Exports’ bleak future over gov’ts uncertainty on EPA

Ghana stands to lose billions of euros in annual export earnings and job losses in excess of 50,000 workers if the country does not sign the Economic Partnership Agreement (EPA) by 1st October, 2016.

A critical sector of the economy, exporters, are already facing unfavourable macroeconomic conditions including high energy costs, a hiked tax environment and steep increments in utility tariffs that have increased cost of doing business and lowered competitiveness.

In 2014 the value of trade between Ghana and the European Union (EU) stood at €6billion, which constituted over 20 percent of Ghana's total external trade in that year -- underlining the EU’s role as a major trading partner for Ghana.

Currently, the EU leaders are awaiting their ECOWAS counterparts to complete the signing of an EPA they endorsed two years after negotiations on the agreement was closed.

However, players in the export trade business believe the uncertainty over government’s stance with signing of the EPA before the deadline could be the final nail in the coffin.

Major exporters -- Pioneer Food Cannery (PFC), Cosmo Seafood Company, West African Fisheries, Golden Exotics, Volta River Estate, Jei-River Farms, Barry-Callebault, ADM and Cargill -- whose main market is the European Union are therefore calling on government to sign the EPA in order not to be hit by a tariff hike of approximately 20 percent on their goods.

It will be recollected that while negotiations for a regional EPA were still on-going, an interim agreement was initialled in December 2007 by Ghana and the EU for goods only to avoid paying these tariffs.

Nichol John Elizabeth, General Manager Pioneer Food Cannery (PFC) which exports over 95 percent of its produce to the EU market and supports over 10,000 jobs, believes government’s reluctance to sign the agreement could derail the nation’s fortunes.

“All we are hoping is for government to sign the agreement. Ghana has to find a way to protect its export industry to access the EU market,” he said.

George Kporye, Head of Corporate Affairs-Golden Exotics, explained that the margins in his industry are so narrow that should the EU add its tariffs of 19.4 percent, his company will close shop and move to a more favourable country.

“We know government is doing its bit, but it is not dependent on us alone. The EU needs the deal signed so that all member-states can ratify it in their individual countries. If we do not move on time the consequences can be grave,” he added.

The main objectives of the Economic Partnership Agreement include increased productive investments and job-creation in Ghana and West Africa, and intensifying and facilitating trade between Ghana, the region, and the EU toward a win-win development relationship.

The agreement is expected to give 100 percent market access in the EU to produce from West Africa, while in return Ghana and other West African countries gradually liberalise 75 percent of their imports from the EU over 20 years.

This asymmetric and gradual opening of the Ghanaian market to European goods takes into account the different level of development between Ghana and the EU, and affords enough flexibility to protect sensitive sectors as well as preserve fiscal revenues.

In order to protect sensitive sectors, a number of agricultural and non-agricultural products such as chicken, tomatoes, sugar, cereals and flour, frozen fish, tobacco, beer and industrial plastics, have been excluded from liberalisation.

However, some trade activists have warned that opening up markets in Africa could open the floodgates for dumping goods from European manufacturers and make locally produced goods uncompetitive, which would lead to the loss of jobs in the region.

But Mr. Elizabeth argues that with PFC’s utility tariff going up more than half a million Ghana cedis a month after the increment in utility tariffs, the company cannot compete should the EU slap a tariff of 20.5 percent on their products as a result of government’s failure to sign the EPA before the expected deadline this year.

“This is a no-go area. My company will be downsizing and eventually close down if the agreement is not signed,” he added.

Mr. Elizabeth stated that industrial tuna production contributes at least 10 percent to the revenue base of non-traditional exports; therefore, government needs to do something about signing the agreement.

‘We want to stay here’

Mr. Kporye stated that even though Golden Exotics have subsidiaries in both the Ivory Coast and Cameroon, the company sees a lot of potential in Ghana and does not want to leave the country.

“We want to stay here, grow and expand; because Ghana offers us a lot of potential to explore and become a giant in the horticulture industry,” he added.

Mr. Elizabeth also added that PFC has been in Ghana since 1972 and is not interested in leaving anytime soon; but if the government doesn’t act, it will be forced to look at other options.

“We are already looking at other options. We have commenced negotiations in Ivory Coast, but the truth is we want to stay here. Pioneer has a history here and we want to stay in Ghana. We do not want to run away,” he added.

But many civil society organisations see the EPA as another agreement that will continually derail the manufacturing base of developing countries including Ghana, with many petitioning government not to sign the full pact.