The former President of the Association of Ghana Industries, James Asare-Agyei has disclosed that, cost of credit will be a key factor in the implementation of the African Continental Free Trade Area (AfCFTA) agreement on Ghanaian businesses.
According to him, other African nations are privy to have ample support mechanisms for their industries and businesses through the applications of loan schemes at a lower rate, a situation he asserts Ghanaian businesses are bereft of capable of putting them out of business.
Speaking at a CEO cocktail ceremony on AfCFTA, he noted that, high interest rate has been a bane in curtailing the expansion and growth of most indigenous businesses.
“What we need now is to look at for example cost of credit… I was just saying that, if you look at the policy rate which was quite recently announced by the governor which is 14.5%. Now, since 2017 it has dropped from about 25.5 percent to the present 14.5 percent, but you don’t see corresponding drop in interest rate in terms of credit. So, if you have about ten or eleven percentage drop in policy rate since 2017 till now, why is it that we still have high cost of credit?”, he quipped.
Conceding it to be a huge challenge, Mr. Asare-Agyei stated that the purpose of short term credit is a working capital and not one most businesses can expand with.
“It’s a huge challenge because if you have a business earning at single digit, now how are you going to compete with such businesses if you are taking credit at probably 23, 25 percent, so it’s a big challenge. Now, beyond the cost of credit, we are also talking about the tenure of credit. In our market we see that it is very difficult to attract medium to long term credit; I mean five years and beyond… for example in manufacturing ,in industry, if you are not getting medium to long term credit, then it is very difficult for you to retool and expand, because you wouldn’t use short term credit which is for working capital to do expansion or retooling”.
The inability of medium to large scale businesses in the country to afford credit at a lower rate will deny many Ghanaian businesses on the African Continental Free Trade Area agreement fair competition.
Elsewhere, Dr. James Asare-Adjei, had described the high interest rates in the country as one which will largely impact the capacity of businesses to compete with other countries on the continent with preparations underway to initiate the commencement of the AfCFTA in January 2021.
According to him, businesses may very well be swallowed up by other countries trading under the African Continental Free Trade Area, unless we build the capacity for it.
“The sub-regional market and for that matter, countries, especially Francophone countries around Ghana, have very low interest rates. So if you have Togo and Benin and probably even Nigeria having interest rates and policy rates which are relatively lower than that of Ghana’s, the question is, ‘Can Ghana be competitive if cost of borrowing is still high?”
Corroborating his assertion, a banking Consultant, Nana Otuo Acheampong, also revealed that government plans of implementing a Ghana Beyond Aid may well be a pipe dream considering the high interest rates businesses are subjected to.
“The government has set for itself a target of a Ghana Beyond Aid. This means we are self-sufficient and are able to produce what we want and eat what we produce. But this production cannot go on with these levels of high-interest rates.”
