West Africa: Trade With EU Declines

West Africa's share of trade with the European Union (EU) has declined significantly from 5% in 1980 to 1% today, the First Councellor of the Delegation of the European Commission to Ghana, Dr. Dick Naezer, has said.

He said this deterioration was due to the use of the General Trade Preference system for the past 30 years that had not helped in the development of Africa.

In place of this, Dr. Naezer explained that the Economic Partnership Agreements (EPAs) would do the trick as the EU will seek to support the economic reforms of governments throughout Africa by changing the market relationship between Africa and European markets.

Dr. Naezer made these remarks when he gave the opening address at the Forum on Financial Guarantee for Investments in Accra yesterday.

"We are currently negotiating EPAs with African sub-regional groupings which aim at creating a business-friendly environment," he revealed.

He said the EPAs would create vigorous inter-regional exchanges, promote exports, provide a predictable regulatory framework for investors, remove non-tariff barriers and strengthen institutional capacities.

"It will also support trade facilitation, better communication and lessen bureaucracy," he assured, adding that he hoped the agreement would be concluded before next year.

Touching on the forum, Dr. Naezer said the lack of access to predictable, affordable and long-term private financing services was an important constraint on the private sector's potential in Ghana.

Referring to AGI's latest Business Climate Survey 2007, he said the private sector, especially SMEs see the cost of credit and lack of access to it as a major bottleneck for their performance and growth.

"This problem is especially acute, regarding medium and long-term sources of financing," he indicated.

He said although inflation and interest rates had come down, the banking system was still faced with difficulties in meeting the demand for private financing.

He stressed it was these difficulties that the Guarantee Fund for Private Investments (GARI) in West Africa with the support of EXIM Guarantee and PROªINVEST aimed at solving.

Dr. Naezer stated that the GARI Funds was an important initiative that sought to address these challenges because it offered financial guarantees to facilitate access of ECOWAS private companies to medium and long-term financing by sharing risks with credit institutions. He said financial guarantees had many advantages for credit institutions including protecting against unpredictable elements, improvement of the solvency ratio, immediate cash transfers by guarantee funds in case of default payments and, in the end, lower risks associated with lending.

"For the private sector, the obvious benefit is improved access to credit and lower costs."

He said EU actively supports GARI Funds through capital provided by AFD, the European Investment Bank and the Deutshe Entwicklungesselschaft.

The MD of GARI said they were supporting private companies in West Africa to mobilise funds for their activities.

The forum was also addressed by the coordinator of PROªINVEST, Mr. Bruno van Eeckhout, and the Board Chairman of EXIM Guarantee Company Limited, Felix Ntrakwah. Mr. Ntrakwah was happy with his outfit's collaboration with GARI.

According to the Managing Director of GARI, Mr. Piere Yaovi Sedjro, GARI approved cumulative guarantees of $152 million by December 2006 since its inception 11 years ago. It has also mobilised financing to the tune of $468 million up to this year.

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