Research and advisory firm Konfidants, has revealed in its latest report titled, Ghana’s Competitive Potential in the AfCFTA: A Country Competitiveness and Opportunity Assessment, that when it comes to productive capacity in the manufacturing sector, Ghana lags behind many of the top countries signed onto the African Continental Free Trade Agreement.
Reaffirming an earlier report by the World Bank on Ghana’s stagnating manufacturing sector and its impact on the Industry sector, Konfidants noted that, “Ghana’s productive capacity (Labour Quality & Skills Availability and Innovation & Production Potential Utilization), compares poorly to many of the leading countries in the AfCFTA. According to data computed from the World Bank Enterprise Surveys along the above-mentioned indicators, Ghana’s total productive capacity score out of a possible score of 10 is 4.75 – falling below half of the total score and below the average score for the top African countries”.
The report, which was published in March 2021, is coming almost three months after the commencement of AfCFTA, a trade agreement among 54 African countries with established potential of boosting both intra-African trade by 52.3% by eliminating import duties.
The agreement also allows for the free movement of goods and services.
While the Ghanaian Government is hopeful that local businesses will take full advantage of the agreement to scale their ventures, the report shows that the nation’s failure to provide its firms with the needed raw materials as well as its inability to guarantee stable supply of electricity has contributed to giving other leading economies on the continent a competitive advantage over Ghana.
“Ghanaian firms are the second-highest dependents on foreign inputs among the 12 frontier economies…Ghanaian firms lose about 17% of annual output to electrical outages compared to the average 10% for frontier competitors.”
While the opportunities presented by AfCFTA are endless, the report recommends that the government, among other things, works to reduce the nation’s dependence on foreign input.
“Government should incentivize and partner companies operating in the same industry or product segments to co-invest to jointly set up local firms to locally produce the inputs and intermediate products for them.”
It also encouraged government to ensure local firms have access to affordable electricity in order for them to take full advantage of the nation’s industrial drive.
“Government must aim at reducing Ghana’s high cost of power to a target of 5 cents per kilowatt-hour (which will still be nearly 100% more expensive than the cost of power in Ethiopia) for strategic industries under the government’s Industrial Transformation Agenda, the Ghana Export Development Strategy and related AfCFTA priority industries,” the report by Konfidants added.