Ghanaian businesses – small, medium, or large – have welcomed the New Year with great expectations.

Many had collapsed, while others have been birthed to the constraints and opportunities of the Coronavirus Pandemic. 

But the year, 2021, carries its business potential and a huge one at that as Ghana and the rest of the Continent begins the journey to the world’s largest single market arrangement under the African Continental Free Trade Agreement Area (AfCFTA).

The World Bank estimates that this agreement will create the largest free trade area in the world measured by the number of countries participating. The pact connects 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at US$3.4 trillion.

Ghana’s SMEs and AfCFTA

Even before Ghana won the bid to host the Secretariat of the single market agreement, the government had injected aggressive reforms and business regulations to ease the cost of doing business and also attract young entrepreneurs and angel investors to the country’s burgeoning market place. 

Business registration timelines have been reduced drastically, nuisance taxes waived, support, and stimulus packages provided to SMEs, technological infrastructure established to aid businesses to migrate and remain sustainable in the digital space – so many interventions.

Already, the Ghana Association of Industries (AGI), has called this new age of African trade “the game changer” to industrial growth and opportunity.

Chief Executive, Seth Twum Akwaboah, in an interaction with me on the business program, Market Place, said :”this is a golden opportunity for Ghanaian industries to take up the mantle and be more productive and influential. This US$3.4 trillion trade market will be a game-changer for Ghanaian businesses especially as we host the secretariat”.

So far, all SMEs and infant businesses in Ghana and across the African sub-region have been considered in a policy to facilitate the smooth completion of the African Continental Free Trade Agreement (AFCTA). 

There have been concerns that smallholder businesses could be out-priced from the agreement especially in Ghana where 70 to 80 percent of them face credit challenges. But the United Nations Economic Commission for Africa (UNECA), Coordinator of African Trade Policy Centre, David Luke, told Joy Business that a special arrangement has been drafted to deal with this issue.

According to him, “the agreement itself provides for the protection of infant industries, startups, and SMEs and they are excluded from subsidies and that kind of support from the government but clearly, the bigger part of support comes from domestic sources.”

Diversifying Ghana’s Agriculture

Meanwhile, Principal Policy Advisor for UNECA, Dr. Joseph Atta-Mensah has called for the “need for Ghana to move away from being suppliers of raw materials to suppliers of finished goods. We have to focus on the agro-business so we get the maximum of this agreement. Especially in the Cocoa sector, there is a need to look at the multi-dimensional. We have a huge demand for chocolates worldwide especially in the African markets.”

Investment-driven reforms 

Former UK Cabinet Minister, Paul Yaw Boateng, in a Zoom interaction with me said the success of the Continental Free Trade Agreement Area will be based on reforms and strategies that will make the continent attracted to investors. 

Paul Yaw Boateng explained that even though threats of the Coronavirus could be a challenge, the content must harness the opportunities that come with regional integration.

 "Yes, the pandemic is a crisis, the world is in a recession. But it creates a unique opportunity not least for SMEs. So we have to make sure there is a startup capital for them, a transparent and reliable regulatory environment that facilitates entrepreneurship and facilitates investment," he stated.

The emergence of a burgeoning entrepreneurial space questions Africa's preparedness to support SMEs expand to meet global competition. Already, there are concerns over the high cost of lending. Ebenezer Onyeagwu is Managing Director and CEO at Zenith Bank PLC. 

"The moment we have the free trade zone, I expect them to draw a framework that should guide various countries on the institutional support to give flesh and blood to SMEs. We need to see it as a completely African project to achieve an economy of scale."

Unfinished business on the rules of origin

Industry players, notably the international commerce community, have insisted that education on the application of trade barriers under the agreement, as specified in AfCFTA’s Rules of Origin in the duty-free trading area – which will determine the eligibility or otherwise of goods to be traded – has not been done adequately enough to enable the trading community to be abreast the relevant tenets of the impending agreement.

Although the implementation of some operational aspects of the African Continental Free Trade Area (AfCFTA) has been temporarily suspended, the agreement would be a very important element to support post-pandemic recovery and to foster economic growth in the medium term in sub-Saharan Africa through the creation of larger and more integrated markets and the promotion of intracontinental trade. 

Importantly, implementation of the AfCFTA will also reduce uncertainty on trading relations within the continent, which—together with an expanded and more integrated market—would foster both domestic and foreign direct investment and help boost economic activity as countries emerge from the pandemic. 

Prospects for intra-African growth

The International Monetary Fund in its Staff Discussion Notes published on May 13 2020 projects that although the implementation of some operational aspects of the African Continental Free Trade Area (AfCFTA) has been temporarily suspended, the agreement would be a very important element to support post-pandemic recovery and to foster economic growth in the medium term in sub-Saharan Africa through the creation of larger and more integrated markets and the promotion of intracontinental trade.

Importantly, implementation of the AfCFTA will also reduce uncertainty on trading relations within the continent, which—together with an expanded and more integrated market—would foster both domestic and foreign direct investment and help boost economic activity as countries emerge from the pandemic. 

For the Secretary-General of the AfCFTA, 2021 sets a new milestone in the economic history of Africa’s trade eco-space. 

“Today, we not only celebrate the start of a new year but today, we give Africa a new beginning, with the start of trading as a free trade area under the AfCFTA,” he stated.

By Charles Ayitey