This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 ACCRA 001391 
 
SIPDIS 
 
SENSITIVE 
 
DEPT PLEASE PASS FOR TREASURY LUKAS KOHLER 
USTR FOR LAURIE-ANN AGAMA 
COMMERCE FOR MARIA RIVERO 
MCC FOR ROD NORMAN 
 
E.O. 12958: N/A 
TAGS: ETRD EINV KMCA GH
SUBJECT: GHANA AND AGOA: RECENT SUCCESSES WITH A DIVERSE 
APPROACH, BUT EXPORTERS STILL FACE HUGE CHALLENGES 
 
 
Summary 
------- 
¶1. (SBU) In 2004, Ghana increased its exports to the U.S. 
under the African Growth and Opportunity Act (AGOA) by over 
85%, to over $74 million dollars -- accounting for over 50% 
of Ghana's total exports to the U.S.  In 2005, USAID's West 
Africa Regional Program's Accra-based West Africa Trade Hub 
(WATH) has helped Ghanaian firms land contracts with major 
U.S. retailers, including Wal-Mart.  Ghana's AGOA exports are 
diverse, with apparel contributing just 10% of the total. 
AGOA's share of Ghana's total exports is under 3%, and 
potential exporters face erratic supplies, lack of access to 
capital, high transport costs, tight delivery schedules, and 
corrupt and congested ports.  Although Europe will remain 
Ghana's dominant trading partner for the foreseeable future, 
Ghanaian exporters are finally beginning to take advantage of 
preferential market access under AGOA.  End Summary. 
 
West Africa Trade Hub (WATH) Successes 
-------------------------------------- 
¶2. (U) The Accra-based Trade Hub, under the USAID-West Africa 
Regional Program, covers 20 countries.  WATH helps West 
Africa take advantage of global trade opportunities, 
including working to build the capacity of export-ready 
companies to develop their products and market them to 
potential U.S. buyers.  WATH targets many sectors, but is 
clients in the apparel sector have increased sales from 
$700,000 in 2004 to potentially more than $4 million in 
2005-2006. 
 
Notable Successes 
----------------- 
¶3. (U) WATH client Belin Textiles (BTI) is run by Mauritian 
Berty Fong, and partially financed through the GoG's 
Presidential Special Initiative (PSI).  WATH provided support 
and booth space at the ASAP Global Sourcing Show in Las Vegas 
in February.  At the show Fong struck a deal with one of 
Wal-Mart's major apparel vendors (Whitewater) that led to a 
contract for $2 million worth of apparel.  Whitewater also 
connected BTI with a supplier whose quality standards already 
meet Wal-Mart's. According to Fong, the entire system can be 
easily expanded to other factories supported by PSI as orders 
increase. 
 
¶4. (U) WATH sponsored Ghana's CAN & KAA fish smoking company 
to attend the International Boston Seafood Show in March. 
When the owner was unable to attend, WATH still marketed his 
products with brochures and photos, generating a $10,000 test 
order.  If the test order goes well CAN & KAA could land an 
order for monthly shipments.  CAN & KAA has been in business 
for over 20 years, selling locally and exporting to Europe 
and has the excess production capacity required by the US 
customer. 
 
Trade Numbers Small But Growing 
------------------------------- 
¶5. (U) As a percentage of total exports ($2.6 billion in 
2004), Ghana's AGOA exports are still tiny at 3%.  However, 
the diversity of products that Ghana exports under AGOA makes 
them less vulnerable to changes in world markets than other 
African countries' apparel-heavy AGOA trade.  The largest 
contributors are energy related products, primarily petroleum 
by-products from the Tema Oil Refinery (TOR), which accounted 
for over 50% of 2004 AGOA exports.  Textiles, forest 
products, and agricultural products all make fairly equal 
contributions of between $5-7 million each.  All sectors 
increased in 2004 except forest products. (NOTE: non-AGOA 
eligible forest product exports are up 30% YTD in 2005 over 
¶2004.  END NOTE.) 
 
New Textile Opportunities Come Too Late For Local Suppliers 
--------------------------------------------- -------------- 
¶6. (SBU) During the June 22 Trade and Investment Framework 
Agreement meeting hosted by USTR in Washington, Commerce 
officials said the USG would consider including some "batik" 
print machine-made textiles unique to Ghana under AGOA's 
Title 9 provisions for traditional crafts.  Ghana's larger 
textile manufacturers could benefit from batik qualifying 
from Title 9 benefits, but it may be too late for some of 
them.  Inexpensive imports have flooded the country recently, 
including some copyrighted Ghanaian designs counterfeited 
right down to the copyright mark itself.  Joapong Textiles-- 
another PSI enterprise partially owned by the GoG --has 
already closed with the loss of 1,000 jobs.  Other textile 
and apparel companies may also close before they can take 
advantage of any new opportunities. 
 
Serious Hurdles for Small and Medium Size Exporters 
--------------------------------------------- ------ 
¶7. (SBU) Despite the help of WATH and other donors, most 
exporters still face serious hurdles to taking advantage of 
enhanced market access under AGOA.  Supply chains for local 
raw materials can be erratic.  Newly established and unproven 
companies have almost no access to capital.  For established 
businesses, credit is prohibitively expensive, with interest 
rates running as high as 25% for short-term loans. 
Corruption in the ports further degrades the return on 
exports.  One source involved in major reconstruction at the 
port of Tema claims it can cost as much as $1,000 in bribes, 
on top of normal fees, to move a container either into, or 
out of, the port.  The ports are congested, and connecting 
transport routes are inadequate.  There has also been an 
increase in freight diverted to Ghana from neighboring 
countries due to local conflicts.  As demand on the transport 
sector has increased, so have prices, and it is becoming more 
difficult for smaller importers to manage costs. 
 
¶8. (SBU) Large U.S. customers with worldwide sourcing options 
naturally dictate the terms of contracts with small 
suppliers.  Most contracts impose stiff penalties for late 
shipments or poor quality.  In order to land large contracts 
with U.S. importers, small Ghanaian companies often risk as 
much as an entire quarter's production on one order.  With 
razor-thin margins the consequences of late delivery can be 
dire.  One small Ghanaian furniture manufacturer lost a 
entire quarter's profit when intermittent supply of raw 
materials and problems with transport delayed the delivery of 
an order for Pier One.  As a result, the company returned to 
its tried and true customers in Europe.  (Note: European 
orders are usually much smaller, and shipping is faster and 
cheaper. End Note) 
 
¶9. (SBU) Ghana's government is betting on the agricultural 
sector as the main engine for future economic growth.  The 
agriculture sector is the focus of Ghana's draft proposal for 
the Millennium Challenge Account, and the PSI program is also 
heavily focused on agriculture.  However, it has been tough 
going for Ghana's agricultural exporters to break into the 
U.S. market.  Already faced with overwhelming competition 
from established exporters in Latin America, they are just at 
the beginning of the process of raising quality and standards 
to the level of stringent U.S. SPS standards.  In the short 
to medium term, Ghanaian exporters of agricultural products 
will continue to target the European and regional West 
African markets. 
 
Comment 
------- 
¶10. (SBU) Ghanaian companies are increasingly pursuing 
opportunities afforded under AGOA's preferential market 
access, but face huge obstacles and great risks.  These firms 
are challenged by the same factors that face foreign 
investors:  excessive government bureaucracy, endemic petty 
corruption, inadequate infrastructure, and shortage of 
qualified labor, in addition to lack of capital and 
unreliable supply chains. Therefore, most small and medium 
size enterprises in Ghana assume a risk averse attitude.  We 
will continue to see increasing exports to the U.S. under 
AGOA (and non-AGOA exports), as companies gradually gain 
experience in the U.S. market, find niches where they are 
competitive, and slowly expand their capacity.  However, 
Europe will remain the export market of choice for most 
Ghanaian companies due to its proximity, lower SPS 
requirements, and manageable order sizes.  End Comment. 
YATES