Governor of the Bank of Ghana Dr. Ernest Addison says the commencement of operations of the Africa Continental Free Trade Area (AfCFTA) requires the building of a competitive Ghanaian economy.
According to the Governor, the effects of a strong Ghanaian economy will ensure that local businesses win against their rivals from other African countries.
Responding to a question by Citi Business News on the continent-wide trade agreement, Dr. Ernest Addison said local firms need to take advantage of the quota-free regime to succeed.
“At the end of the day, these trade flows will depend on the competitiveness of the various economies. This is what will really eventually determine who benefits from the free trade area. So it is important that we run a very competitive economy with low-cost exchange rate stability. All of that will help us in a sense to have an advantage over our competitors in terms of the type of exports we undertake.”
Dr. Addison also stated that the country’s balance of trade will also be strengthened if local firms strengthen their capacities to boost exports from Ghana to other African countries.
Data from the Bank of Ghana indicate that the country’s trade balance at the end of the third quarter was 549 million dollars compared to 147 million dollars at the end of the second quarter and 849 million dollars at the end of the first quarter.
“If we compete effectively, that should help us strengthen our balance of payment. It will only mean that our exports will pick up. If we don’t compete effectively, we will lose exports to imports then obviously our balance of trade will also reflect that deterioration. So this is the time to make sure that our exports to the other African countries perform very strongly.”
The AfCFTA pact
The continent-wide pact consolidates a market of 1.2 billion people and a combined GDP of $2.5 trillion.
Because of the AfCFTA, Africa’s manufacturing output is expected to double to $1 trillion, creating 14 million jobs by 2025.
The AfCFTA agreement initially requires members to remove 90 per cent tariffs from goods, allowing free access to commodities, goods, and services across the continent.
With the right transport infrastructure and high integration, manufacturers of consumer goods could earn up to $326 billion dollars per year, according to McKinsey & Company, a US-based management consulting firm.