AfCFTA: reduce cost of power, address credit challenges to boost Ghana’s competitiveness – Konfidants

International advisory firm, Konfidants has urged the government to devise strategies to strengthen the country’s existing trade relations on the African continent to take maximum advantage of the African Continental Free Trade Area (AfCFTA).

Konfidants also advised the government to among other things address the exorbitant cost of credit and power in order to prepare the country to benefit from the free trade agreement.

In a research conducted on Ghana’s competitive potential in the AfCFTA market, Konfidants discovered that high cost of credit facilities and power, as well as unnecessary wasting of time in complying with export documentation, are factors that may derail Ghana’s ability to take advantage of the estimated three trillion-dollar AfCFTA market.

Konfidant also observed that Ghana remains a high raw material exporter with just 20 per cent of its exports being refined goods.

Analysing seven major commodities that Ghana exports and imports including agro-processed goods, cosmetics, textiles, pharmaceuticals, lubricants, plastics and metals, Konfidants ranked Ghana as being among the top 10 exporters in four out of the seven categories.

The above notwithstanding, the exorbitant cost of credit and power and the sheer wasting of time in the processing of export documents are factors Konfidant found that might negatively impact Ghana’s competitiveness in AfCFTA.

“Ghana’s current average tariff of 12.9 cents per kilowatt-hour for industrial consumers as of December 2020 is less competitive against countries such as Zimbabwe, Tanzania, Malawi, Botswana, DR Congo, Mozambique, Zambia, Ethiopia – which all had cost of power less than 10 cents per kilowatt-hour as at 2016. Worthy of note is that Ethiopia as at 2016 charged 2.4 cents per kilowatt-hour for consumers,” the report said.

On the cost of credit, the report noted that the cost of credit was Ghana’s weakest point as the country ranked at the bottom of the list when compared to the top African exporters.

The 14.5 per cent policy interest rate in Ghana as of January 2021 is double the African average of seven per cent , and also compares unfavourably to 1.5 per cent in Morocco, 3.5 per cent in South Africa, 4.5 per cent Côte d’Ivoire.

Ghana’s 15 per cent domestic credit to private sector (as a share of GDP) is one of the lowest as compared to South Africa (146.5 per cent ), Tunisia (82.4 per cent ), and Morocco (63.6 per cent ).”

The report also noted that “Ghana’s customs efficiency is not among the best in Africa even though Ghana ranks above the African average. The time efficiency of customs in Ghana is estimated at 197.3 hours compared to 40 hours in Kenya, the fastest among the frontier countries. Regarding the cost of meeting documentary and border compliance, it costs US$645 in Ghana compared to US$262.7 in Morocco, the cheapest among the frontier countries”.

Another challenge that Konfidant noted might pose challenges to Ghana’s competitiveness in the AfCFTA market is “Ghana’s poor transport and logistics connectivity to intra-Africa market”.

The report called on the government to “improve trade facilitation and logistics, ensure domestic competitiveness and protect domestic market against unfair trade practices and also prioritise innovative measures to facilitate market access by finding buyers and export intermediation for Ghanaian SMEs”.

The report dubbed: “Ghana’s competitive potential in the AfCFTA; a country competitiveness and opportunity assessment” was released on Wednesday at an event held in Accra.