Government, business groups, negotiate African free trade implementation

Government has opened discussions with the Association of Ghana Industries, the Ghana National Chamber of Commerce and Industry and the Ghana Union of Traders Associations – representing manufacturers and traders respectively – to ensure the competitiveness of businesses in Ghana prior to the implementation of the Africa Continental Free Trade Area (AfCFTA) agreement.

This follows concerns raised by some financial and economic analysts cautioning of the possibility of economies of scale making it difficult for a number of Small and Medium-sized Enterprises (SMEs) in Ghana to compete with multinational enterprises operating across the continent in terms of production and procurement costs and consequent pricing of the goods they will soon be able to offer all around Africa, import duty free.

The negotiations are therefore geared towards seeking ways to protect the cost competitiveness of local enterprises against competitors around Africa and also better positioning local industries and enterprises to exploit the unfolding export trade opportunities created by the agreement.

Local businesses fret that multinationals have distinct advantages over them with regards to both procurement and production costs because of economies of scale, and this will reflect in clear price competitiveness, now that tariff protection is about to be removed.

For instance, multinational consumer goods producers such as Unilever produce each of their brands in the African countries where the basic raw materials for production for that brand are cheapest and most readily available, and then uses its sibling subsidiaries around the continent to reach consumer markets everywhere.

This means considerable economies of scale advantages in the cost of production of each brand, but up till now, import tariffs have enabled local producers to remain price competitive. Multinational retailers such as Shoprite have enjoyed similar advantages, and again import tariffs have kept local retailers competitive. Local businesses are pointing out to government that these same production cost and consequent sales price advantages stand to constrain their ability to exploit African export markets.

Faced with the imminent loss of crucial tariff protection Ghana’s local business groupings are discussing with government possible policies that can provide some sorts of protection with regards to price competitiveness both in local markets and export markets.

To ensure local competitiveness, a number of issues are being looked at – although such proposals are not actually new.

Speaking with the Goldstreet Business, the Chief Executive Officer (CEO) of AGI, Mr. Seth Twum-Akwboah said the issues border on measures that reduce the cost of doing business and that increase productivity, such as reducing the cost of electricity, acquisition of advanced technology and improvements in human capacity and productivity as well as ensuring an effective raw material supply chain for local businesses.

“Private sector operates on the basis of return on investments and profit maximization. If you are not competitive, you cannot maximize profit and investors will not come to invest. An effective system will attract both local and international investors”, he asserted.

President of GUTA, Dr. Joseph Obeng said his outfit has outlined some measures to discuss further with government. Such measures include strengthening existing institutions such as the Ghana Standards Authority and Food and Drugs Authority to better harmonize standards to prevent influx of sub-standard goods onto the Ghanaian market.

“We have been briefed. We are waiting for a broader stakeholder participation so we can factor our inputs”, he said.

The AfCFTA is the world’s largest free trade agreement, with 22 countries having signed up so far and the possibility of up to 30 more joining eventually. Africa has a market size in the region of US$3 trillion, although the three biggest economies, South Africa, Nigeria and Egypt are yet to sign up, instructively largely because of fears that their local businesses will not be able to compete with multinationals operating around the continent.