The capacity of businesses in Ghana to actively engage in global trade and exports is significantly hampered by challenges related to access to finance and the high cost of funding.
This issue was highlighted in the World Trade Report 2023, which was released in Geneva, Switzerland, on September 12, 2023, during the World Trade Organization’s (WTO) Public Forum Conference.
The WTO’s assessment focused on Ghana as one of four West African countries evaluated for their ability to secure financing for trade and exports through banking institutions. The report disclosed that “limited and expensive access to trade finance” significantly restricted these countries’ trade expansion efforts.
Furthermore, the report revealed that trade finance in Ghana and the other four ECOWAS countries only supported 25 percent of their import and export activities, which was notably lower than the African average of 40 percent and the global average of 60-80 percent.
It also emerged that there was high rejection rate when it comes to trade finance with “small businesses and women owned SME application” which the report said is “disproportionate”.
The report suggests that trade finance accessibility for new SMEs could be enhanced to improve coverage. Additionally, it anticipates that the four countries, Ghana included, may experience an annual trade growth of 8 percent, equivalent to US$13 billion.
In an interview with Joy Business, Ralph Ossa, the Chief Economist at the WTO, highlighted that Ghana would need to address market failures that currently restrict trade finance opportunities for businesses.
“Maybe there might be the need for government to also step in as well as some international institutions to deal with this challenge”, Mr. Ossa said.
“Is there a reason why banks are not supporting these businesses and what needs to be done to correct this problem? Trade finance overall in Africa is not well developed as trade finance in North America and this has contributed to this high trade cost that we are measuring”, he added.
In her statement, Ngozi Okonjo-Iweala, the Director-General of the World Trade Organization, called for coordinated efforts to address trade financing gaps. She stressed the importance of leveraging technology and training to facilitate knowledge transfer and support capacity building for small businesses.
The WTO trade report also highlighted several other key issues:
- The report advocated for a concept termed “Re-Globalization” in response to early signs of fragmentation in global trade.
- It confirmed that geopolitical tensions were starting to impact trade flows.
- However, the report argued that despite these challenges, international trade was still thriving, suggesting that claims of de-globalization were not strongly supported by the available data.
- The publication pointed out the expansion of digital services trade, the growth of environmental goods trade, and the resilience of global value chains, all of which contributed to trade’s ability to withstand recent global crises.
Regarding the World Trade Organization’s Public Forum:
The WTO is utilizing its flagship event, the “WTO’s Public Forum,” to concentrate on promoting sustainable trade.
The Public Forum serves as the WTO’s most significant outreach event, providing a unique platform for stakeholders worldwide, including civil society, academia, business, government, international organizations, and the media, to engage in discussions about the latest developments in global trade and propose ways to enhance the multilateral trading system. This event brought together more than 2,000 representatives from various sectors.
The Route to Transport Decarbonisation https://t.co/5bwF9r3Bv9
— WTO (@wto) September 13, 2023