Raising awareness of AfCFTA benefits is critical to its success

The private sector is key to the success of the African Continental Free Trade Area and yet surveys of business highlight the need for more work to be done to raise awareness of the details of the agreement and how firms can participate.

This was among the findings of the first phase of research done to inform the Country Business Index launched by the ECA, a key instrument through which businesses in Africa can articulate to policy makers their main trade challenges under the free trade agreement.

Research is being carried out to see how easy it is for a business in Cameroon to set up in Kenya and vice versa and, in the process, identify bottlenecks to trade and issues preventing the easy movement of goods across the continent.

Firms surveyed were strongly aware of their country’s participation in different Regional Economic Communities (RECs) but they were less informed about their country’s participation in the AfCFTA, Stephen Karingi, Director, Regional Integration and Trade Division of the ECA. 

A pilot study was conducted in Cameroon and Zambia for the research that will underpin the index, with further research undertaken in seven more countries once the methodology was refined. These were Angola, Côte d’Ivoire, Gabon, Kenya, Namibia, Nigeria and South Africa. 

In the third phase, the Index will be rolled out in the Democratic Republic of Congo, Egypt, Morocco, Rwanda, Senegal and Tunisia.

Across all countries, agriculture and services account for most firm activity, although services dominate accounting for an average of 46% of overall firm activity. 

The research showed that complying with the FTA’s rules of origin requirements was perceived as the most restrictive aspect to trading, said Karingi. 

This can be partly explained by the difficulty in conforming to these rules and may be particularly onerous for informal traders and especially women-owned businesses.

“UN development agencies, African governments and business associations should reinforce their collaboration to address the challenges faced by women-owned businesses and SMEs in trading across borders,” Karingi urged.

Unauthorised charges on trade were negatively viewed by companies, large and small, while areas such as sanitary and phyto-sanitary requirements and technical barriers to trade were generally regarded as being neutral, the research showed.

Vera Songwe, Secretary General of the ECA and UN Under Secretary General, told the delegates, “For the AfCFTA to work, we don’t want to just understand what countries need to do to improve their business environment, but what they need to do at a cross- border level.”

The Regional Economic Communities had done “a fantastic job” in opening up trade, she said, but there were still challenges. It was important to find out what these were, what was hampering trade and creating blockages at borders as well as how the situation could be properly monitored. 

Birgitte Markussen, head of the European Union Delegation to the African Union and UNECA, emphasised the organisation’s support for the AfCFTA initiatives and also the participation of business in realising the vision it embodied. 

“We can reach 26% {of intra-African trade as a percentage of total trade} by 2045 only if we have the active participation of the private sector.”

Dr Amany Osfor, President of the African Business Council, based in Egypt, said the continent needed to dedicate 40% of government procurement budgets to the African private sector, including women and youth. 

She also emphasised the importance of competitiveness and the need for proper value addition to African products.

ECA research shows the opportunity offered by the free trade area, assuming its successful implementation by 2030.

Robert Lisinge, Chief of Section, PSDFD- Energy Infrastructure & Services Section at the ECA, outlined various scenarios and numbers of potential demand for vessels, vehicles and other inputs that will be needed assuming planned projects are implemented by 2030. 

Opportunity

These include 212 bulk cargo vessels and 14 container cargo vessels as well as 1.9 million bulk cargo trucks and 268,000 container trucks.

Increasing the road network will better connect areas of production and consumption. Currently, Africa’s road network is about 2.8 million kilometres what that of the US exceeds 6.5 million kilometres.

All these are areas of great opportunity for African companies, he said.