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

An international advisory firm, Konfidants has urged 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 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 3 trillion-dollar AfCFTA market.

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

Analyzing 7 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 4 out of the 7 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 may 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.”

On the cost of credit, the report noted that: Cost of credit is Ghana’s weakest point – the country ranks at the bottom of the list when compared to the top African exporters. The 14.5% policy interest rate in Ghana as of January 2021 is double the African average of 7%, and also compares unfavourably to 1.5% in Morocco, 3.5% in South Africa, 4.5% Côte d’Ivoire. Ghana’s 15% domestic credit to private sector (as a share of GDP) is one of the lowest as compared to South Africa (146.5%), Tunisia (82.4%), and Morocco (63.6%).”

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 may 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 Government to “improve trade facilitation and logistics, ensure domestic competitiveness and protect domestic market against unfair trade practices and also prioritize 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, April 21, 2021, at an event held in Accra.