Ghana published her first trade policy in 2004, and the document endeavours to place trade at the heart of Ghana’s development plans.
By Ms. Anita Nkrumah and Ms Nora Dei-Anang
The policy highlights the need for a fair, transparent import and export regime that would enhance production capacity for domestic export markets and attract foreign direct investment (FDI), and the need to adopt trade-facilitating measures, including transparent and efficient procedures for customs clearance. According to the Ministry of Trade and Industry’s (MOTI) trade policy document, economic growth must occur through increased international trade, in view of Ghana’s relatively small domestic market, and for this reason, a clear and transparent trade policy will guide the implementation of a successful international trade agenda. The expansion of foreign trade is to be achieved through increased regional and global integration, streamlined export and import procedures, a diversified and strengthened export base, the promotion of agricultural processing, new areas of comparative advantage, geographical diversification towards ECOWAS, and full utilisation of preferential market access through agreements, such as the Economic Partnership Agreement (EPA) and the African Growth and Opportunity Act (AGOA).
Since the start of the Economic Recovery Program (ERP) in 1983, several policies have been introduced by different governments in an attempt to adjust and improve the patterns of trade in Ghana. These included devaluing the currency as well as raising producer prices for crucial exports such as cocoa to offset the advantages of smuggling such goods across borders. Most recently, in an effort to boost the private sector and promote trade, the government revised and reduced numerous import duties and trade taxes. Ghana is also signatory to many free trade agreements (FTAs) including the EPA, AGOA and the ECOWAS Trade Liberalisation Scheme (ETLS), and as such has favourable access (due to the removal of duties and quotas on certain export products) to European, American and West African markets, respectively.
An important question after years of implementing these FTAs is how trade, particularly export performance, has improved in the country over time. All things being equal, the end result of trade policy should be an increase in export performance, with an attending gain in growth. This report will highlight the trends and market share of selected export products, and discuss the key challenges they face. The report also assesses the extent to which current government initiatives address the challenges and make recommendations that will help Ghana maximise her gains from FTAs to help her achieve an upper-middle income status and a higher level of economic development, all things being equal. The report is organised as follows: a trend and market share analysis of trade with the various trade blocks, an assessment of key challenges to trade in Ghana and some recommendations and conclusion.
Trends and Market Share of Selected Export Products in Ghana
This section analyses the growth trends of Ghana’s trade flows along EPA, AGOA, and ETLS trade routes. Comparisons are made with trends in Côte d’Ivoire and in some cases with West African averages. Côte d’Ivoire is selected for comparison because not only does she trade along EPA, AGOA and ETLS trade routes, she also has similar characteristics as Ghana – both Ghana and Côte d’Ivoire export mainly agricultural products and are both lower middle income countries with per capita incomes (2016) of $1,380.00 and $1,520.00 respectively. The section also explores the market share of some selected export products — gold; cocoa beans; coconuts, brazil nuts, and cashews; crude petroleum; and, sawn wood. A product destination analysis – an analysis of Ghana’s market share in the major export destinations, and the competition faced in those market is also conducted in this section.
European Union (Interim EPA)
In accordance with the Cotonou Agreement, West African countries agreed to negotiate an Economic Partnership Agreement (EPA) with the EU. The EPA is a trade and development agreement, which secures Ghana’s free access to the EU market for Ghanaian goods, with the aim of sustaining Ghana’s economic growth through trade, investment, and employment. While negotiations were still ongoing, Ghana signed an interim EPA with the EU. This was to avoid disruptions to her exports as the trade provisions in the Cotonou Agreement were due to expire on 1 January 2008. The interim EPA was ratified in August 2016. Ghana and the EU are actively engaging in the process of adopting the regional West Africa EPA, which will eventually replace the interim EPA.
The two major goals to be fulfilled by the adoption of the EPAs are: 1) integration into the world economy, and 2) the furthering of sustainable development within countries. The provisions on trade in goods in the interim EPA covers duty and quota free access into the EU for all Ghanaian imports, except arms; the asymmetric and gradual opening of Ghana’s market to EU goods, taking into full account the differences in development levels between Ghana and the EU; a chapter on trade defence with bilateral safeguards, allowing each party to reintroduce duties or quotas if imports of the other party disturb or threaten to disturb their economy; a chapter on technical barriers to trade as well as sanitary and phytosanitary (SPS) measures; and, a chapter facilitating trade through measures such as more efficient customs procedures.
Aside Ghana, Côte d’Ivoire was the only other country to sign the interim EPA agreement within the West African region. In 2016, Ghana occupied the 56th rank as EU trading partner and her total trade was 0.1 percent of EU trade. Côte d’Ivoire on the other hand occupied the 53rd rank with a total trade share of 0.2 percent of EU trade. The EU is one of Ghana’s most important trade partners, and is a leading destination for Ghanaian exports. In 2015, top exports from Ghana to the EU were oil products (37 percent of total exports), cocoa beans (29.3 percent), cocoa butter/paste/powder (14.2 percent), prepared or preserved fish (7.1 percent), and fruits and nuts (4.4 percent) including bananas (1.6 percent).
FIGURE 1: GHANA’S MERCHANDISE TRADE FLOWS AND BALANCE WITH THE EUROPEAN UNION (2006 – 2016)
The figure above shows an eleven year (2006 – 2016) trend of Ghana’s trade with the EU. From 2006, Ghana’s export grew considerably from €1,120 million to €1,475 million in 2010 at an annual average rate of 8 percent. Between 2010 and 2011 however, exports shot up by about 136 percent to €3,481 million. Since then, exports grew negatively at an annual average rate of 8 percent to record €2,295 million in 2016. As clearly shown in figure 1, this trend is somewhat similar for imports, though there was no hike between 2010 and 2011, as was the case for exports. Rather, between 2009 and 2012 imports grew rapidly at an annual average rate of 17 percent to a peak of €3,613 million. Thereafter, imports declined steadily at an annual average rate of 5.8 percent. Ghana also maintained a negative trade balance with EU except in 2011 (the year of the hike in exports) when she had a trade surplus of €555 million.
FIGURE 2: CÔTE D’IVOIRE’S MERCHANDISE TRADE FLOWS AND BALANCE WITH THE EUROPEAN UNION (2006-2016)
In terms of trade balance, Ghana’s performance is not comparable to Côte d’Ivoire who maintained a positive trade balance throughout the period (2006 – 2016) with an average trade surplus of €1,463 million (See figure 2 for more details). Though Côte d’Ivoire’s exports were considerably higher than that of Ghana’s (Côte d’Ivoire exported about 34 percent more on average to the EU than Ghana), her exports grew by just 4 percent on average between 2006 and 2013. However, Côte d’Ivoire’s exports rapidly increased at an annual average rate of 12 percent between 2014 and 2016. Her imports from the EU were also about 27 percent lower than Ghana’s imports from the EU. Ghana also performed below the West African average. While the average of Ghana’s trade balance with the EU was a deficit of €351 million, between 2006 and 2016, West Africa’s average was a deficit of €134 million.
Regarding export products, Ghana along with other West African countries still exports mainly fuels and food products to the European market. In 2016, of the total €2,295 million worth of goods Ghana exported to the EU, 96 percent were primary products compared to the West African average of 94.1 percent, and 1.9 percent of the goods were manufactures, compared to the West African average of 4.8 percent. Though Ghana exported more primary products and less manufactured products from a West African perspective, she exported less primary products and more manufacturing products relative to Côte d’Ivoire’s exports. See table 1 below for more details.
TABLE 1: SITC PRODUCT GROUPS FOR GHANA AND COTE D’IVOIRE
The EU is a very important market for Ghana’s exports especially in non-traditional exports (NTEs). Though Ghana’s exports to the EU have increased after signing the interim EPA, as seen in figure 1, this has not been sustained over the years. Côte d’Ivoire on the other hand experienced higher export volumes (though with little growth) than Ghana, alongside lower imports. This accounted for the trade surplus she enjoyed as against Ghana’s near 100 percent trade deficit. Though Ghana has not made much gains from the interim EPA, there has however been great improvements in the export of some selected NTEs: Cocoa preparations such as butter and paste experienced an average growth rate of 197 percent in the period being considered. Rubber and articles thereof also experienced growth of 259 percent. There is significant room for Ghana to improve especially as she goes into a regional EPA.
United States (AGOA)
The Africa Growth and Opportunity Act (AGOA), enacted in May 2000, has been the centerpiece of trade relationship between the United States and qualifying Sub-Saharan African countries. It has since been renewed to 2025. It is a unilateral preferential law that provides Sub-Saharan African countries, Ghana inclusive, with the opportunity to export a wide array of goods to the United States duty and quota-free.
AGOA enhances preferential market access to the US for over 6,000 products. Apart from crude oil products, apparel is the most exported product for many AGOA countries. AGOA aims to encourage export-led growth and economic development in Sub-Saharan African countries, and to create a more meaningful partnership with them based on shared economic growth and trade, by offering non-reciprocal and economic benefits. In 2015, Ghana was the US’s 91st largest goods trading partner with $1.2 billion in total (two way) goods trade. During this period, while Ghana exported $309 million worth of goods to the US, it imported $887 million from the US, generating a trade deficit of $578 million. Top Ghanaian exports to the US in 2015 were cocoa beans (64 percent), wood and wood products (10 percent) and cocoa paste and butter (6 percent). Top imports from the US in 2015 were machinery (22 percent), vehicles (18 percent), mineral fuels (7 percent) and plastics (4.8 percent). The figure below shows historical trends of trade between Ghana and the US.
FIGURE 3: GHANA’S MERCHANDISE TRADE FLOWS AND BALANCE WITH THE US (2006 – 2016)
Quite similar to Ghana’s trade with the EU, Ghana maintained a trade deficit in the entire eleven year (2006 – 2016) period being considered, recording an average trade deficit of $557 million. Exports which experienced an average decline of 0.4 percent between 2006 and 2010, increased sharply by about 167 percent in 2011. After this sharp increase, it continued to decline at an average rate of 13 percent. Imports also declined at an average rate of 7 percent between 2006 and 2016. As can be seen from figure 3 above, though the size of the deficit fluctuated between 2008 and 2012, there was a steady decline in the deficit from 2012 onwards. On the whole, trade volumes between Ghana and the US reduced greatly. Trade volumes declined by 58 percent from $1,153 million in 2006 to $481 million 2010.
Côte d’Ivoire on the other hand, just like in the European case, maintained a trade surplus throughout the period. She maintained relatively low import levels, which declined at an annual average rate of 14 percent. Her imports from the US were also about 77 percent less than Ghana’s imports. Though she exported about 70 percent more to the US than Ghana, her exports also declined (like Ghana) by about 46 percent on average. Cote d’Ivoire’s average trade surplus was $806 million against Ghana’s average trade deficit of $557 million (See figure 4 for details). Her trade volumes with the US also declined by 41 percent between 2006 and 2016.
FIGURE 4: COTE D’IVOIRE’S MERCHANDISE TRADE FLOWS AND BALANCE WITH THE US (2006-2016)
There is no doubt that AGOA presents a lot of potential for Ghana to expand trade with the US, especially exports. However, it is also quite evident that the potential of AGOA remains largely unexploited, shown by the declining trade flows since 2011 (see figure 3). Some of the issues that hinder Ghana’s maximisation of gains from AGOA include a lack of supply capacity, low industrialisation, lack of a national strategy on AGOA and limited financial resources. In fact, in July 2017, the US Ambassador to Ghana bemoaned the low levels of exports from Ghana to the US, stating that Ghanaian exporters are not making the most of the Act. However, the Akufo-Addo administration has recognised this waste of an opportunity, and the fact that Ghana has not made significant gains of AGOA since it was passed as legislation. As a result, the government has set a target of $500 million of export revenue from the US by 2020, from the current $12 million. It is also finalising a new AGOA export strategy that would allow Ghana to fully exploit the opportunities offered by the US market. Meanwhile, the extension of AGOA until 2025 will allow Ghana ample time to utilise and leverage the opportunities it provides to increase export volumes, increase job creation for the youth, and contribute to the nation’s socioeconomic development conditioned on addressing the identified challenges.
West Africa (ECOWAS ETLS)
Regional trade agreements (RTAs) can positively or negatively affect trade depending on their design and implementation. The ECOWAS Trade Liberalisation Scheme (ETLS) first came into existence in 1979, only covering agricultural goods and artisan handcrafted products at that point. However, in 1990, it was expanded to include industrial goods, and this expansion created the need for rules defining the notion of ECOWAS ‘originating products’ or ‘Rules of Origin’. Provided they originate from the ECOWAS region, these products include agricultural and livestock products; fishery products from the sea, rivers or lakes; mining products; artisanal handicrafts; and, industrial goods. The ETLS is designed to promote the West African region as a free trade area, by liberalising trade among its member states, and abolishing customs duties levied on imports and exports, and tariff and non-tariff barriers. It also hopes to establish a Common Customs External Tariff. The benefits of the ETLS for West Africa, when fully implemented is expected to result in greater economic growth, more jobs, and lower consumer prices. Figure 5 shows the trade flows between Ghana and ECOWAS.
FIGURE 5: GHANA’S MERCHANDISE TRADE FLOWS AND BALANCE WITH ECOWAS (2006 – 2016)
As can be seen from figure 5, between 2006 and 2010, growth in Ghana’s export to ECOWAS fluctuated. Exports however rose by about 1170 percent from 2010 to 2011 (same year Ghana began to export crude oil in commercial quantities) and fell by 70 percent in 2012. Since then it grew negatively by about 4 percent on average. Ghana also experienced a growing negative trade balance with ECOWAS from 2006 to 2008, but entered a trade surplus in 2009 which she has since maintained.
Ghana’s trade performance (measured in trade balances) under the ETLS is generally better relative to the EU-28 and the US (see figure 6). However, sub-regional integration still remains a challenge that hinders Ghana’s ability to make the most out of the ETLS, and this has resulted in low-levels of intra-regional trade. The simplest measure of integration is the trend in the share of trade (imports and exports) from regional partners in the total trade of a region. Well integrated regions like Asia and Europe experience intensive trade among their members. For instance in 2015, 53 percent of China’s total imports originated from Asia while 44 percent of exports went to Asia. In the same year 62 percent of UK’s imports originated from Europe. Under the ETLS, the main active countries in trade are Nigeria, which on its own accounts for approximately 76 percent of total trade in 2014 followed by Ghana (9.2 percent) and Côte d’Ivoire (8.64 percent).
FIGURE 6: AVERAGE TRADE BALANCE (IN MILLION $USD) BETWEEN 2006-2016
Explaining the hike in Ghana’s Exports in 2011
2011 was generally a good year for Ghana. Ghana experienced a double digit GDP growth of 14.4 percent, had a single digit inflation rate of 8.6 percent, and started to export crude oil in commercial quantities. In 2011, crude petroleum accounted for 19 percent of her total exports to the world. In 2012, it accounted for 18 percent and in 2013, 2014, 2015, 2016, it accounted for 19 percent, 26 percent, 16 percent and 9.1 percent of total exports respectively.
Though at present, about 75 percent of crude petroleum from Ghana is exported to China, in 2011, about 81 percent of crude petroleum was exported to the EU fetching Ghana $2.28 billion. Crude petroleum exports thus accounted for 47.5 percent of Ghana’s exports to the EU in 2011. After 2011, the EU’s share of Ghana’s crude petroleum export fell to 74 percent in 2012, 68 percent in 2013, 40 percent in 2014, 44.3 percent in 2015 and 25 percent in 2016. Also crude petroleum and refined petroleum exports accounted for 44 percent of Ghana’s exports to the US in 2011. After 2011, it declined to 34 percent in 2012, 31 percent in 2013 and 1.9 percent in 2015. Agian in 2011, Ghana’s export to ECOWAS increased by about 1170 percent (see figure 5). In that year, Togo accounted for about 74 percent of total exports to ECOWAS. After 2011 however Togo’s import from Ghana fell by 76 percent in 2012, then by 90 percent in 2013. In addition, about 90 percent of the exports to Togo were mineral fuels. After 2011, this component fell to 16 percent.
The paragraph above has highlighted some of the reasons that could have accounted for the rapid increase in exports in 2011. The reasons are however not exhaustive, more research will be needed to uncover more reasons which can potentially guide trade policy in Ghana.
Explaining Côte d’Ivoire’s Performance
The analysis of export trends and values of key Ghanaian export products from 2006 to 2016 was compared with Côte d’Ivoire’s export performance. This is because Côte d’Ivoire shares a very similar export profile to Ghana. For example, agricultural products make up a significant percentage of their total exports to the EU in both countries — in 2016, agricultural products accounted for 71 percent of total exports for Ghana, and 81 percent of total exports for Côte d’Ivoire. Measured in trade balance, Côte d’Ivoire performed relatively better than Ghana. In both countries’ trade with the EU and the US, while Côte d’Ivoire experienced trade surpluses throughout, Ghana mostly experienced trade deficits. Côte d’Ivoire also exported relatively more to both markets, and imported relatively less from both markets. In the US, Côte d’Ivoire exported about 70 percent more than Ghana, and imported 77 percent less than Ghana. In the EU, Côte d’Ivoire exported 34 percent more than Ghana, and imported 27 percent less.
Overall, Côte d’Ivoire appears to put more emphasis in its agriculture sector, specifically targeting the agricultural processing of key NTEs, such as cocoa, cashews, mangoes, and other commodities, making them a high priority. This could potentially account for its better export performance, vis-à-vis Ghana. In addition, following the end of civil conflict in 2011, Côte d’Ivoire experienced a boom in foreign investment and economic growth. As part of its post-crisis economic reconstruction plan, the government actively encourages FDI and is committed to doubling foreign investment over subsequent years. In most sectors of the economy, there are no laws that limit foreign investment, however, there are restrictions on foreign investment in the health sector, law and accounting firms, and travel agencies.
Under the ‘freedom to trade internationally’ rating of the Fraser Institute’s Economic Freedom of the World 2017 Annual Report, Côte d’Ivoire has a higher rating (and thus better performance) in ‘foreign ownership/investment restrictions’, with a score of 6.45, compared to Ghana’s score of 6.35 in 2015. It also performed better in this category with a score of 6.91 in 2010 (Ghana’s was 6.62), and 7.13 in 2014 (Ghana’s was 7.07).
These accounts of Côte d’Ivoire’s export performance are by no means exhaustive, and further research will be needed to ascertain what accounted for the differences in export performance, and potentially, what Ghana can glean from Côte d’Ivoire’s experience.
Market Share and Competition faced by Ghana’s Export
According to the Observatory of Economic Complexity, in 2016 Ghana exported $10.5 billion, making it the 64th largest exporter in the world. In addition, Ghana exports 53 products with revealed comparative advantage (meaning that its share of global exports is larger than what would be expected from the size of its export economy and from the size of a product’s global market). Notwithstanding this, some of her exports face tough competition in their major export destinations. Table 2 below gives details of the top export products their main export destination, their market share and competition faced in those destinations.
Table 2: Product Destination Categorisation for 2016 Ghanaian Exports
|Product||Main export destinations for product||Main competition at the export destination|
|Gold||Switzerland (42%)||UAE (19%); UK (14%); US (9.6%); Hong Kong (7.7%); Thailand (4.9%); Ghana (2.8%)|
|(In 2016, was 42% of the overall export value)||United Arab Emirates (32%)||India (20%); Libya (8.7%); Turkey (8.4%); Ghana (6.4%); Sudan (5.6%)|
|India (16%)||Switzerland (57%); UAE (11%); US (5.8%); Ghana (5.6%); South Africa (5.2%)|
|South Africa (7.8%)||Vietnam (82%); Germany (13%); Italy (2.6%)|
|Cocoa Beans||Netherlands (21%)||Côte d’Ivoire (35%); Ghana (21%); Cameroon (14%); Nigeria (13%); Peru (3.8%)|
|(In 2016, was 18% of total export value)||Brazil (11%)||Ghana (100%)|
|Malaysia (11%)||Ghana (19%); Côte d’Ivoire (17%); Papua New Guinea (12%); Indonesia (11%); Cameroon (9.5%); Ecuador (9.3%)|
|United States (8.8%)||Côte d’Ivoire (64%); Ghana (14%); Ecuador (13%); Dominican Republic (4.0%); Papua New Guinea (1.7%)|
|Coconuts, Brazil Nuts, and Cashews||Vietnam (54%)||No data available|
|(In 2016, was 9.4% of total export value)||India (46%)||Côte d’Ivoire (27%); Guinea-Bissau (17%); Tanzania (16%); Benin (10%); Ghana (4.5%)|
|Crude Petroleum||China (75%)||Russia (14%); Saudi Arabia (13%); Angola (12%); Oman (9.6%); Iraq (9.1%); Ghana (0.79%)|
|(In 2016, it was 9.1% of total export value)||Italy (13%)||Iraq (17%); Azerbaijan (16%); Russia (11%); Saudi Arabia (9.3%); Kazakhstan (7.1%); Ghana (0.66%)|
|Portugal (6.1%)||Russia (24%); Angola (20%); Azerbaijan (12%); Saudi Arabia (11%); Algeria (8.1%); Ghana (1.3%)|
|France (5.0%)||Saudi Arabia (15%); Kazakhstan (13%); Nigeria (11%); Russia (10%); Norway (9.6%); Ghana (0.28%)|
|Sawn Wood||India (77%)||Germany (18%); Malaysia (15%); Burma (14%); Indonesia (14%); Brazil (6.6%); Ghana (0.12%)|
|(In 2016, was 3.5% of total export value)||China (16%)||Russia (29%); US (18%); Thailand (16%); Canada (11%); Finland (2.8%); Ghana (0.13%)|
|Vietnam (1.9%)||No data available|
Source: The Observatory of Economic Complexity.
As seen from the table above, the most exported Ghanaian product in 2016 was gold, which accounted for 42 percent of Ghana’s overall export value, with Switzerland being Ghana’s largest export market for gold. Cocoa beans are Ghana’s second largest export, accounting for 18 percent of the total export value. Ghana faces tough competition in the export of cocoa beans, particularly in the US market. More than half of US imports of cocoa beans come from Côte d’Ivoire (64 percent), and only 14 percent comes from Ghana. Brazil imports all (100 percent) of its cocoa beans from Ghana, and so Ghana does not face any competition in this market. In the export of crude petroleum, Russia and Saudi Arabia appear to be Ghana’s main competitors in the markets in which it exports crude petroleum.
Strengthening Partnerships: The UK (Post-Brexit) and China
Aside from the interim EPA, AGOA, and the ETLS, there are potential opportunities for Ghana to strengthen trade partnerships and even pursue bilateral agreements with other countries, such as the UK and China.
Brexit and its impact on Ghana’s trade
There are long-standing economic ties between the UK and Britain, with a history of trade and shared values. When the UK voted to leave the EU on 23 June 2016, it raised a lot of questions as to how it would affect global markets, specifically in emerging markets. For Commonwealth States in Africa such as Ghana, it has raised questions on the implications for key issues such as finance and trade. Ghana’s former Foreign Affairs Minister, Mrs Hanna Tetteh, affirmed that the Brexit vote will affect Ghana in many ways, particularly with regards to trade. Key concerns centres on the level of trade and the trade relationship the UK will have with Ghana independently.
Early projections of the impact of trade on Ghana post-Brexit
Key proponents of the Brexit campaign, including Boris Johnson (the current UK Foreign Secretary) and Peter Lilley MP have used Brexit as a means through which the UK can offer African nations a fairer trade deal than they had received from the European Commission. In a post-Brexit discussion of the future of British trade relations with developing countries; Peter Lilley outlines clearly the nature of this supposed progressive UK trade policy.
- A UK trade policy that provides a non-reciprocal access for developing nations. Such a policy could replicate previous arrangements like the ACP-EEC Lomé Convention or existing scheme such as the Everything But Arms arrangements under the EU Cotonou Agreement.
- Lilley also highlights the potential for the UK government to reduce non-tariff barriers such as the stringent hygiene and phytosanitary requirements placed on African produce entering the European market. For instance, in September 2015, Ghana’s Ministry of Food and Agriculture placed a temporary ban on the exports of some vegetables to the EU, in order to address hygiene and phytosanitary challenges.
- In contrast with the European Union’s Common Agricultural Policy (CAP), Peter Lilley also advocates against protective subsidies given to UK farmers that artificially support UK producers against competition from Africa. The implementation of such a policy can potentially shift trade between the UK and Sub-Saharan African (Commonwealth) nations as African producers in sectors such as beef and poultry can be competitive and have much better export opportunities.
However, does the UK government have the political will and/or capacity to deliver this progressive trade policy with African countries whose development was supposedly a moral concern for leading Brexit advocates?
In September 2016, just two months after the UK’s exit vote, the first ever UK-Ghana Chamber of Commerce (UKGCC) was launched in Ghana by the then British High Commissioner, Jon Benjamin. This represents the UK’s interest in ensuring that Ghana remains one of its significant trading partners. Ghana’s overall dependence on the UK market has over the years declined, relative to other countries. Data from UNCTAD shows that UK’s share of Ghana’s trade has reduced from 14 percent in 2000 to about 3 percent in 2016. UK’s exports to Ghana as a share of Ghana’s overall imports have also reduced from 9 percent to 4 percent. As trade with the UK has declined, trade with other countries such as China has been on the rise (see Figure 7). This trend may serve to cushion, though not totally eliminate, the potential negative effects of Brexit on Ghana.
Ghana’s Trade with China
Trade between Ghana and China has witnessed substantial increase in recent years. Trade volume increased by 776 percent from 683 million USD in 2006 to 5.9 billion USD in 2016. Though there isn’t a specific bilateral trade agreement between Ghana and China, there are economic cooperation arrangements between the two countries in the area of agriculture, trade, infrastructure and investments. Over the years, China has become an important source of imports to the Ghanaian economy. Ghana’s imports from China increased from 2006 to 2016 by about 663 percent. In 2016, 4.67 billion USD worth of goods were imported to Ghana compared to about 612 million USD in 2006. As Ghana’s imports have increased, so have her exports. Exports to China have increased from 71 million USD in 2006 to 1.3 billion USD in 2016, an increase of about 1745 percent. Figure 8 below show clearly the trend in exports and imports between Ghana and China.
Figure 7: Ghana’s Merchandise Trade Flows and Balance with China
So why have both exports to and imports from China increased significantly over the years? Samuel K. Frimpong in studying the relationship between Ghana and China in terms of trade and FDI, noted that Ghanaian importers are looking increasingly to China for imports. He explained that Chinese products in Ghanaian markets are of low quality and are relatively cheaper thus meeting the needs of low-income groups. Additionally he reports, after confirming with Chinese firms, that Ghanaian businessmen in order to meet the demands of the larger low-income Ghanaian market, order low-grade, substandard products from the Chinese market. This 2012 research found China to be the second highest country in terms of trade and FDI in Ghana.
According to the Observatory for Economic Complexity, top Ghanaian imports from China in 2016 included; machines (22.5 percent), metals (14.8 percent), textiles (14.3 percent), plastics and rubbers (6.8 percent) and footwear and headwear (6 percent). Top exports from Ghana to China in 2016 also included crude petroleum (70 percent), Manganese Ore (11 percent), rough wood (7.8 percent), aluminum (6 percent), cocoa beans (1.9 percent), and cocoa paste (0.29 percent). Clearly from the trade composition, resource endowment will explain the primary products Ghana trades in, while competitive advantage explains the manufactured goods coming from China. In fact, export volumes increased significantly in 2011, when Ghana started to export crude petroleum in commercial quantities, and have continued to increase as figure 7 clearly shows.
Crude petroleum as a percentage of total exports increased significantly from 2011. It was 30 percent, 55 percent, 40 percent, 57 percent, 80 percent and 70 percent in 2011, 2012, 2013, 2014, 2015, and 2016 respectively. It would seem a significant percent of the 1745 percent increment in Ghana’s export from 2006 to 2016 is accounted for by the discovery and production of oil in commercial quantities. This further highlights the importance of increasing supply capacity in other traditional and non-traditional exports.
While China’s share of Ghana’s trade volumes has been on an upward trajectory, the market share of other important trade partners has been on the decline. Figure 8 below shows the rate of increase and decline for China, US, EU, ECOWAS and UK share of trade volumes in Ghana.
Figure 8: China, US, EU, ECOWAS and UK Share of Ghana’s Trade Volumes (2000 – 2016)
Challenges of Trading in a Competitive Global Environment
This section highlights some of the challenges that Ghana’s exports face in a competitive global market. Ghana’s trade related challenges are enormous. In the subsequent sections, the challenges are grouped under two main headings: 1) Sanitary and Phytosanitary measures (in the EU export market); and, 2) Supply-Side constraints which includes productive capacity constraints and trade related constraints.
Sanitary and Phytosanitary Measures (Export challenges to the EU)
Ghana’s current export structure to the EU market reveals that nearly all products exported to the EU do not face any tariff due to the conditions of the interim EPA, which Ghana initialed with the EU in December 2007. The main challenges Ghanaian exporters now face before the establishment of a full EPA is the need to comply with sanitary and phytosanitary (SPS) and Hazard Analysis Critical Control Point (HACCP) requirements, and sometimes unfair competition occasioned by subsidised products in EU markets. Standards and technical regulations drawn up by individual countries to protect health and the environment, and ensure quality and safety, can also act as technical barriers to trade. In addition to technical regulations and product standards, African exporters face the more stringent private standards of developed country retailers. Aspects of SPS measures, albeit unintentionally, creates restrictions on market access and difficulties for exporters, in particular, for SMEs from developing countries.
SPS measures have a significant role in trade between the EU and its trade partners. The EU seeks to ensure that a balance is maintained between protecting consumers and creating a supportive international environment for animal and plant-based exports from developing countries. Increased awareness of and concern about food safety in the EU and other developed countries has resulted in developing countries having to deal with stricter SPS requirements when exporting their produce. Such requirements relate to the protection of animal or plant life and health; risks arising from additives, contaminants or disease-causing organisms in foods, beverages or feedstuffs; or the entry, establishment or spread of pests.
As part of its general trade-related assistance to developing countries, the EU supports these countries in setting up quality standards and conformity assessment procedures and systems that facilitate their access to European markets. This includes strengthening national administrations and competent authorities, and supporting farmers and the private sector in their compliance with regulatory and commercial requirements for SPS measures.
Ghana has high potential for commercial fruit and vegetable production and export. However, for the country to access international markets, particularly the EU, Ghanaian products must comply with sanitary and phytosanitary standards. Despite having signed onto the WTO’s SPS Agreement, the country’s agricultural produce shipments still have significant SPS compliance challenges. Due in large part to the lack of awareness of the social, environmental, and economic costs of poor SPS compliance, many producers do not implement good agricultural practices that would mitigate these SPS issues. The lack of compliance has meant that exports of vegetables from Ghana are at times rejected due to the presence of organisms that occur in the EU’s list of harmful organisms. In 2014 the EU (Ghana’s major export market) provided an official notice to the Government of Ghana regarding the presence of harmful organisms in Ghanaian horticultural products. The Ministry of Food and Agriculture (MoFA) eventually placed a temporary ban on the export of the most affected vegetables to avoid an official sanction.
Phytosanitary issues relate to inspection and sampling procedures at border posts, which are inadequate. In most cases, control and inspection are mainly visual, without underlying laboratory analysis, because there are often no laboratory facilities available on site. At Kotoka International Airport too, consignments are only visually inspected and inspectors are not equipped to take representative samples.
In addition, while exporting companies of fruits and vegetables are widely implementing quality and safety standards, such as the GlobalGAP domestically, a demand-driven compliance to quality and safety appears to be absent, and there is not much incentive for adopting standards or voluntary compliance to good agricultural practices.
Non-compliance to SPS is also related to food safety issues, especially the use of pesticides. The majority of farmers are still using pesticides excessively and improperly. Unregistered and counterfeit pesticides are widespread in the market, and the high illiteracy levels among farmers means that they are unable to interpret labels. A traceability system is also lacking. Traceability is defined as the ‘ability to trace and follow food, feed, and ingredients through all stages of production, processing and distribution’. In Ghana, there are no specific requirements imposed for the traceability of products. Moreover, the domestic market is fragmented and comprised of informal marketing channels, meaning that produce comes from multiple sources. Having a sound system will ensure that if there are issues, they can be traced back to the source, and the right measures can be put in place to solve them.
Addressing issues in SPS compliance
The government has been partnering with development partners to undergo capacity-building programmes that will help it address issues with SPS compliance. For example, in March 2007, the Ministry of Trade and Industry (MOTI) alongside the lead ministry of the Trade Sector Support Programme (TSSP), the Ghana Standards Authority (GSA), the Ghana Export Promotion Authority (GEPA), the Plant Protection and Regulatory Services Directorate (PPRSD) and the Food and Drugs Authority (FDA) were part of a UNIDO project on trade capacity-building. The project’s expected outcomes were to: 1) increase GSA’s capacity in standards development; disseminating, promoting and training Ghanaian enterprises on priority public and voluntary standards, 2) establish a traceability system at GEPA for export products, and to ensure that producers and exporters apply these traceability schemes, and an active National Traceability committee; 3) establish the Ghana Certification Body and prepare it for the accreditation for the certification of quality management systems; 4) strengthening testing laboratories so that they are able to provide internationally accepted tests for key exports; 5) upgrade the PPRSD to become EU competent in horticulture, and developing the capacity and competencies to inspect exports; and, 6) the development of the National Quality Infrastructure.
With regards to outcome 1, in July 2016, GSA provided training for its stakeholders on food safety management. These participants were trained in skills certification, food processing, auditing accounting, and in the requirements of International Organisation for Standardisation (ISO) 22000 and the HACCP tool used to analyse associated hazards in production. In addition, in September 2016, GEPA also held training sessions for exporters, to enhance the capacities they need to meet the required global standards. GEPA has also been working to achieve outcome 2. While a National Traceability Committee has not been created by GEPA, it has rolled out a geographical mapping of companies, in order to create a database for a national database for product traceability. The Geographic Information System (GIS) has been working alongside GEPA to create a database for exporters in food and agro-processing products, which will reduce the risk of exports to the EU being reduced due to lack of traceability. GIS uses a system of unique identification of products, and is working on maintaining accurate records on the geographic location of firms, factories, and other movements along the value chain.
The establishment of an accredited certification body for Ghana, was to be achieved under outcome 3. The Green Label Certification Scheme (GLCS) is a project implemented by the Directorate of Crops Services of the Ministry of Food and Agriculture, which aims at increasing the competitiveness and quality of fruits and vegetables that are produced domestically. The GCLS has also produced about 500 guides, and 400 farmers have been trained on Green Label Certification. Moreover, in March 2016, the MOTI launched the Ghana Green Label Farmer’s Manual, a training tool which informs farmers about the ways they can become certified. These developments are positive for food safety and export promotion in Ghana, because they ensure that food is produced in an environmentally sustainable and safe way, in line with SPS regulations, across various parts of the value chain.
Recently in June 2017, there have been steps to improve the standards of local laboratories for exports, representing steps to achieve outcome 4. This also involves the accreditation of laboratories to demonstrate the fact that they can conduct tests, which comply with internationally recognised standards and regulations. Currently, there is no accreditation body for certification in Ghana, but the GSA intends to accredit laboratories in testing using the ISO requirements. The Swiss government is also providing ongoing support to GSA to increase its capacity in standard development and upgrading its testing laboratories, as part of the UNIDO capacity-building programme. This $5.35 million from the Swiss also benefits the FDA, GEPA in establishing the national traceability system, and the PPRSD in improving inspection methods for exported vegetables and fruits, and upgrading seed testing laboratories to test the quality of seeds. Further, with regards to outcome 5, the PPRSD has worked on upgrading the skills and technical capacities of its inspectors in response to the EU temporary ban on fruits and vegetables. A new Plant Quarantine Inspection Room for the PPRSD was also commissioned the Aviance Cargo Village. These measures have been taken in the hope that they will ensure that no further bans on exports to the European markets occur again in the future.
In July 2017, the Deputy Minister of Trade and Industry stated that the draft National Quality Policy (NQP) was ready after a two-day workshop of corroboration and revision.The final version is set to be ready by 2018. Moreover, the government is also working to establish a National Quality Council, comprising of key representatives of Ministries, Departments and Agencies (MDAs), and the private sector, with the mandate to implement the NQP and coordinate the activities of the institutions that oversee quality and standards-related activities. These developments are very positive, because the policy would make the development of quality trade infrastructure, which would be recognised internationally, a key priority. It would also have the effect of improving the competitiveness of Ghana’s exports abroad, protect domestic consumers from counterfeit products, and support SMEs to conform to national standards and regulations, thereby enhancing economic growth.
It is evident that Ghana is taking the necessary steps to improve its compliance with SPS regulations, and recognises that doing so will be beneficial for export promotion. It is highly likely that with these measures in place, there will be growth in the volumes of exports and improved quality and standards of export products.
A commodity-based export country like Ghana is faced with numerous supply-side challenges that impede trade expansion. This part of the report attempts to cover what is known on potential supply-side constraints to trade in Ghana. These constraints are broadly divided into productive capacity constraints such as access to credit, and trade-related constraints such as transport infrastructure and trade facilitation.
The challenges Ghana faces within AGOA are mostly due to supply-side constraints. As the Assistant US Trade Representative for Africa, Florizelle Liser put it, ‘supply-side constraints, including unreliable electricity and transportation, poor ports, lack of transnational highways, and poor access to the internet were among the impediments to trade development on the continent’.
Productive Capacity Constraints
Ghana’s capacity to expand trade, specifically agricultural trade, is related to her ability to produce more. While Ghana has a lot of capacity in terms of arable lands, fresh water and rural labour, productive capacity is often significantly restricted by a number of constraints which can and should be addressed by policy interventions. In Ghana, access to credit is a serious challenge, which impedes productivity. Limited access to credit affects productivity through different channels. It is an important determinant of investment in improved inputs — quality fertilisers, high yielding seeds, skilled labour, storage facilities, irrigation, and adoption of new technology and so on.
The export business in Ghana as with many businesses is dominated by SMEs. There are many who believe that the single most important factor constraining the growth of the SME sector, and by extension the export sector, is the limited access to funding. According to the recent World Bank Enterprise Survey, 49.5 percent of firms in Ghana consider access to credit as their biggest obstacle. Some of the factors that account for this financing challenge include a relatively undeveloped financial sector with low levels of intermediation, a lack of institutional and legal structures that facilitate the management of SME lending risk and high cost of borrowing and interest rate rigidities. Thus aside private financial institutions, there are official schemes launched and supported by the government and development partners to stimulate the flow of financing to SMEs in order to fill the persistent financing gap. Recent schemes include the Microfinance and Small Loans Centre (Masloc) and export oriented ones such as the EXIM bank.
Regardless of the impact that both sources of financing have on SMEs, there are a great number of challenges that hinder their impact in terms of their reach and sustainability. Ghana’s export sector is dominated by SMEs with limited technical capacity. This creates biases, which limit their access to credit from traditional sources such as Banks and Non-Bank Financial Institutions (NBFIs). This perception has led to the adoption of stringent conditions, strict vetting of credit applications and short periods for repayments which mostly do not suit the long term needs of the export business. Exacerbating this problem is SMEs’ lack of understanding of the lending process and the facts considered by banks and NBFIs in giving out loans. Banks and NBFIs are also constrained by the high transaction or processing costs, inadequate and unreliable information and the absence of a credit rating system.
Over the years, administrations, with or without assistance from development partners, have tried to address this challenge by complementing the trade finance activities of traditional banks and NBFIs with support programs. To increase the flow of funds and to promote NTEs funds such as EDIF, the Export Finance Company (EFC) and the EXIM Guaranty Company Limited were set up. EDIF was set up to improve access to trade finance for NTEs. It worked with financial institutions (mostly commercial banks) to achieve its objectives. New and small exporters however were unable to access support from EDIF as the process that exporters had to go through to access funding meant that mostly well-established exporters with proven professional history benefited from their loans. EFC, established in 1989 with a similar mandate as EDIF, was mostly limited by insufficient funding, and as such was unable to fulfill its mandate. The EXIM Guaranty Company Limited was also set up to encourage banks to extend facilities to SME borrowers in the NTE sector that the banks were reluctant to assist for lack of collateral. All of these institutions have now been consolidated into the EXIM Bank to support local producers with the necessary financial and technical expertise to position them favourably in order to compete with their foreign counterparts.
As with private financial institutions, government supported programs also have their own challenges that prevent them from being effective. The lack of dialogue and consultation between all relevant stakeholders, public sector (EDIF, Ministry of Trade and Industry (MOTI), Ghana Commercial Bank) and the export community, on trade finance issues made the functioning of EDIF and EFC not aligned to the needs of the export community. Development partners on their own have also set up financing schemes to help address this challenge. Specific export related ones include USAID Trade and Investment Programme for Competitive Export Economy (TIPCEE) and the DANIDA funded Support Programme for Enterprise Empowerment and Development (SPEED). However, exporters especially SME exporters have limited information about these funds and how to access them.
The opportunities created by trade reforms can only be seized with funding. Sufficient access to credit will ensure that the benefits of trade are shared widely as poor households can move away from subsistence production. Access to funding also enables Ghana to access the full gains of trade as it can encourage importation of capital goods for production and further exports.
Trade-related constraints: Transport Infrastructure & Trade Facilitation
Trade-related constraints encompass both transport infrastructure and trade facilitation, which greatly hinder Ghana’s export capacity. Infrastructure problems, especially transport and electricity supply, are a significant constraint to trade especially for a commodity based export country such as Ghana. Increasing electricity in developing countries by 10 percent increases a country’s openness by 2 percent and its exports by 2.4 percent, according to OECD research. Also the recent World Bank Enterprise survey on Ghana shows that almost 19 percent of firms in Ghana consider electricity as their biggest obstacle. The cost of unreliable electricity is even greater – fluctuation not only damages machines used in production, but introduce unplanned expenses in a company’s expense account.
The backbone of Ghana’s infrastructure covers the entire national territory and also plays a significant role in integrating the different regions. A report by the United States International Trade Commission, which analyses the exports opportunities and barriers in AGOA-eligible countries highlights infrastructure, including congested ports, and inadequate and insufficient road networks as domestic barriers and impediments in terms of its potential export growth to the US under AGOA. Within ECOWAS, the lack of trade facilitation is a major challenge, which underpins the low level of intra-regional trade. Increasing trade facilitation, which involves reducing the costs of clearing goods, the time spent in clearing goods and reducing customs malpractices would provide solutions to the challenges to trading within the regional bloc. Sub-regional integration still remains a challenge that hinders Ghana’s ability to make the most of the ETLS.
Ghanaian exports have huge market potential in ECOWAS. However, the full potential is far from being realised. Challenges still exist in cross-border trade, transit and the movement of people across borders, despite the fact that these have been regulated within the framework of the ETLS. The dissatisfaction with the system is mostly due to the poor implementation of the rules and regulations by Member States. The variation in which the rules are applied varies from one Member State to the other, and this reflects their level of commitment to the ECOWAS regional integration project. This has resulted in low levels of intra-ECOWAS trade, below its potential. The integration of ECOWAS into a full customs union will allow Ghanaian products to compete freely in the regional market and promote exports. To leverage these opportunities, the Government is working towards pursuing the establishment of a full customs union in ECOWAS, while simultaneously honouring all its obligations in respect of existing ECOWAS protocols. It is also supporting measures, which are aimed at removing obstacles to full integration.
The government is also taking significant steps to improve its transport infrastructure. These involve expanding port capacity, and reducing processing times and costs. APM Terminals, a Dutch company, and Bollore Africa Logistics and the Ghana Ports and Harbours Authority (GPHA) are jointly undertaking the $1.5 billion port expansion project, which involves the construction of four deep water berths, and extensive cargo handling and storage infrastructure. The Port of Tema’s development will improve its operational capacity and efficiency, which will also have a positive impact on freighting across the region. Moreover, regulatory reforms are being set up to streamline and standardise bureaucratic processes as a way of improving efficiency, and consequently, reducing delays. The Ghana National Single Window (GNSW) for example, was implemented in September 2015, allowing local importers and exporters to submit their documents electronically on one processing point, giving all stakeholders such as customs and clearing agents access to the documents online. Furthermore, the government is currently putting into place additional measures to improve port efficiency. These include a 100 percent paperless system, powered by GCNet and WestBlue, and the removal of internal customs barriers.
Other Ongoing Initiatives Intended to Boost Export Promotion
Given Ghana’s weak competitive export supply capacity, building productive and export capacity is an indispensable condition, if she is to maximise her benefits from the various FTAs she is party to. Increasing export volumes is one of the main ways the nation can reduce the balance of payment deficit, and reduce pressures on foreign exchange.
The MOTI has urged GEPA to take decisive action on the challenges present in the export sector to enhance economic growth and development. Perhaps the most significant hindrances to exports in Ghana include the multiplicity of inspections by various government agencies, and the ban on vegetable and fruit exports to the EU. Another issue is that of a weak supply base, which cannot meet the huge export order demands. GEPA is working towards driving the Government’s export agenda, which is to shift the nation from a consumption-based to a production and export-based economy. Further, GEPA states that it will generate $10 billion from NTEs over the next four years, which is an increase from the $5 billion target, which was set in 2016. In fact, the $5 billion target was not achieved, as NTEs came to $2.52 billion that year. The implementation of the ‘one-district, one-export product initiative’, which aims at promoting one exportable product in every district can help achieve this target and have the added benefit of generating youth employment, if implemented well.
The GEPA has also re-launched an initiative to boost the production of the smooth cayenne (SC) variety of pineapples, both for the local and export market. Ghana had a successful pineapple export trade to the EU, focusing on the low-end segment of the market by competing on price. In 2004, pineapple export reached about US$22 million, making Ghana one of the biggest suppliers of pineapple to the EU. However, it began to lose its market share with the coming of MD2 – a new pineapple variety from Costa Rica. Ghanaian firms began exporting by air Smooth Cayenne (SC) variety of fresh pineapple to Europe in the mid-1980s, relying on smallholders who contributed about 50 percent of export volumes. The industry experienced growth from 1994-2004 at a cumulative annual growth of 172 percent. This resulted in increased market share of fresh Ghanaian pineapples in Europe from 7-8 percent in 1999, to 10 percent in 2004 with an annual volume of 71,000 MT.
Since 2004, however, the fresh pineapple export industry has declined volume of exports, due to a number of reasons, principally, shifts in market demand in favour of the MD2 variety of pineapple produced primarily in Costa Rica. Due to this shift, Ghana has seen a decline in volume of exports, with smallholder farmers who contributed between 35 – 50 percent of the export volume of pineapple before 2004 being primarily affected.
The GEPA CEO has stated that the initiative will address weak supply chains in processing firms and also promote exports of SC pineapples, which will be air-freighted into a niche market in the EU. A four-year work plan has also been developed to revitalise the SC pineapple variety, and would introduce SC suckers to farmers to increase yields, thereby increasing their incomes and creating further jobs. GEPA has set aside GHc 4.2 million (approximately $950,237) to implement these activities, and will be injecting an estimated over 15 million suckers of SC pineapples into farming systems.
A key barrier to pineapple exports to the European market have been certification standards, such as the wholesale Global GAP certification. GEPA has taken steps to ensure that the quality and control of these pineapples are not compromised. It will develop through a competitive process, a database of beneficiary exporters of fresh and high value pineapple processors who meet the selection criteria. These potential beneficiaries must be registered exporters, and be of good standing with GEPA, be exporting either fresh or processed pineapple, and be within the top 20 pineapple exporters in volume and value. Further, GEPA intends advertise and request bids from farms with certification by the PPRSD. By supporting producers and exporters to meet global standards, and access the world market, earnings in NTEs would increase, which would be beneficial for the economy.
Conclusion and Policy Recommendations
Free trade agreements have the potential to increase economic growth, promote a more dynamic business climate, increase FDI and encourage technology transfer among many other things. To harness all the great benefits of trade however, FTAs must be complemented by sound local policies that promote a sustainable business environment. An OECD research that sought to estimate major trade constraints in developing countries reports that trade performance depended much less on customs tariff reforms than on a large variety of supply-side constraints, such as electricity or access to credit.
This report has analysed the trends in Ghana’s trade, specifically exports, between 2006 and 2016 along three trade routes — Europe (via EPA), US (via AGOA) and West Africa (via ETLS). The analysis indicates that more needs to be done to allow Ghana to maximise her gains from these trade partnerships. The report also highlights some of the challenges that impede export performance. Past and recent government initiatives introduced to address the challenges have also been analysed. Ghana has great export potential, and overcoming these challenges will allow her to be able to compete internationally on the export market, and be a reliable trading partner.
The policy recommendations are listed below:
Sanitary and Phytosanitary Challenges
Conformity to sanitary and phytosanitary standards is a non-negotiable condition to trade expansion and competitiveness in an international market. The government has been taking the necessary steps to improve SPS compliance. However, the work must still continue. Below are further policy recommendations:
- A national SPS strategy and policy must be implemented to streamline, execute and achieve SPS objectives and ensure that they remain relevant.
- There must be continued coordination between the private and public sector in activities to improve SPS measures.
- Work towards establishing demand-driven compliance to quality and safety standards, as well as good agricultural practices domestically.
- Increase incentives to highlight the need for adoption of quality and safety standards. For example, it could be emphasis on the fact that because Ghanaian exports do not undergo rigorous quality and safety testing, they are losing their market window to other countries who may be exporting such products, or even alternatives.
- Government through the Ghana Standards Authority (GSA) must begin the process of inculcating international standards within the local market. This will enable easy adoption of international standards by new entrants and will also address fears of potential entrants into the export market.
Access to credit challenges
Access to credit is a critical issue in export development. It is required at every level at a competitive cost to borrowing exporters. Most government support programmes for exports have been largely ineffective in the provision of sustainable trade finance for SMEs, which dominate the export business. Thus importance must be given to addressing the core issues of funding. The following recommendations are put forward:
- In Ghana, banks do not pay sufficient attention to the development of SMEs which dominates the export sector. This is mostly due to high processing costs and associated default risk of SME lending. The Government has an important role of opening the dialogue and creating instruments together with the banks to promote the financial aspects of successful SME and export financing. The government can provide incentives hinged on the provision of dedicated SME departments equipped to fully incorporate risk and ensure sustainability in export and SME financing.
- The government through GEPA must complement its support programs with education and training. GEPA in collaboration with export and SME associations must increase their training efforts to support exporters particularly SMEs to strengthen their bookkeeping and technical capacity to enhance their ability to source funding from financial institutions.
- The government must collaborate with the private sector to explore avenues for setting up a reliable credit rating system to reduce the processing cost and time of SME lending.
- To ensure that the right outputs are achieved, there is a need to elaborate and follow a set of instruments for monitoring, evaluation and follow-up of different aspects of SME and export support programmes and activities. The government must be more proactive in addressing challenges in a timely manner to ensure the sustainability of these programs.
- Exim Bank, which has been specifically set up to promote export financing must be adequately resourced to enhance availability of funds to exporters.
- Information dissemination on all available sources of funding to SMEs and to exporters must be improved. Information can be disseminated through a dedicated online platform and also through the various export and SME Associations such as the Sea-Freight Pineapple Exporters of Ghana (SPEG) and the Federation of Association of Ghanaian Exporters (FAGE).
Trade Infrastructure and Trade Facilitation
- For improved exports within ECOWAS, initiatives to simplify procedures and documentation requirements at border must be implemented- the reduction of the number of agents, and a review of the taxes and fees payable at the border. In the long-term, a single window mechanism and a single point of payment for trade transactions could help reduce illegal payments.
- There must be increased connectivity by increasing land links and intermodal transport systems. This will also facilitate transit and transshipment trade with Ghana’s regional neighbours.
- Infrastructure financing through Public Private Partnerships (PPPs) arrangements can greatly reduce Ghana’s infrastructure deficit if risk to foreign investors are reduced. A World Bank survey on investors identified insufficient legal protection of investors as the primary concern to PPPs. Government must focus on providing a supportive legal environment that promotes investments.
- Government must strictly monitor the progress on the deliverables of the new upcoming AGOA strategy and increased collaboration between the MOTI, GEPA, the Free Zones Board and the Ghana Standards Authority.
- Ensure alignment between AGOA and the development integration agenda of Ghana, focusing on diversifying its exports base, integrating supply chains, taking advantage of market access opportunities, attracting investments, and improving productive capacities.
- An enabling environment for the private sector must be created, inclusive of women and young entrepreneurial people to take advantage of AGOA.
Several of the challenges highlighted in this report were also highlighted in the National Export Strategy (NES) document for non-traditional export. The NES which targeted to increase the value of NTEs to GHC 5 billion by 2016, failed to achieve its target mostly due to implementation challenges. Though the incumbent government has announced a lot of initiatives to revamp trade in Ghana, we recommend that close attention is given to implementation and strict monitoring and evaluation of these initiatives.
- Government must take a broader view on policy formulation. The formulation process should focus on all key variables that influence the identified problem. In most cases focus is only on the political and economic variables and fails to include the social, administrative and external environmental variables. This introduces major deficiencies in the policy and lapses in implementation.
- There should be increased participation of the target group, both in the formulation and implementation phases. Participation should not be limited to senior government officials and policy actors. This will ensure that policies are client-oriented and address specific problems. It will also promote ownership of the policy which is critical to the sustainability of initiatives.
- Sustainability concerns must be addressed in the formulation stage. Politicians in an effort to quickly satisfy the demands of the people formulate policies that provide short-term solutions that fail to address the roots of the problem. Winning of elections must not be held as more important than the sustainability of policies and the attainment of their core goals.
- Strict monitoring is needed to check inefficiencies specifically those caused by bribery and corruption.
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 Average trade balances are calculated by the authors.
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 Data for 2014 and 2015 was collected from the Ghana Statistical Service. The values which were in Ghana Cedis were converted to USD by using the arithmetic average of monthly exchange rate figures for 2014 and 2015 from the Bank of Ghana. Data is available from: http://www.statsghana.gov.gh/docfiles/Econs_Stats/2016/Digest%20of%20trade.pdf
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 Graph generated by the authors.
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 The Observatory of Economic Complexity (OEC) is the world’s leading data visualization tool for international trade data. The OEC makes more than 50 years of international trade data available through dozens of millions of interactive visualizations. Visit the OEC at: http://atlas.media.mit.edu
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 Today, the main objectives of the CAP are to provide a stable, sustainably produced supply of safe food at affordable prices for Europeans, while also ensuring a decent standard of living for farmers and agricultural workers. For more details, visit: https://ec.europa.eu/agriculture/cap-overview/history_en
 Langan (2016)
 The UK-Ghana Chamber of Commerce (UKGCC) primarily focuses on building networks and increasing bilateral trade amongst businesses. Its role is to promote, foster and represent UK business interests in Ghana – directly helping UK companies identify market opportunities and providing them with a first point of call when looking to do business/trade in Ghana.
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 Trade volumes calculated from trade data from the Observatory for Economic Complexity.
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Foreign Direct Investment (FDI)”, Available at: http://www.iiste.org/Journals/index.php/JEDS/article/viewFile/2045/2024
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