Markets, credit and production bottlenecks remain the biggest concerns of non-traditional exporters, the B&FT has found -- in an era when commodities increasingly dominate Ghana�s international trade.
While non-traditional exports have been increasing, the three challenges continue to hinder the potential to diversify away from commodities, said Frederick Ayeh, vice-president of the Federation of Associations of Ghanaian Exporters (FAGE).
Gold, oil and cocoa beans accounted for 76 percent of exports between January-November 2011, according to data from the Central Bank, and together the three commodities boosted earnings to US$11.8billion.
�Either the market is available for a specific product, but production is not up to it ; or the product will be available but finance and credit is difficult to come by. We have to understand that commercial exporting is capital-intensive, and the inability to secure funds increases an exporter�s production costs and makes his product less competitive,� Ayeh said.
Non-traditional crop exports include banana, pineapples and vegetables, while cocoa products, plastics and plywood are among the top-earners.
�If an exporter operates with an obsolete machine, he will not be able to optimise his output; but to retool means funds or credit should be available.�
EDIF funds
Collateral required to access credit from the Export Development and Investment Fund (EDIF) effectively rules out start-ups from benefiting from the fund, Ayeh said.
EDIF money is given at 12.5 percent interest, cheaper than traditional borrowing rates of 30-40 percent interest. But according to him, the actual borrowing cost could scale-up to 17 percent on account of �processing fees�.
�Besides that, the funds are only for short-term projects; but our members need long-term funds.� For instance, he said, pineapple farmers take 18 months to plant and harvest the crop, meaning a loan would have to cover at least the same number of months if the exporter is to pay back without hassle.
�But EDIF will not grant such a loan. And even if they did, the collateral, which should be equal to the value of the loan, makes it especially unattractive to start-ups,� he added.
EDIF is well-intended but not well-implemented, Ayeh lamented, as funding for agriculture, a key export sector, is generally a problem for commercial banks -- which put a risk-premium on loans to support the country�s rain-dependent crop production.
Demand and standards
Investment by donors and the government has improved quality-control for exports, and the ability to produce to standard is no longer a serious impediment to entering Western markets, he said.
A worry for the industry, though, is the impact of the slowdown in GDP and demand in the European Union -- the largest destination for non-traditional exports from Ghana, accounting for half of the total.
�We need to expand and look for new markets, especially in Africa, in order to stay competitive -- without throwing away our traditional partners,� Ayeh said. The ECOWAS region is the second-largest market for non-traditional exports, and provided 26 percent of revenues in 2010.
According to two researchers, Kwabena Anaman of the Institute for Democratic Governance (IDEG) and Alhassan Atta-Quayson of Third World Network, hopes of reviving Ghana�s manufacturing sector hinge on fully tapping the demand potential in the sub-region.
�Poverty reduction in Ghana can be achieved through increased employment of people by the manufacturing sector. This entails increased export trade by Ghana within the West Africa region,� the two said in a study of the country�s bilateral trade relations with sub-regional economies.
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