Africa Trade: Retail Trading in Ghana and Nigeria. The Foreigner Question

Published on by Joseph Foray jnr.

The desire of the Nations of West Africa is to build Trade, economic cooperation and the free movement of goods and services among sister countries of West Africa.  Uniting Africa through trade, social, cultural and political unity is the goal of the continent.  

Individual countries within the West African sub region also strive for economic and business success in ways that gives them some advantage over other countries in the region.

In the case of Ghana, retail trading in Ghanaian markets are the reserve of Ghanaians and not “foreigners” whether from West Africa or Asia. According to the Ghana investment Promotion Center(GIPC) Act, non-Ghanaians should not get involved in retail trading in the markets since it contravenes Ghanaian laws. Foreigners can only get involved if they meet certain conditions.  The Act states as follows:

ACTIVITIES RESERVED FOR GHANAIANS AND GHANAIAN OWNED ENTERPRISES

 

Section 27(1) of Act 865 generally lays out activities that foreign investors are not permitted to invest or participate in. This list is not exclusive. Other laws have provisions on activities reserved for Ghanaians. These activities include the sale of goods or provision of services in a market, petty trading or hawking or selling of goods in a stall at any place. Other activities not permitted for non-citizens include:

  • the operation of taxi or car hire service in an enterprise that has a fleet of less than twenty-five vehicles
  • the operation of a beauty salon or a barber shop
  • the printing of recharge scratch cards for the use of subscribers of telecommunication services
  • the production of exercise books and other basic stationery
  • the retail of finished pharmaceutical products
  • the production, and retail of sachet water

 Section 27(2) of Act 865 additionally provides that the Minister in consultation with the Board may by Legislative Instrument amend the list of enterprises reserved for citizens and enterprises wholly owned by citizens.

CAN PERSONS WHO ARE NOT CITIZENS OF GHANA ENGAGE IN RETAIL TRADING ACTIVITIES?

 

Section 28(2) of Act 865 expressly provides for the conditions under which a person who is not a citizen can engage in trading activities. The provision provides as follows:

 

 A person who is not a citizen may engage in a trading enterprise if that person invests in the enterprise, not less than One Million United States Dollars in cash or goods and services relevant to the investments. Section 28(3) of Act 865 further provides that “trading” includes the purchasing and selling of imported goods and services. A further condition imposed on foreign enterprises that intend to engage in trading by Section 28(4) is that such an enterprise must employ at least twenty (20) skilled Ghanaians.

According to Section 28(5) of Act 865, the minimum foreign capital requirements to invest in Ghana including for engaging in trading, do not apply to the foreign spouse of a citizen of Ghana to the extent that  the foreign spouse is or has been married to a citizen of Ghana for a minimum period of five years continuously or holds an indefinite resident permit prior to registration of an enterprise;

    the marriage has been duly verified as having been validly conducted; the foreign spouse is ordinarily resident in Ghana

 

 In relation to the above, Section 28(6) of Act 865 further provides that a citizen of Ghana who loses his or her citizenship by reason of the assumption of the citizenship of another country shall not be required to comply with the minimum capital requirements including that of engaging in trading. Foreigners who fulfil this minimum requirement for trading are prohibited from trading in markets, stores and stalls. Foreigners are also prohibited from hawking.

 

 OFFENCES AND PENALTIES RELATED TO RETAIL TRADE CONTRARY TO ACT 865

 

 Section 40 of Act 865 provides for a list of offences. A person commits an offence under Act 865 if the person among others,  lets out a stall or store in a market to a foreigner; or otherwise contravenes a provision of this Act.

 

 The effect of this provision is that a person who is not a citizen of Ghana who engages in retail trade without meeting the minimum capital requirements set out in Section 28 of Act 865 commits an offence under Act 865. Ghanaians or non-Ghanaians who let out a stall or a store in a market to a foreigner also commit a breach of Act 865.

 

 Section 41 of Act 865 provides certain sanctions for the offences listed in Section 40 of Act 865. These penalties include a summary conviction to a fine of not less than five hundred penalty units and not more than one thousand penalty units.

 

The Centre entreats the public and relevant stakeholders to exercise restraint as this matter is being handled in Parliament by the joint Committee on Trade, Industry and Tourism, Defense and Interior.[1]

Source: GIPC

 

The Economic Community of West African States (ECOWAS) protocol on trade stipulates the free movement of goods and services across West African countries without impediments. Meaning that an ECOWAS citizen who have moved let say from Nigeria to Ghana can trade freely between the two countries without obstacles. The ECOWAS Protocol on trades stipulates the removal of obstacles and impediments to free movement of people, goods, services and capital.

Nigeria and 14 other West African countries are members of ECOWAS and are signatory to the protocol on free movement of persons, goods and services in the sub-region. There should therefore be no barriers to intra-community trade and movement.

Promulgated in 1979, the protocol was signed in Dakar, Senegal, to provide a legal framework for member states’ citizens’ right to enter, reside and engage in economic activities in the territory of other member states.[2]

 

An implementation plan spanning 15 years was adopted. The protocol’s primary purpose was to abolish visa and entry permit requirements, extend the right of residency and the right of establishment. It also grants nationals of member states the right to reside in another country for up to 90 days before obtaining permission for an extension of stay.

 

The supplementary protocol in 1985 included the right of citizens of member states to seek and hold employment in host states in the region once the citizen had obtained an ECOWAS residence card or permit. The exceptions to closure are elections and critical emergencies, such as coups, wars or invasions.[3]

The question is how well are these protocols being enforced by West African Countries or is it just a matter of paying lip service and doing the contrary.  While the GIPC Act of Ghana clearly contravenes the protocol of ECOWAS on trade, Ghanaian governments past and present have been adamant about ratifying the Ghanaian law to align with the ECOWAS Protocol on trade and free movement of persons.

The Ghana government in 2017 however made its commitment clearly known on enforcing the ECOWAS protocol on trade and free movement of people.  

Ghana made its position on the matter in 2017 as follows:

The Government of Ghana is firmly committed to the implementation of the ECOWAS Protocol on Free Movement of Persons, the Right of Residence and the Right of Establishment as well as the Protocol on Community Citizenship.

 

Mr Charles Owiredu, the Deputy Minister of Foreign Affairs and Regional Integration, said the two Protocols together aim to create a single ECOWAS Regional Community, devoid of obstacles and impediments to free movement of people, goods, services and capital.

 

“Indeed, it is our steadfast conviction that free movement, constitute the cornerstone of our Regional Integration efforts, and serves as the basis for unlocking the dividends thereof, with an immense potential to advance the sustainable development of our Region,” Mr Owiredu stated.

 

The Deputy Minister said this at the inauguration of the National Steering Committee in Ghana of the Regional Monitoring Mechanisms for Free Movement of Inter-State Passenger Vehicles, Persons and Goods within ECOWAS.

 

The two-day meeting is being organized within the framework of the ECOWAS-Swiss Agreement for the removal of harassment along ECOWAS highways and the joint ECOWAS EU funded 10th European Development Fund (EDF) Project “Support to Free Movement of Persons and Migration in West Africa”.

 

The ECOWAS Commission has selected Ghana as one of the eight pilot countries to establish a National Steering Committee to operationalize the Regional Monitoring Mechanism for the Free Movement of Inter-State Passenger Vehicles, Persons and Goods within the ECOWAS sub-region.[4]

 

The eight pilot countries were selected at the 46th Session of the Council of Ministers and 73rd Session of the Conference of Heads of States and Government.

 

The piloting countries include: Ghana, Benin, Burkina Faso, Mali, the Ivory Coast, Niger, Nigeria and Togo.

 

The Regional Mechanism aims to contribute in finding effective and sustainable solutions to obstacles to the free movement of persons and goods within the ECOWAS space.

 

It also seeks to improve the safety of the people and the free flow of interstate buses in the sub-region; strengthen regional coordination on the free movement of persons and goods; and minimize time and reduce red tape for transporters and passengers.

 

The launch of the National Steering Committee in Ghana therefore, completes the circle of National Steering Committees in the eight pilot countries to support the operationalisation of the Regional Mechanism based in Abidjan.

Mr Owiredu said: “It is our expectation that, the National Steering Committee, which would be the entity responsible for overseeing activities related to Regional Mechanism, would pave the way for enhanced intra-regional interactions, particularly the regional effort to facilitate movement of persons along the Lagos-Abidjan Corridor.

 

“This will complement arrangements put in place by the Government of Ghana to secure our international road corridors and ensure the free flow of goods and services across our borders”.

 

He said the event was a major achievement in their collective efforts to reduce harassment along their international road corridors and at their borders with their neighbours, while bringing them a great deal closer to the full realisation of their objective of free movement.

 

Mr Albert Siaw-Boateng, the Director, Free Movement and Tourism at the ECOWAS Commission, said aside the eight countries currently implementing the pilot phase, there were pla ns to extend the project to other countries within the ECOWAS sub-region.

 

He said the Regional Mechanizations aims to achieve two general objectives: “Simplify and facilitate the movement and crossing of land borders and eliminate intermediate road side checks, delays and perceived illegal benefits; while ensuring the safety of people in a safe environment”. [5]

Nigeria on the other hand, the largest economy in West Africa is also back tracking on its commitment to free movement of goods and services in the sub region.  Among other things in recent months, Nigeria has shut its borders between itself and the Republic of Benin for what it called smuggling of all kinds of goods from Benin into Nigeria and also benefitting from trade distortions in the Nigerian economy.

This is accounted as follows:

Nigeria’s recent announcement confirming that it is closing its borders to prevent movement of all goods has been met with harsh criticism from neighbors and regional integration advocates. The Buhari administration has justified the decision as a tactic to curb smuggling of goods of which the country wants to internally increase production, such as rice.

 

The border closures will have particularly negative consequences for traders, especially informal ones, along the Benin-Nigeria border, as

the two economies are closely intertwined.  Indeed, this informal trade generates substantial income and employment in Benin, and Benin’s government collects substantial revenues on entrepôt trade—goods imported legally and either legally re-exported to Nigeria, or illegally diverted into Nigeria through smuggling.

 

The informal sector throughout West Africa, and particularly in Benin, represents approximately 50 percent of GDP (70 percent in Benin, in fact) and 90 percent of employment. Unsurprisingly, informal cross-border trade (ICBT) is pervasive and has a long history given the region’s artificial and often porous borders, a long history of regional trade, weak border enforcement, corruption, and, perhaps most importantly, lack of coordination of economic policies among neighboring countries. Notably, ICBT takes several forms, not all of which are illegal: For example, trade in traditional agricultural products and livestock in bordering countries may involve little or no intent to deceive the authorities, as peasants and herders ignore artificial and un-policed borders.[6]

 

The economic relationship between the two countries, both members of the Economic Community of West African States (ECOWAS), is already asymmetric, with Nigeria exerting much more influence on Benin than vice versa. Given Nigeria’s larger population, economy, and natural resource wealth, Benin has adopted a strategy centered on being “entrepôt state,” i.e., serving as a trading hub, importing goods and re-exporting them legally but most often illegally to Nigeria, thus profiting from distortions in Nigeria’s economy. Benin’s dependence on Nigeria is not apparent from official trade statistics, as Benin’s reported trade with Nigeria accounted for only about 6 percent of Benin’s exports and 2 percent of Benin’s imports in 2015-17.[2] These official statistics are very misleading, however, as they do not reflect the vast informal trade along the border.[7]

The impact

To defy the ECOWAS protocol without any recourse or agreement with member states before the border closure amounts to a rogue act. The shutdown was sudden, leaving immigration and customs agencies in Nigeria as well its neighbors and other ECOWAS member states unprepared.

 

The closure was initially put in place for 28 days. But this has been vastly exceeded.

 

The measure is killing the local economy too. Niger, Chad, Mali and Burkina Faso are all landlocked countries and need Nigeria’s ports for trade. In addition, Nigerian companies that export products to countries to the north such as Niger will lose foreign earnings, potentially threatening jobs.

Big exporters to other African countries will also be affected, accentuating an imminent recession.

Then there is a moral question. Apart from being a neighbour, Benin is also a major ally and partner in the war against Boko Haram.

The impact of trade will be felt across the entire region, creating an imbalance that is hard to justify. Nigeria has halted all goods from West Africa coming in by land borders. But Nigerian goods are being exported to these same countries by sea and land, particularly in the north. This is creating a trade imbalance. Ghana and a few others are already lamenting this and threatening reciprocal action.

 

Finally, Nigeria should not forget how its foreign policy principle of good neighborliness has helped it over the years. Examples include the Biafra War, anti-terrorism and counter-terrorism initiatives, including the fight against Boko Haram.[8]

 

This underlines the urgent need to review the border closure.

A bad decision

 

A little bit of empathy laced with significant strategic thinking is required for a realistic – or pragmatic – and rewarding foreign policy.

Nigeria’s decision could set a trade war in motion by triggering rogue counteraction by other countries. It could therefore be shooting itself in the foot.

The border closure is obviously a protectionist policy of the Nigerian government. The essence is to secure and grow its local industries, including agriculture. But it would not need to close borders if its customs, immigration and other security agencies at the frontiers were doing their job well.

The problem of illegal importation of rice, smuggling of firearms and growing insecurity in the country is not a function of open borders. It stems from corruption, negligence and lack of due diligence. Closing the borders is thus an admission that Nigeria has not done enough to raise a professional security architecture. And that corruption litters our porous and filthy borders.[9]

 

Conclusion

Ghanaian and Nigerian traders are in every nook and cranny of West Africa and engaging in basic retail trading across board and no country is stopping them. So the measure of closing the shops of foreigners in the name of GIPC Law is an insult to the rest of ECOWAS. Halt the practice and let the ECOWAS protocol be allowed to work.

Economic and Regional integration in West Africa through ECOWAS is what will bless the sub region. Ghana and Nigeria can do so much better to move West Africa forward in terms of trade and free movement of goods and people. The protectionist policies of “inward looking” and not considering the strength and unity of ECOWAS is very disappointing.  Ghana must align its local laws to reflect the ECOWAS protocol on trade. Nigeria is too big a country not to be able to control smuggling and cross border trade distortions. This is the time for the leadership in the two countries to wake up and face the challenges squarely instead of such lazy and irresponsible measures adopted by the two countries.

IF you want ECOWAS to succeed, you must put in the work, discipline, professionalism, fight corruption and pull all the resources together for a successful economic union.  West Africa and the continent of Africa deserves better.

 

[1] http://www.gipcghana.com/press-and-media/706-what-is-the-position-of-the-gipc-law-in-relation-to-retail-trade-in-ghana.html

[2] http://theconversation.com/closing-borders-with-its-neighbours-isnt-the-answer-nigeria-can-do-better-125583

[3] http://theconversation.com/closing-borders-with-its-neighbours-isnt-the-answer-nigeria-can-do-better-125583

[4] https://www.tralac.org/news/article/12155-ghana-commits-to-ecowas-free-movement-protocol.html

[5] https://www.tralac.org/news/article/12155-ghana-commits-to-ecowas-free-movement-protocol.html

[6] https://www.brookings.edu/blog/africa-in-focus/2019/10/29/the-effects-of-nigerias-closed-borders-on-informal-trade-with-benin/

[7] https://www.brookings.edu/blog/africa-in-focus/2019/10/29/the-effects-of-nigerias-closed-borders-on-informal-trade-with-benin/

[8] http://theconversation.com/closing-borders-with-its-neighbours-isnt-the-answer-nigeria-can-do-better-125583

[9] http://theconversation.com/closing-borders-with-its-neighbours-isnt-the-answer-nigeria-can-do-better-125583

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