Ghana, Kenya takes advantage of AfCFTA to boost trade
Ghana has declared intentions to maximise gains from the African Continental Free Trade Agreement (AfCFTA) through strengthening of commercial ties with Kenya.
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As a result, it is planning to establish an Export Trade House (ETH) next month in Kenya as part of measures to promote trade relations between the two countries.
When established, the ETH would serve as a special vehicle that specialises in facilitating transactions between a home country and foreign countries.
It will be positioned at a central location where Made-in-Ghana products can be shipped, displayed and distributed in Kenya and other countries in East Africa.
The trade house is being established because exports have become a tool the government must embrace to improve and promote the country’s products to the global market.
To this end, Ghana will organise a three-day business expedition before the trade fair to highlight the goods it plans to export into Kenya.
Stakeholders including the Ministry of Trade and Industry (MoTI), the Association of Ghana Industries (AGI), the National AfCFTA Coordination Office (NCO) and the Ghana Export Promotion Authority (GEPA), are working together to organise the exhibition.
Trade barriers between the nations of East and West Africa have historically been low because of regulatory restrictions.
Nonetheless, many African countries are now trading more independently thanks to the AfCFTA, the largest free trade area in the world.
World Bank report
According to the World Bank, the African Continental Free Trade Area could deliver far greater benefits in terms of jobs, growth and poverty reduction than previously estimated – making it a potential game changer for Africa’s economic development if its ambitious goals are fully realised.
The deal creates a continent-wide market embracing 54 countries with 1.3 billion people and a combined Gross Domestic Product (GDP) of US$3.4 trillion.
Its first phase, which took effect in January 2021, would gradually eliminate tariffs on 90 per cent of goods and reduce barriers to trade in services.
That could raise income by seven per cent or US$450 billion by 2035, reducing the number of people living in extreme poverty.
A new World Bank study, released in collaboration with the AfCFTA secretariat, accounts for the additional benefits that would accrue from an increase in foreign direct investment (FDI) – both from within and outside of Africa – that the deal is expected to generate.
The FDI is important because it brings the fresh capital, technology and skills so badly needed to raise living standards and reduce Africa’s dependence on volatile commodity exports.
In this scenario, real income would rise further to about eight per cent in 2035 and the number of people living in extreme poverty would fall by 45 million.
AfCFTA ratification
The first two countries to sign their AfCFTA ratification agreements on the same day were Kenya and Ghana.
Ghana’s High Commissioner to Kenya, Damptey Bediako stated that the overarching purpose of the trade house was to serve as a one-stop wholesale outlet in the Eastern bloc of the continent for all Made-in-Ghana products.
Two months after being chosen as one of seven nations to serve as the pilot for the continental free trade area that aims to open up commerce in products and services in Africa, Kenya transported its first shipment of locally produced batteries to Ghana in September of last year.
In 2021, Kenya exported US$10.3 million to Ghana, according to the United Nations Comtrade database of international trade.
Over the same time frame, Ghana’s top exports to Kenya were cocoa powder, rubber and other live plants, cuttings, and slips, as well as mushroom spawn.
“Through the export trade house, Ghana is seeking to increase the availability of Ghanaian products strategically into the Kenyan market and consequently promote items made in Ghana to the Eastern and Southern parts of Africa,” Mr Bediako added.
According to the high commissioner to Kenya, all Ghanaian goods entering Kenya would go through the trade house, which will be located in the Sameer Business Park.
Way forward
Ghana establishing an export trade house in Kenya would serve as a booster to further fulfill the mandate of promoting, developing and diversifying its export base.
It should be designed in line with the concept of a trade house that purchases and sells products for other businesses, using their international expertise as practiced in China, Switzerland, the United States, Singapore and the United Kingdom (UK).
The trade house should also be structured in a way that can help businesses that use trade houses to benefit from its expertise and insight into international markets they operate in as well as get access to vendor financing through loans and credits, stressing that the project is one of the council’s facilities aimed at increasing Ghana’s international market share.
This will enhance the visibility of Made-in-Ghana products outside the country’s shores, reduce cost of logistics on the Small and Medium Enterprises (SMEs) and increase Ghana’s share in the targeted markets.
Others include creating employment for the country’s teeming youth and increasing foreign direct investment inflows into Ghana’s troubled economy.
