Friday, March 01, 2024
Italian (Italy)English (United Kingdom)

Desiderio Consultants Ltd. is a think tank and a network of independent professional international development consultants established to promote and influence customs & trade-related policies in African nations to achieve trade facilitation reforms aimed at improving international and regional trade
Creativity, Commitment to Excellence, Results

Limits and constraints of the AfCFTA according to informal traders: a perspective from Ghana

Trade Unions and Trade in Africa, a web platform which is the result of the collaboration between the International Trade Union Conference-Africa (ITUC-Africa), the Labour Research Service (LRS), and the Trade Union Solidarity Centre of Finland (SASK), has published a post on its website which analyses the perceptions of the informal sector in Ghana on the African Continental Free Trade Area (AfCFTA) based on several interviews conducted in the country. Despite the general optimism about the potential of the Agreement to unlock trade in the continent and increase the wellbeing of Africans, the post reveals that after more than 4 years from the entry into force of the AfCFTA, the informal sector in the country is still little aware of this agreement and of its advantages... and probably the situation is not much different in other African States.

Two reasons are indicated as the main causes of such knowledge gap: 1) the non-inclusion of informal economy operators and their associations in the discussions on the Agreement and in the processes of design of AfCFTA decisions and initiatives; 2) an inadequate sensitisation on national AfCFTA initiatives to informal operators in a language that is easily understood by these ones, based on the use of appropriate communication tools. The result is that some skepticism about the agreement still persists. But this is not the only reason. Other 3 additional factors are indicated as underpinning informal traders’ skepticism about their participation in the AfCFTA. These are:

a) limited access to credit and finance: in order to trade within the continent on a larger scale, traders (including informal traders) need to increase the volumes of goods that they exchange at African borders. This implies the need to produce or purchase more products, which in most cases is not possible due to the limited financial resources they have. A solution would be to obtain a loan from a bank. But in the end, this turns out to be a non-option. The statements made by interviewed trader are self-explaining: “When you go to the bank for loans, the requirement is that you should come with collateral. Most of us cannot meet this requirement. Those who can provide collateral to secure loans must do so at very high interest rates.” “…The interest is too high. I am afraid that other countries will benefit from the free trade agreement at the expense of Ghanaians if the interest rate remains high and we can’t secure loans to expand our businesses.”

b) Poor transport infrastructure: Informal traders indicate the poor transport infrastructure as a key barrier to participation in the AfCFTA. Participants in the focus group that were interviewed argue that the country’s poor road network increases their transport costs, basically cancelling the benefits that the Agreement introduces in terms of removal of customs duties on intra-African trade.

c) A last factor which is indicated as a barrier for participation of Ghanaian informal traders in the AfCFTA is the inadequate skills development. Opportunities for informal workers to upgrade their skills through formal training are still limited. In particular, vocational and technical skills should be developed to increase production and trade capacities of manufacturers and artisans so to avoid that economic operators from other African countries with superior manufacturing and trading skills will outcompete Ghanaian ones.

The post therefore concludes with a series of recommendations :

-      Specific initiatives should be developed to ensure that informal economy operators have better access to AfCFTA resources and information.

-      The involvement of the informal sector in the formulation of the national AfCFTA policies and measures must be promoted.

-       Lastly, the National AfCFTA Coordination Office is encouraged to establish a special purpose vehicle to address the challenges for informal operators to benefit from an AfCFTA that is inclusive and effective and to work with technical and vocational training institutions to improve the skills of informal artisans.

View Danilo Desiderio's profile on LinkedIn

 

Copyright © 2011

Desiderio Consultants Ltd., 46, Rhapta Road, Westlands, Nairobi (KENYA)