Competing with equally formidable African countries on the single market platform offered by the African Continental Free Trade Area (AfCFTA) may likely be usurped by the issue on the cost of borrowing and scanty information on the trading Agreement.
In light of this, President of the Ghana Union of Traders Association (GUTA), Dr. Joseph Obeng has expressed some misgivings on the level of preparedness of the country in fully harnessing its potential.
Realizing the AfCFTA prospects, he said the Free Trade would mean competition with businesses from other African countries who have access to credit facilities at lower rates than are currently being offered in Ghana.
Welcoming the implementation of the AfCFTA, he particularly noted that he is in high anticipation the inherent limitation will be addressed by the government soon.
According to him, it will require access to cheaper credit to be able to take full advantage of the African Continental Free Trade Area (AfCFTA) agreement.
“We are going to compete with other African countries, and it’s going to be very competitive especially when we have been talking about the cost of doing business here, in terms of borrowing. Cost of borrowing is very high and so, if we do not do anything about that aspect, it means that we are going to be outdone by the other African countries who have affordable credit”.
Dr. Obeng further called for more training on AfCFTA to enable members of the Association maximize the opportunities associated with the agreement.
“AfCFTA is very good for us, only that we are not ready. We lack more information; the rules of origin and all that has not been properly worked on. So, it’s welcome news that it’s starting, but we think the actual work and business will start later because most of the things that we seek especially with regard to the goods that are permissible to trade with all, need to be known.”
The International Monetary Fund (IMF), discussing potential economic impact and challenges of AfCFTA explained that an enabling business environment, access to credit, and adequate human capital are all critical to support intraregional trade.
It indicated that the implementation of the AfCFTA could result in transitional costs for member countries. These could include tax revenue losses from lower import tariffs, higher income inequality and higher unemployment, especially where trade liberalization is not accompanied by reforms to make labor markets more flexible and workers more mobile to grasp new opportunities.
Being a challenge on the African scene, it suggested a more fully developed regional financial infrastructure which can also help facilitate further intraregional trade.
This infrastructure could include harmonizing regional payment systems to further facilitate cross-border payments; creating swap arrangements across central banks and a multicurrency clearing center to reduce risks from trading in different national currencies; and better coordinating the supervision of pan-African banks.
The AfCFTA also has the potential to increase income and welfare significantly for its member countries and would also have a strong impact on intraregional trade, which it estimate would expand by more than 80 percent.
