This month, Shared Interest Managing Director Patricia Alexander tells us about the challenges faced by businesses currently
As the UK finally approved its trade agreement with the European Union (EU) on 30th December, it transpired that trade deals between the UK and some countries had not been finalised in time for Britain exiting the EU the following day.
As I write this article, Ghana is one of the countries still hoping to finalise a free trade agreement but is operating under interim terms as negotiations take place. While they wait, their exports will be categorised under Britain’s Generalised Scheme of Preferences, which face import fees, albeit at a reduced rate as a developing country. Under these requirements, Fairtrade bananas carry tariffs equivalent to 9.5p/ kg, where previously no tariff applied. The Ghanaian government is asking for the country’s main exports such as bananas, pineapples, and cocoa, to continue the tariff-free conditions, which were in place when Britain was a member of the EU.
Shared Interest provides much needed finance to farmers in Ghana, and this latest challenge will be an additional blow to businesses already under pressure. You may have heard in October last year that Nestlé announced KitKat bars in the UK and Ireland would no longer be certified Fairtrade. The Chief Executive of the Fairtrade Foundation referred to their decision as “profoundly disappointing” and cocoa farmers in West Africa were “devastated” by the news. As the Managing Director of an organisation that works closely with smallholder farmers across the globe to provide much needed finance, I knew immediately that this move would have a huge impact on people, co-operatives, and communities.
Two thirds of chocolate consumed worldwide includes beans from West Africa, where cocoa production is a way of life, and for many, sadly there is no other source of income. A typical farmer, working outside fair trade, lives on around 75p per day. That is below the World Bank’s extreme poverty line of about £1.40. When we consider that cocoa producers currently only receive about 6% of the value of the global chocolate industry, it gives some indication of the imbalance of wealth in supply chains.
Aside from the challenges faced environmentally and economically, farmers are also facing the health and infrastructure challenges caused by Covid-19. News from our regional team in West Africa is that co-operatives in Ghana have been making serious efforts to reduce the impact on the cocoa sector, which they describe as their economic lifeline.
There are now concerns that current trade tariffs caused by Brexit will see the country’s farmers priced out of the British market completely. The lack of a signed deal means that fees currently apply to goods such as Ghanaian bananas and processed cocoa products, which will likely be passed to the farmers and workers. We know that, following Brexit, the first Fairtrade product shipped into the UK from Ghana arrived in early January. The shipment contained 185 metric tonnes of bananas and the tariff amounted to more than £17,500.
As this article goes to print, it is encouraging to hear that we are close to a trade agreement as Ghana imports a high percentage of its goods into the UK. Official data shows that this equalled trade to the value of £498m in 2019, a big part of which was cocoa and fruit. Our main concern is that producers have built business models that rely significantly on tariff-free export operations, and they will not be able to survive the current duties imposed.
