Brexit: Ghana faces potential roadblocks

• Posted on July 14, 2016
• by Nana Kwesi Coomson
• Comment

GHANA is exposed to a myriad of potential roadblocks following the exit of the United Kingdom (UK) from the European Union (EU).

From an adverse effect for Ghanaian exporters to UK and Europe, to a fall in the value of remittances from the Kingdom to Ghana, Ghana would definitely pay a price for UK’s exit from the Union.

Europe, including the UK, is Ghana’s main export destination. According to the EU Ambassador to Ghana, Mr William Hanna, in 2014, 35 per cent of all Ghanaian exports, worth €2.5 billion, went to the European market, creating many jobs and sources of income for the Ghanaian economy.

Additionally, about 7.8 per cent of all Ghanaian exports end up in the UK where Ghana is the12th largest exporter to that country from Africa. Ghana’s exports to the UK include cocoa and cocoa products, spices, fish, and vegetables.

Although it might just seem like a simple issue for Ghana, in that it can consider both destinations (EU and UK) as separate export markets, there might be a dear cost lurking.

Mr Samson Asaki, Executive Secretary of the Ghana Importers and Exporters Association believes that Brexit would pose a big challenge to Ghana’s export fraternity.

“It is going to be a big blow to Ghanaian exporters because majority of Ghanaian exports end up in the EU and some of the products go to the UK. Companies like Blue Skies and Pioneer Food Cannery export to most European countries but a majority of those exports go to the UK,” he says.

Mr Asaki notes there might be trade restrictions from the EU should it trade with the UK, or vice versa. He said per the yet-to-be ratified Economic Partnership Agreement (EPA), “the EU could say if it serves as a market for Ghanaian exports then we should not export to the UK.”

He fearsthe UK could also set new standards for Ghanaian exports different from that of the EU – which the UK currently uses. This could bring about a double set of standards Ghana must meet to export to Europe – one for the UK and one for the EU.

The Executive Secretary of the Ghana Importers and Exporters Association’s fears are well founded.

Additionally, the European Union could restrict UK-bound Ghanaian exports from transiting on the European mainland in countries like France and Germany. Since France and Germany assume the largest part of Ghana’s exports to the EU, most Ghanaian exporters who make use of air cargo export most of their produce to any of the two countries and then do the supply via rail.

This would now mean that Ghanaian exporters would have to airlift exports bound for the UK separately – and this means an extra cost of transportation for Ghanaian exporters.

However, senior lecturer at the University of Ghana Business School , Dr Lord Mensah, is optimistic as he forecasts that Brexit would positively impact on Ghana’s commodity revenues, especially gold export revenues.

“Investors will prefer to invest in commodities that are relatively stable on the world market such as gold than to invest in shares in Europe after the Brexit and I think the demand for some commodities like gold will go up and that will impact our [Ghana’s] revenue from the commodity positively,” he explains.

He is of the view that the development may positively affect revenues of African countries, including Ghana who rely on the proceeds of the commodity.

Contrary to that, the Executive Director, European Business Organisation (EBO), Ghana, Nico van Staalduinen is of the view that the Brexit will not affect commodity prices substantially.

He asserts that Britain does not hold monopoly over world commodity prices since the prices are normally determined by the world market.

“Well for me, I hold a different view. I don’t think Britain’s exit from the EU will necessarily affect commodity prices on the world market. These prices are determined by the world market and not the UK,” he stresses.

He maintains that the UK after leaving the EU has lost its momentum such that no other European country in the EU wants to leave.

On the impact Brexit will have on remittances to Ghana, Executive Director of the European Business Organisation, Ghana, Nico van Staalduinen saysGhanaians living in the UK would have to send more pounds in remittances to their family in Ghana than they did before Brexit.

“Ghanaians in the UK would have to send about 15 per cent more than they did before Brexit because the British pound has fallen in value to about GH?5, and this is bad,” Mr van Staalduinen laments.

He maintains the fall in remittances from the UK will also hit Ghana’s construction sector where most of the houses being built are for Ghanaians living abroad.

Value of remittances from the UK to Ghana is about 15 per cent more than trade values between both countries and as such a fall in remittances would affect Ghana’s economy.

On the issue of immigration, Banking consultant and Head of the Osei Tutu II Centre for Executive Education and Research, Nana Otuo Acheampong predicts a stringent immigration policy by the UK will be put in place with its new Prime Minister, Theresa May.

“The UK’s immigration policy will be strict now especially when the new Prime Minister is a former Home Secretary of the United Kingdom,” Nana

By Raju Raghu Parwani