Recession in the West Cuts Off An Economic Pipeline in Ghana Business
editorial comment: Time to wake up guys and take initiatives for you own
sake, instead of putting the blame on the rest of the World. In China they did
better than last year with 7.8 % more business than in 2008. David Norden
found Thursday, 6 August 2009 at ghanaweb.com
ADUASE, Ghana -- When the U.S. housing crash triggered
economic chain reactions around the world, one ended in a lush forest near this
village, where on a recent day Emmanuel Awatey was tapping his machete on a log
that he very much wanted to chop up.
In previous years, Awatey would have done just that, and then carried the wood
on his head to the red dirt road nearby. A truck there would have ferried it
three hours to the Tekura handicrafts workshop in Accra, Ghana's capital, where
it might have been carved into a stool by an artisan, then shipped duty-free to
the United States, then sold at Cost Plus World Market for display in an
American home.
But the U.S. housing market and the global economy collapsed. And so has work
for Awatey, the carvers and others working what had been a thriving pipeline
from Ghanaian rainforest to American retail.
"If work comes tomorrow, we will head to the forest," said Awatey, 44,
a sinewy subsistence farmer who, like others in his village, used to make as
much as $25 a week chopping and carrying cedrela wood for Tekura. "But it
all depends on the ones who bring the work."
'Wiping Out' the Vulnerable
The financial crisis has checked demand for African
commodities, slowing the continent's economies. Less visibly, however, it has
also stunted small African exporters who had become fledgling trade success
stories -- and micro-level poverty busters -- in a region often associated with
gloom.
In many cases, these exporters were lifted by a decade-old U.S. program meant to
promote economic development through duty-free access to American markets. Now a
U.S.-triggered meltdown is erasing many of the gains.
"We had small- and medium-sized businesses that had so much hope. They
invested capital, they took loans. And the rug has been pulled out from under
them," said Rosa Whitaker, a former assistant U.S. trade representative for
Africa and architect of the program, the African Growth and Opportunity Act, or
AGOA. "It's wiping out some of the world's most vulnerable people."
In the first quarter of this year, AGOA exports from sub-Saharan Africa to the
United States, including oil, plummeted 59 percent, while non-oil exports such
as textiles and agricultural products dropped 22 percent.
Secretary of State Hillary Rodham Clinton is set to discuss the program, which
expires in 2015, at a forum Wednesday in Kenya as part of her seven-country trip
to Africa.
Ghana's overall economy has remained steady because of strong prices for its
cocoa and gold. But exports under AGOA dropped by more than one-third in 2008,
and fell 86 percent, to $5.2 million, in the first five months of this year.
While much of the plunge came from a fall in exports of foreign oil processed in
Ghana, it also reverberated through particleboard factories, mango farms and
jewelry studios.
As in many sub-Saharan countries, Ghanaian textile and apparel exporters have
been particularly hard-hit, including some that U.S. officials once touted as
AGOA poster children. Among them is Prosper Adabla's formerly humming factory
near Accra, which manufactured tube socks for export.
An end to worldwide quotas on Chinese apparel exports in 2005 brought stiff
competition. Two years later, Adabla's U.S. partner went bankrupt. Adabla shut
his factory last summer, leaving $1 million worth of socks unsold and 1,000
workers jobless.
"The demand has dried up, number one. Number two, the partners have either
gone bankrupt or are no longer in business or have decided to buy from
China," Adabla said. "AGOA gave us an option . . . but if you can't
sell your product, it's useless."
Few Ready for Tough Times in Ghana
Ghana's small handicrafts industry, which was already
expanding because of free-market reforms meant to grow nontraditional exports,
got an additional boost from the program and then another from a booming U.S.
housing and consumer market.
Earlier this decade, big American retailers such as Pier 1, World Market and TJ
Maxx were snatching up handmade candleholders and baskets from Ghana. When
Target ordered hundreds of thousands of dollars worth of goods from Tekura and
other enterprises in 2004, hundreds of rural carvers won work chiseling African
art for American abodes.
But most of the orders dried up by the end of 2007. Spokesmen for Pier 1, TJ
Maxx and World Market did not respond to or declined requests for comment, but
retail analysts say the explanation is evident.
In an era when retailers are trimming inventories, cutting price points and
closing stores, African accessories count as luxuries, said Nick McCoy, an
analyst with RetailForward in Ohio.
Robert Ellis, whose Fritete African Art Works was the forerunner of Ghana's
handicrafts exporters, said cracks in the industry began showing before U.S. and
world financial woes. Asian factories were making cheaper copies. Ghanaian
artisans were not updating their work often enough. And when demand fell, he
said, few had built a foundation to get them through tough times.
Ellis, who proudly shows off a 2005 Target ad touting "AFRICAN DESIGNS
14.99 -- 79.99" that includes his rustic wood table, watched his export
sales drop from $305,000 in 2007 to $70,000 in 2008. Six muscular carvers now
toil in his wood-strewn workshop, down from 150 in December.
He has sold property and paid off debts, and he says he thinks he can survive
the crash. Smaller Ghanaian producers, he said, "will need a miracle."
AGOA has never become a
silver bullet for micro-enterprise in Africa, whose share of global trade is
just 2 percent. Ninety percent of exports under the program still come from oil,
though non-oil exports have tripled since 2001.
Small businesses complain about the program's byzantine guidelines and say
U.S.-provided training is not tailored enough. While some African governments
saw the program as an opportunity and created export-friendly policies, others
ignored it. More generally, poor roads and power supplies hinder commerce, and
little companies cannot afford the 30 percent interest rates that African banks
typically slap on long-term business loans.
In Tekura's quiet offices on the muddy outskirts of Accra, Josephine and Kweku
Forson said they are waiting out the storm. Their sleek stools and masks -- all
made from trees cut as part of government reforestation programs -- are
gathering dust. Sales fell in half from 2007 to 2008 and are on track to fall
another 60 percent this year.
In the sawdust-filled workshop on a recent day, Kwabena Appiah, 25, was one of
just 10 artisans on duty. He was lucky: The Forsons said that they had
regretfully let go more than 100 workers, and that they were especially worried
about the woodcutters in the forest.
Out in Aduase, a tiny settlement where goats scurry about, those 20 or so
woodcutters were once again getting by on their cassava and plantains. The
clothes, haircuts and even rat poison they purchased with the extra income were
on hold, Awatey said.
The woodcutters said they had no idea where the trees they chopped ended up
after they left Ghana. But they said they knew why the wood was staying put for
now.
"Because of the recession," said 32-year-old Paulina Ohenewaa,
"there are economic problems everywhere in the world."
Ghana business