved in Trade and Investment Hub. A strategic coordination of financing options for local emerging businesses will be critical to promote and reap the highest potentials of AfCTA.

 

Public-Private Partnerships

The Ghana government has expressed its readiness for public-private partnerships in the development agenda. A success story of such partnership is the TPEP. In response to the operationalisation of AfCFTA, investors have the opportunity to invest in commercial agriculture and value addition of raw materials readily available in Ghana to make them market-ready for the continent. The One District One Factory (1D1F) initiative is an opportunity to access different products from different districts across Ghana for value addition and exportation. The Free Zones Authority also presents a unique opportunity for investors to produce for exportation.

In conclusion, Ghana is proving its commitment to the vision of  trading in a liberalised African market through concrete steps to develop trade-related infrastructure in preparation towards the launch of AfCFTA in January 2021. While several opportunities remain to improve the trade framework by way of small business trade finance initiatives, among others, it holds that as we round the corner of a new year, there is much positive evolution to anticipate for Ghana and Africa.

 

[1] Infrastructure and Asia’s Trade Costs. Accessed at https://www.adb.org/sites/default/files/publication/157268/adbi-rpb27.pdf  on 20/11/20 at 10:44 am.

[2] Down the Highway. Accessed at https://oxfordbusinessgroup.com/overview/opportunities-private-engagement-abound-government-renews-its-commitment-infrastructure-investment  on 19/11/20 at 2:08 pm

[3] Tema-Mpakadan Railway to be ready in August 2020. Accessed at  https://thefinderonline.com/news/item/17946-tema-mpakadan-railway-to-be-ready-august-2020  on 19/11/20 at 4:45 pm.

[4]Will Ghana’s New National Airline Fly? Accessed at https://aviationghana.com/africa-will-ghanas-new-national-airline-fly/  on 19/11/20 at 5:22 pm.

[5] Accessibility to Finance For Non Traditional Exports In Ghana, pp 1.  Accessed at http://ir.knust.edu.gh/bitstream/123456789/4822/1/Onny%20Benjamin%20Lloyd.pdf  on 24/11/2020.