4 Reasons the Africa Free Trade Agreement (AfCFTA) Matters for Entrepreneurs in Ghana

Africa has long been characterized by fragmented marketplaces that prevent the economies of the continent’s nations from growing more quickly. According to data currently available, Africa trades only 15% internally and 85% with the rest of the world. A long-awaited initiative, the African Continental Free Trade Area (AfCFTA) otherwise known as the Africa Free trade Agreement will perhaps defragment the continent and increase the productivity of its economies.

The African Continental Free Trade Area (AfCFTA), which would include 55 African economies once completely recognized by all member states of the World Trade Organization (WTO), will be the largest free trade area by membership. 

The AfCFTA, will establish a single continental market for goods and services, facilitated by movement of capital and persons. Immediately, 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at US$3.4 trillion (World Bank, 2020) will be connected.

By negotiating goods and services simultaneously, the AfCFTA otherwise known as the Africa Free trade Agreement promises to represent a paradigm shift and a deeper commitment to the integration of the continent in addition to its ground-breaking magnitude. The deal has the potential to transform the economic landscape for the development of Africa, not only by boosting intra-African trade but also by giving the region’s nations a chance to compete effectively in the global economy, fight poverty, and advance inclusion.

Numerous analysts believe that boosting trade under the AfCFTA could trigger reforms, leading to enhanced productivity and job opportunities. Consequently, this could reduce poverty rates across the continent. The World Bank supports this notion, indicating that by 2035, implementing the agreement could potentially lift an additional 30 million people out of extreme poverty and 68 million people from moderate poverty.

The Importance of the Africa Free trade Agreement to MSMEs

Ghana’s enhanced intra-African trade lies with MSMEs. With MSMEs accounting for a substantial amount of economic activity in the country, the AfCFTA provides an opportunity for them to export to other African countries, thereby boosting intra-African trade. MSMEs are known to be the bedrock of economic activity in Ghana and are some of the biggest contributors to dealing with the unemployment situation in the country as well as the many other general economic indicators within the country. AfCFTA is expected to create a single market and bring over a billion people together, including a growing middle class and a combined GDP of more than US$3.4tn.

Through improved harmonisation and coordination of trade liberalization and facilitation mechanisms throughout the many regional economic communities on the continent, the Continental Trade Agreement will increase intra-African commerce. The environment for creating regional value chains and joining GVCs will be better in the African market. Due to these factors, it is essential that MSMEs thoroughly know the agreement in order to take advantage of its growth potential and lessen the impact the COVID19 epidemic would have on their operations.

It is crucial to remember that for countries to achieve sustained economic growth, they must fully benefit from trade integration. This would mean identifying sectors with export potential for Ghana, considering competitive advantage, and understanding the competitiveness of the Ghanaian private sector, including the challenges the private sector faces in domestic and international trade. 

Production Capabilities: The study reveals that Ghanaian firms generally have low productive capabilities across various sectors, indicating a challenge in competitive production and taking full advantage of AfCFTA. Immediate action is necessary to address these challenges.

Ability to Compete: Ghanaian SMEs face difficulties in competing, primarily due to higher prices resulting from increased costs over the past three years. Production volumes are low, making them uncompetitive. High production costs due to expensive raw materials, credit, and utility charges contribute to this issue. However, Ghanaian SMEs do have a competitive advantage in terms of quality, especially in regulated industries like pharmaceuticals.

Ability to Innovate: While firms have demonstrated the ability to innovate, challenges such as high costs of upgrading production, lack of skilled personnel, and expensive imports of basic equipment hinder their innovation efforts. Despite this, investments in new technology are prevalent among the enterprises.

Ability to Export: Many firms lack export certificates, indicating they are primarily local businesses. Challenges in exporting to other African countries include custom regimes, language barriers, diverse currencies, and varying standards and regulations. Additionally, domestic-oriented industries like tourism face limitations in export potential.

About the National AfCFTA Coordination Office (NCO)

The National AfCFTA Coordination Office (NCO) was established in March 2020 under the Ministry of Trade and Industry as a central point for coordinating the Government of Ghana’s policy and strategic response to the Africa Continental Free Trade Area (AfCFTA) Agreement.
The NCO is responsible for the day-to-day management of implementation and programme administration. It is also the liaison office between the AfCFTA Secretariat and the Ministry of Trade and other Ghanaian Stakeholders.
In line with its coordination role, the National Coordination Office is dedicated to establishing an efficient operational network of all the key institutions involved in the implementation of AfCFTA in Ghana. These include GRA-Customs Division, the Ghana National Chamber of Commerce and Industry, the Ghana Food and Drugs Authority, the Ghana Standards Authority and the Ghana Export Promotion Authority, amongst others. The NCO has also actively been engaging non-state actors including financial institutions, entrepreneurs and private sector associations

Exploring The Opporunities

Discover boundless opportunities in Ghana, the heartbeat of Africa’s commercial and trade sector, as emphasized by Wamkele Mene, the General-Secretary of the AfCFTA Secretariat. With the AfCFTA opening new avenues, Ghana stands at the forefront of regional business. Foreign investors aiming to capitalize on these limitless prospects should consider investing here.

The Ghanaian government, along with the Ghana Investment Promotion Centre (GIPC), is committed to facilitating seamless operations for both local and foreign businesses. According to Yofi Grant, the CEO of GIPC, ‘Come to Ghana and engage with us. We offer the best investment environment. Ghana remains a land of opportunities, openness, and optimism!

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