Informal economy members of the Trades Union Congress (Ghana) stress the need for better access to information and understanding of trade agreements like the African Continental Free Trade Area to benefit workers and cross-border trade.

“It is a good initiative that is beyond our reach.”

~ Informal economy members of the Trades Union Congress (Ghana)

 

Introduction

In Ghana, significant national initiatives match official optimism about the African Continental Free Trade Area (AfCFTA). The National AfCFTA Coordination Office and a policy on the AfCFTA are in place, and trade has begun under the Guided Trade Initiative of the AfCFTA. In particular, the government expects the AfCFTA to improve the economic activities of farmers, agro-processors, youth, women and cross-border traders.

Informal cross-border trade (ICBT) thrives between Ghana and neighbouring countries. Ghana exports approximately US$56.9 million worth of goods through ICBT to Burkina Faso, Côte d’Ivoire, and Togo, with imports from these nations totalling about US$40.3 million. The ICBT volumes illustrate the importance of informality in the economy and the connection of Ghana’s informal cross-border traders to the AfCFTA.

The data

This article uses data from two focus group discussions involving 20 informal economy members of the Trades Union Congress (Ghana). The participants in the focus groups operate in different economic sectors, including retail, manufacturing, the arts and cross-border trade. Their  perspectives do not represent the opinions of all informal workers in Ghana. Even so, the participation of operators in the different economic activities provides an indication of what the AfCFTA may mean for the country’s informal sector.

The AfCFTA in Ghana

The AfCFTA secretariat is based in Ghana, adding to the official buzz and optimism about the free trade area. The government views the AfCFTA as an opportunity for an export-led economic programme. To the National AfCFTA Coordination Office, the AfCFTA offers the country’s small and medium enterprises (SMEs) access to the African market, leading to expansion and diversification. Ghana’s objectives for the AfCFTA include:

1. Promoting access to existing and new markets for Ghanaian goods and services.
2. Enabling the development of new products with export potential for the African market.
3. Ensuring increased demand for “made in Ghana” goods and services in Africa.

The government has established various structures to enable the realisation of Ghana’s AfCFTA objectives:

The Inter-Ministerial Facilitation Committee (IMFC) ensures the development of national AfCFTA policies and compliance with the AfCFTA agreement and guides AfCFTA national initiatives.

The National AfCFTA Coordination Office coordinates the country’s programmes on the AfCFTA, including supporting local businesses to access the AfCFTA.

A National AfCFTA Policy Framework and Action Plan that defines the policy environment for the implementation of Ghana’s short to medium-term strategy for AfCFTA.

The government has also introduced important initiatives on the AfCFTA, notably customs procedure codes to facilitate trading, the One District One Factory initiative, the Strategic Anchor Industries, and the National Export Development Strategy. About 180 companies will receive support to export to the AfCFTA.

Ghana is one of the seven countries that commenced trading under the AfCFTA’s Guided Trade Initiative (GTI), with two companies exporting products to Kenya and Cameroun. 30 Ghanaian companies have secured certificates of origin to trade under the AfCFTA.

Awareness of the AfCFTA

Beyond the general objective of the AfCFTA, which is the removal of tariffs and non-tariff barriers, participants in the TUC’s informal economy focus group have limited knowledge of the AfCFTA.

 “I have heard that Africa wants to make it easy for us to trade with each other by removing taxes and other barriers, but I don’t have enough information about it.”

[Trader in the TUC focus group]

“I don’t have much information about the AfCFTA. The conversation around it has not reached our level. I didn’t even know if trading had started or what the processes were to access it.”

[Artisan in the TUC focus group]

 

There are two main reasons for the lack of awareness of the AfCFTA.

The first is the non-inclusion of informal economy operators and their associations in the AfCFTA decisions and initiatives.

“We all know that most trade activities are in the informal economy. But we are left out of the discussions on such a huge trade agreement.”

[Trader in the TUC focus group]

The second factor is inadequate sensitisation on national AfCFTA initiatives to informal operators in a language that is easily understood and using appropriate communication tools.

Optimism about the AfCFTA

Nevertheless, the TUC informal sector members have faith in the ability of the AfCFTA to facilitate cross-border trade, including ICBT.

“I have been to Togo several times to buy some products. Usually, I get delayed at the border. If this free trade is implemented well, it will help me and other traders who travel around the continent.”

[Trader participant in focus group]

Ghana ranks low among African countries for the time it takes to cross the border and comply with documentation. In West Africa, the presence of numerous border regulators hinders the achievement of the ECOWAS Trade Liberalisation Scheme (ETLS) objective of reducing the number of days it takes to trade across the sub-region’s national borders. Border delays add to cost of doing business and sometimes result in losses, especially for perishable goods. Informal cross-border traders would benefit immensely from the elimination of border delays.

“I know a colleague who brings tomatoes from neighbouring countries. She complains that her tomatoes sometimes spoil because of delays at the border.”

[Trader participant in focus group]

Focus group participants praised the potential of the AfCFTA regime to guarantee the human rights of cross-border traders. Harmonised and simplified cross-border trade rules under the AfCFTA are essential to preventing abuse and harassment of women traders.

“The AfCFTA is a welcome development. Women traders get harassed by customs officials just to get their goods across the borders. These things prevent some of us from going to other African countries to do business.”

[Female trader participant in focus group]

The informal operators also pointed to the potential of the AfCFTA to minimise the illegal cross-border movement of goods. The cumbersome procedures and costs for moving goods legally across authorised borders encourage smuggling.

“Some traders cannot afford the huge duties, so they smuggle goods. If tariff barriers are removed or even reduced, the illegal activities will stop.”

[Tailor participant in focus group]

 

Scepticism about the AfCFTA

Four main factors underpin informal traders’ scepticism about their participation in the AfCFTA.

Limited access to credit and finance

According to one trader in the focus group, one of the biggest challenges for informal workers is the inability to secure loans to invest in businesses. Other studies give credence to the issue of access to credit, attributing it to the perception that informal workers are at higher risk of defaulting on loans.

“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.”

[Trader participant in focus group]

“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.”

[Trader participant in focus group]

Closely linked to Ghanaian businesses being able to compete under the AfCFTA is access to credit. According to the Ghana Employers’ Association, the high cost of credit affects the ability of its members seeking to reap the benefits of the AfCFTA.

Lack of awareness and information on the AfCFTA

The participants in TUC’s focus groups are largely unaware of national initiatives to support Ghanaian businesses to trade under the AfCFTA: “I don’t have enough information about it [the AfCFTA]… I don’t know if we can access it.” [Trader participant in focus group]

Poor transport infrastructure

Informal traders identified the poor transport infrastructure as a barrier to participation in the AfCFTA. According to trader participants in the focus group, the country’s poor road network adds to their transport costs. Our study on the implication of the AfCFTA on the manufacturing sector in Ghana echoes their concerns on transport bottlenecks.

Inadequate skills development

Opportunities for informal workers to upgrade their skills through formal training are limited. Owoo and Lambon-Quayefio (2020: 133) argue that the limited opportunities for informal artisans in Ghana to develop vocational and technical skills make them less competitive than their counterparts in neighbouring countries. For example, Togolese artisans with superior ‘finishing’ skills outcompete Ghanaian artisans. Artisans in the focus group, fearing the potential free movement of people under the AfCFTA, criticised its potential for labour market competition.

“We are not improving our skills. We will be in our own country and others will come and take our jobs.”

[Artisan participant in focus group]

Conclusion

Ghana’s efforts on the AfCFTA are driven by the potential of the trade regime to boost employment, including among the youth, women and cross-border traders. Some informal members of the TUC have mixed views on the AfCFTA, in contrast to the official optimism. On the one hand, they are pessimistic about the new trade regime because of the existing challenges for informal sector operators. On the flip side, there is hope that the AfCFTA can facilitate trade and improve the livelihoods of informal cross-border traders.

The debate on international trade, the divide between free trade and protectionism, is echoed in the views of some of the TUC’s informal members on the AfCFTA. Arguably, a dogmatic approach to international trade – an uncritical adherence to either protectionism or ultra-free trade –  is problematic, according to the narratives of the focus group participants. Informal members of the TUC support tariff removals  and market access under the AfCFTA. At the same time, these workers recognise the significant challenges that limit their participation in AfCFTA trade. A combination of policies and initiatives that protect local industries while providing market access are needed to ensure that informal workers benefit adequately from the AfCFTA and, more broadly, from international trade.

Recommendations

1. The National AfCFTA Coordination Office and trade unions must develop initiatives to ensure informal economy operators have better access to AfCFTA resources and information.
2. Informal economy operators need to be involved in formulating national AfCFTA policies and measures, which should reflect the aspirations of these workers and the national efforts to formalise the informal economy.
3. The National AfCFTA Coordination Office must establish a special purpose vehicle to address the challenges for informal operators to benefit from an AfCFTA that is inclusive and effective.
4. The National AfCFTA Coordination Office must work with technical and vocational training institutions to improve the skills of informal artisans to ensure.

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REFERENCES

AfCFTA Secretariat (2023) About the AfCFTA

Asafu-Adjaye, P (2021) Trade Union Responses to Economic Liberalisation in Ghana. PhD thesis. SOAS University of London

Gaarder, E.,  Luke, D. and  Sommer, L. (2021) ‘Towards an estimate of informal cross-border trade in Africa’ Addis Ababa, ECA

GoG (2022) The Budget Statement and Economic Policy of the Government of Ghana for the 2023 Financial Year

GoG (2021) The Budget Statement and Economic Policy of the Government of Ghana for the 2022 financial year

MOTI and NCO (2022) National AfCFTA Policy Framework and Action Plan

NCO (n.d) Frequently asked questions about the AfCFTA

Otoo, K. N., Asafu-Adjaye, P., Asare, O., and Addo, M. (2021) Trade Unions and Trade: The implications of the Africa Continental Free Trade Area (AfCFTA) agreement for the manufacturing sector in Ghana.

Owoo, N.S. and Lambon-Quayefio, M. P. (2018) ‘The Construction Sector in Ghana’ in Page and Tarp eds. In Mining for Change: Natural Resources and Industry in Africa. Oxford University Press. Owusu-Afriyie (2023)

AfCFTA in Ghana, Ghanaian firms to export under AfCFTA

Essential resources

• The impact of Continental Free Trade Agreements on informal employment in Africa: A case of the manufacturing industry in Zambia
• Trade Unions and Trade: The implications of the Africa Continental Free Trade Area (AfCFTA) agreement for the manufacturing sector in Ghana

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Can workers in Ghana’s manufacturing sector gain from the AfCFTA?