Regional economic integration is predicated on the important principles of competition and the reallocation of resources. Efficiency results from less inefficient producers being push out of an area of economic activity into other areas where their resources might be better invested. Many however, see regional integration as complementary economic activities among member states.
Recently there has disagreement between Ghanaian traders and their Nigerian counterparts who have set up business in this country. Market traders, spare parts dealers, petty-traders and hawkers have in some instances locked up the shops of Nigerians for trading in goods that are supposed to be reserved for Ghanaians to trade in.
What could be the reason for this stance by the Ghanaian traders who cite the laws of Ghana as the basis for their actions? Could it be that the Nigerian traders are outcompeting their Ghanaian hosts? Is the market too small to accommodate both Ghanaian and Nigerian traders, and by extension other ECOWAS citizens from other member states?
There really must be a reason for the Ghanaian traders to be citing the law to back-up their demands to stop Nigerians from trading. In my opinion, the law by itself may be a necessary condition for stopping trading by Nigerian traders but will not be a sufficient condition for the competitiveness of Ghanaian traders. For the situation to be solved sustainably, the underlying causes of the need for the Ghanaian traders to resort to the law must be solved otherwise any solution will only be papering over the cracks.
Regional integration among developing countries is fossilised in archaic theories which assume dirigisme (i.e. state control of economic affairs) which would have been fine if we were still in the 1970s, when ECOWAS was formed. At that time, the pooling of resources, collective self-reliance and such other language defined the thinking behind regionalism. West Africa has moved on since then to fully embrace private sector led development. Economic integration is therefore no longer to be driven by governments allocating resources. Instead, the private sector through competition is the one allocating resources.
The development of the region through integration requires an expanded market beyond those that the individual member states currently have, except for Nigeria. For Ghana to expand its market beyond the borders of this country to especially Nigeria, there must be a clear understanding that it must be possible for there to be the right of ECOWAS citizens to move freely, reside and also establish businesses in each other’s country.
Protocol on Free Movement of Persons, Residence and Establishment
The Protocol Relating to Free Movement of Persons, Residence and Establishment was enacted in May 1979. Its implementation was to be completed over a 15-year period which means the protocol ought to have been fully in place by 1994. Why then is it that 26 years after it ought to have been in place, we are still wrangling over who should be trading where and in what? The situation in Ghana is a test of whether ECOWAS member states really believe in regional integration being an essential component of the quest for development.
Phase III of the Protocol Relating to Free Movement of Persons, Residence and Establishment was passed in 1990.
Article 2 states:
The right of establishment … shall include access to non-salaried activities and the exercise of such activities as well as the creation and management of enterprises and companies which comply with the definition contained in Article 3 below subject to the same conditions stipulated by the laws and regulations of the country of establishment for its own nationals
And Article 3 States:
For the purpose of implementation of this Protocol, companies which are formed in accordance with the laws and regulations of a Member State with their headquarters, central seat of administration or principal establishment within the Community shall be considered in the same category as individual nationals of Member States. Where, however, only the statutory headquarters of the company are established in a Member State, activities of such a company should have effective and sustained links with the economy of the Member State.
From the above, member states of ECOWAS are to accord to legally established ECOWAS enterprises the same conditions that their citizens enjoy.
The conflict between Ghanaian traders and their Nigerian counterparts
There is supposed to be non-discrimination between local traders and traders from other countries. This is where the problem is. The Nigerian traders are using the ECOWAS Protocol to support their right to trade in Ghana whereas the Ghanaians are saying certain areas of economic activity are reserved for Ghanaians and the Nigerians should not carry on trading in those areas.
Ghana’s Investment Law on reserved areas of economic activity
Even though this is what the protocol says, Ghanaian traders are citing the Ghana Investment Promotion Centre Act, 2013, Section 27(1) which reserves certain activities for Ghanaian enterprises as the basis for their actions against the Nigerians. A Ghanaian enterprise in this instance being one that has 100% Ghanaian ownership. Anybody who does not qualify should not invest or participate in the reserved areas. The areas 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;
- 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;
- (d) 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, supply and retail of sachet water; and
- all aspects of pool betting business and lotteries, except football pool.
The Act stipulates that the Minister in consultation with the GIPC Board may by legislative instrument revise the list of activities that are reserved for only Ghanaians. Foreign citizens are however at liberty to trade in Ghana in goods other those reserved for Ghanaians if they meet certain defined criteria.
- A non-citizen:
- in the case of a joint enterprise with a partner who is a citizen, invests a foreign capital of not less than two hundred thousand United States Dollars in cash or capital goods relevant to the investment or a combination of both by way of equity participation and the partner who is a citizen does not have less than ten percent equity participation in the joint enterprise; or
- where the enterprise is wholly owned by that person, invests a foreign capital of not less than five hundred thousand United States Dollars in cash or capital goods relevant to the investment or a combination of both by way of equity capital in the enterprise.
- 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.
Trading is defined to include “the purchasing and selling of imported goods and services. Such a trading enterprise is expected to employ at least twenty skilled Ghanaians.
Where a foreigner is married to a Ghanaian, he or she is exempted from the minimum capital requirement of One Million United States Dollars as long as they have been married for a minimum of five years continuously or holds an indefinite resident permit before registering the enterprise. Where it is by marriage, it must be a valid one and the foreign spouse is ordinarily resident in the country. Also a Ghanaian citizen who losses his or her citizenship because they have become citizens of another country will not be required to comply with the minimum capital requirements.
Nigeria’s Investment Law on Reserved Economic Activity
From the above it seems that Ghana is not adhering to the Supplementary Protocol on Establishment. That would seem to be the case until one looks at Nigeria’s own laws.
From the table, it is clear that Nigeria also has a similar list as that of Ghana.
Apart from the change in the underpinnings of the economic theory of regional integration, there have been various changes in how ECOWAS Protocol now work which we must take into account while discussing this issue of illegality or otherwise of the Nigerian trader’s presence in Ghana.
At the 44th Ordinary Session of the Authority of Heads of State and Government held from July 10th to 11th 2014 in Accra, a Supplementary Act A/SA.2/07/14 amending Paragraphs 8 of Article 1 and 2 of Article 3 and Paragraph 1 and 2 of Article 5 of A/P1/5/79 Free Movement of Persons, Rights of Residence and Establishment Relating to Travel Documents
Three significant things must be pointed out in relation to the Supplementary Act. The first is that prior to this, Protocols had to be ratified in member parliaments or their equivalents in order to form the basis of action in member countries. The second is that along with the transformation of the ECOWAS Secretariat into a Commission was the change in how laws were to be made in ECOWAS. Supplementary Acts by the Authority are now binding on member states. They no longer needed to be ratified in member countries. The third issue in relation to the 2014 Supplementary Act in relation to the fracas between the Nigerian traders and their Ghanaian host is that certain amendments were made that are of significance to the discussion. Note the amendments below:
The amendment of Paragraph 1 of Article 3 defines what is meant by a travel document. The amendment also leaves out the need for an international health certificate. Paragraph 2 of Article 3 on the other hand was repealed. The paragraph used to state that:
Any citizen of the Community visiting any member State for a period not exceeding ninety (90) days shall enter territory of that Member State through the official entry point free of visa requirements. Such a citizen shall, however, be required to obtain permission for an extension of stay from the appropriate authority if after such entry that citizen has cause to stay for more than ninety (90) days.
The repealing of the above paragraph means that Community citizens are no longer limited to 90 days stay in the country and do not need an extension to stay. The 90 days has also been removed for Community citizens’ vehicles entering other Member states. Visa-free entry also applies to ECOWAS citizens.
Clearly the Protocol Relating to Free Movement, Residence and Establishment is should be applied in member states because it is a Supplementary Act of the Authority. There is a need to iron out residual conflicts between the Treaty of ECOWAS and national laws such as the investment law of Ghana and Nigeria as seen above. There needs to be a domestication of the ECOWAS laws. There is also the urgent need for sensitisation and awareness creation of the rules and laws of ECOWAS in member countries, especially among relevant stakeholders.
Where Next?
What one hears in the news is that the Nigerians (both the authorities and Nigerians who have established businesses in Ghana and carrying out activities in the reserved areas) are asking Ghana to amend her investment laws to accommodate Nigerian traders in the country. Is that a sustainable solution?
In my opinion, there are two ways in which the Ghana/Nigeria impasse can be resolved: bilaterally or multilaterally.
The bilateral route will be easier to achieve on a quid-pro-quo basis. Both countries would in this scenario, be working to remove the reserved areas in their laws that have the effect of discriminating against each other. This means Ghanaians would be able to establish businesses in areas designated for Nigerians only and vice-versa. It cannot be only Ghana looking at its investment laws without Nigeria taking reciprocal steps to ease restrictions.
The bilateral route will, however set a bad example for the rest of ECOWAS, especially because of the important role the two countries paly in the ECOWAS integration project. They are leading members of the Community.
The second approach will be multilateral. It will involve all member states of the Community. This approach will have an expansive effect and move the integration process forward. This is because the multilateral approach will have to look at harmonising all the trade policies of the member States of the Community. Regional integration is most effective where the process mechanism get expanded to accommodate issues that were originally unforeseen to be solved. The spill-over effect is that integration moves to cover areas that had previously not been covered.
If Ghana is not to negotiate piecemeal with each member state and firefight each time such a situation arises with a member state, then the multilateral approach should be adopted. It will simply be that Ghana will spearhead the implementation of the protocol. First, all ECOWAS countries should redefine “foreigners” in their laws to exclude ECOWAS citizens
In the meantime, and while waiting to solve the problem comprehensively, Ghana can start talks with Nigeria with the intention of getting other member states on board. This will prevent the current situation from escalating to one where citizens of both countries begin to take unilateral retaliatory action.
Given that President Nana Addo Danquah Akufo-Addo is the current Chairman of the ECOWAS, many will be looking up to him to promote a course of action which will move integration forward and also ensure that the interest of Ghana is protected.
The writer is the Managing Director of Zormelo & Associates, a Management and Development Consultancy Firm in Ghana and also the Chairman of the Upstream Oil and Gas Service Providers Association of Ghana.
