[BLOG] Ghana, making the best of AGOA
One of my favourite African proverbs is a Nigerian one which translates as, 'If you stand in the rain weeping, nobody will see your tears.' It seems as though we are found wanting as to how to create jobs for our youth but we do not know how to do it.
The African Growth and Opportunity Act (AGOA) is one of those initiatives that offers hope for a lot of Ghanaians, most of whom to date have missed out on this transformational platform to earn a decent living.
A new dynamic in the global economy makes AGOA now more than ever a ripe opportunity for Ghana to bolster exports, create jobs, earn foreign exchange and enhance skills development. As the US Congress reviews the AGOA legislation for a possible extension and expansion from 2015 onwards, an immense potential and opportunity will be handed to not just Ghana but Africa as a whole.
Bilateral trade between Africa and the US increased from US$28.1 billion in 2001, the first full year of AGOA's implementation to US$72.3 billion as of the end of 2012, and this is expected to increase tremendously when the review and hopeful expansion take effect after AGOA's 2015 deadline.
One area of opportunity which Ghana can quickly harness to reduce youth unemployment is in garments and apparel production. Even people without employable skills can be trained in cutting patterns, fixing buttons, hemming clothes and many other processes involved in garments and apparel industry. Over 50,000 people are employed in the garments industry in Lesotho even more than its public sector employs currently.
A more commercial approach in Ghana will be to attract investment into production for export clothing that already has a large market in the US such as khaki trousers, shirts, polo shirts and work wear. There may be a niche market for Ghanaian traditional clothing but there exists more commercial outcomes for clothing that has readily available market and companies interested in producing this type of clothing should be encouraged to set up in Ghana.
An even more emerging opportunity is the attention foreign investors are directing towards Africa. Factory fires have been a source of grave concern in Bangladesh - second only to China in garment production - where over 1200 people have been killed in recent times, raising questions of worker rights and safety violations. Already companies have started looking at moving their orders away from Bangladesh.
This is an industry estimated at US$20 billion, employing over four million people in more than 5600 factories. In disapproval of the conditions there, President Barak Obama cut off trade benefits to Bangladesh under the Generalized System of Preferences (GSP) in June 2013 (http://www.whitehouse.gov/the-press-office/2013/06/27/technical-tra...).
As the cost of manufacturing in China is also rising quickly and could soon rival those in the US and the EU, western companies which located their production to China on low cost reasons are beginning to reconsider other destinations and obviously Africa offers the best options. This is where the government can re-emphasise Ghana's position as the most ideal destination for companies to site their factories in Africa.
A look at the trade statistics indicate that Ghana may not be doing too badly under AGOA though more can be achieved looking at the country's potential. Most of Ghana's AGOA exports to the US market are made up of agricultural products, food manufactures, wood products, forest products and many more. In 2000 prior to AGOA, Ghana's total export to the US was about $204 million which increased to about US $291 million in 2012.
The highest export value achieved under AGOA was in 2011 with $778.9 million and this was obviously influenced by oil exports to the tune of about $341 million with agricultural products contributing a record US $229 million. Agricultural products had increased from a little over US$57 million in 2000 to US $134 million in 2012. Food manufactures was just about $13.4 million in 2000 but has increased to US$54.9 million in 2012 though it peaked at $89.7 million in 2010. Other products that have experienced growth include forestry products from as low as $146,369 in 2000 to $18.6 million in 2012. Ghana has the natural resources, the human capital and a conducive investment climate to do much better.
Some efforts government is making are worth mentioning and should be given the needed impetus to succeed. The government in March 2011 had announced steps it was taking in collaboration with the World Bank and the African Development Bank to revive cotton production in the three northern regions of Ghana, targeting over 100,000 farmers.
This initiative is very commendable and has the potential to be at the centre of a garment industry in Ghana. The Minister of Trade and Industry, Mr Haruna Iddrissu, recently announced some initiatives that the government was taking to assist some local businesses through the Export Development and Agricultural Investment Fund (EDAIF).
This will identify 25 selected businesses from the pharmaceutical, garment and apparel, handicrafts, agribusiness and poultry sub-sectors that will be provided some financial support. He also pledged the government's support to businesses investing in the agricultural sector as well as non-traditional exports. This effort is laudable and the government must be encouraged to do more.
Ghana slipped 11 places in the Global Competitiveness Report for 2013 but addressing quickly the challenges facing investors will help direct Foreign Direct Investment (FDI) into sectors, including textiles and garments, with its potentials of solving the unemployment challenges. Government must take extra steps to address administrative bottlenecks, acquisition of land challenges, the cost of doing business and provide other incentives to make this a reality.
A Free Zones enclave can be extended into all the regions with government securing land banks to assure investors of litigation-free land. In the current world order where every country is trying to strategically position itself; where capital has no time to wait looking for a destination, any dysfunctional bureaucracy is bound to drive away investments. Anytime, anywhere -- corruption, bureaucratic bottlenecks, red tape and institutional paralysis kill investments, jobs and growth.
Increasing our exports as a country is what can actually help stabilise the local currency as it comes under persistent pressure due to the import-oriented nature of the Ghanaian economy. AGOA as a platform creates the readily available market by eliminating key barriers for sub-Saharan African goods to reach the huge American consumer base.
Ghana must seize the new opportunity that lies ahead as the US Congress reviews AGOA. The various American Chambers of Commerce (AmCham) in Africa are already urging their government to extend the Act. And for Ghana, garments and apparel constitute only one of many sectors that the country can strategically harness to transform the economy through job creation and revenue generation. Ghana stands to gain immensely from AGOA if it can improve structures already in place to reap the huge opportunities presented under this historic programme that continues to change the landscape in many African economies.
Written By Richard Bansah,
Director, West Africa - The Whitaker Group
The Whitaker Group is the premier consultancy driving transformative investments, infrastructure, thought leadership and global business engagement in West Africa while maintaining a strong profile and profit margin.
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