The effect of Brexit on Ghana

One of these three scenarios will definitely happen on October 31, 2019— The United Kingdom (UK) will leave the European Union (EU) without any deal (hard Brexit), the separation of the UK from the EU will happen with a deal that will set the basis for the relationship between the two sides or the UK and the EU will agree to extend the deadline for Brexit to give the two sides more time to reach an agreement.

Whatever form Brexit will take will be determined by London and Brussels, but its ripple effect will have far more  consequences on many countries , including our beloved country, Ghana.

Although any of the three scenarios mentioned above could happen on October 31, the one that could have far more devastating effects on Ghana is a hard Brexit (a no-deal Brexit).

The British Prime Minister, Mr Boris Johnson, is determined to lead the UK out of the EU without a deal, unless the current Brexit deal negotiated by his predecessor, Ms Theresa May, is reviewed to remove the Irish border backstop plan.

 On the other hand, the EU is unwilling to renegotiate the current deal. With the two sides taking entrenched positions, the possibility of a no-deal Brexit is more than likely.

The backstop plan is meant to ensure that Northern Ireland (which is part of the UK), and the Republic of Ireland ( a separate country which is a member of the EU)  will continue to trade with each other without any border or physical barriers on goods and people.

The UK is the Republic of Ireland’s biggest trading partner and the free movement of goods and people between the two countries through Northern Ireland is crucial for the economy of both  countries .

The backstop plan is supposed to come into effect on December 31, 2020 (the end of the transition period of Brexit ) if the EU and the UK fail to agree on a permanent future relationship and would be in place until a future deal is agreed .

 Hard core  Brexiters such as Mr Johnson, however, believe that the backstop plan which will keep Northern Ireland and in effect, the UK in the EU customs union defeats the purpose of Brexit. Brexit, they say, means Brexit and it includes the whole of the UK.

No-deal Brexit

The UK being part of the EU  does not on its own negotiate bilateral trade deals with other countries, rather it falls under any trade deal negotiated by the EU.

If the divorce between the UK and the EU happens without a deal, the UK will now use  World Trade Organisation (WTO) rules as the basis for trading with the EU and other countries .

WTO rules allow countries without free-trade agreements or any form of trade agreement to set restrictions and  tariffs on goods entering their countries.

Sometimes this can be catastrophic and can  generate into what is known as trade wars.

A clear example is what is currently ongoing between the United States of America (USA) and China.

How will Ghana suffer ?

In August 2016, Ghana signed an interim Economic Partnership Agreement (EPA) with the EU, which allowed the export of goods to EU-member countries, including the UK, quota-free and without payment of tariffs.

With a no-deal  Brexit, companies in Ghana which depend on the UK market to sell their products can be affected significantly, because the UK will no more be part of the EU.

Exports from Ghana to the UK market could now attract tariffs and quantities of exports to the market could also be restricted.

With a no- deal Brexit, Ghana will, therefore, not have any trade agreement with the UK and without the tariff exemptions under the EPA, goods from Ghana will become expensive and uncompetitive in the UK.

Roll over of the EPA

To avoid disruption in trade in an event of a no-deal Brexit, countries such as those under the Common Market for Eastern and Southern Africa (COMESA), made up of 21 countries, including Kenya, Egypt, Ethiopia and Rwanda, signed an agreement with the UK to enjoy some trade concessions just as they enjoy under the EPA.

Some private companies operating in the country  have, therefore,  appealed to the government to, as a matter of urgency, sign a similar  trade agreement with the UK to guarantee existing trade relations between the two countries in an event of a no–deal  Brexit.

“If there is no deal on Brexit, or an agreement in place, importers in the UK will automatically charge €114 per tonne of the banana which is about €2 per box that we export.

“To put it into perspective, €114 additional charge will turn a profit into a loss for us and we will have no option but to fold up our operations in Ghana,”, Mr Benedict Rich, the Managing Director of Golden Exotics , a banana  cultivation company which exports 55 per cent of its products to the UK told journalists recently .

For Mr Anthony Pile , the Chairman of Blue Skies,  a fresh fruit production company which exports about  60 per cent of its products to the UK, any delay on the side of the government in signing the interim agreement with the UK will spell doom for companies that depend on the UK market.

“We desperately need the interim EPA to be in place in case Brexit happens with no agreement, so that we can go on to export products from Ghana to the UK,” he said in an interaction with the Minister of Trade and Industry,  Mr Alan Kyerematen, during his visit to the company this week.

Brexit has come to stay and irrespective of its form, the government of Ghana must be prepared to do anything possible to limit its negative impact on the country's economy.

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