ACFTA is Botswana’s gateway to untapped African market
No single African country can trade itself out of poverty
It is not SADC, not ECOWAS, not EAC. Similarly there is no single country on the African continent that can trade itself out of poverty
Botswana has much to gain from regional cooperation, integration and implementation of the African Continental Free Trade Area Agreement ( AfCFTA).
Secretary General of the African Continental Free Trade Area, Wamkele Mene who was in Botswana recently, says the bulk of the current 18 percent of intra- Africa trade, about 35 percent, is driven by the Southern African Development Community ( SADC) region, therefore it is appropriate for Botswana to consider expansion into new markets in other parts of Africa.
In 2020, Botswana intra- Africa exports amounted to US$ 720 million with the main export products being industrial diamonds and ignition wiring sets, while main destinations were South Africa, Namibia, Zambia and Zimbabwe. Only 0.32 percent of intra- Africa exports from Botswana are to African countries that are not members of SADC and Southern African Customs Union ( SACU). Similarly, 68 percent of imports were mainly from SADC and SACU. With only 0.3 percent of intra- Africa imports sourced from African countries outside SADC and SACU. Mene says these statistics indicate that Botswana’s trade with African countries has a lot of room for improvement and there is a lot of benefit to be gained by scaling up local production and export capacity in the context of the AfCFTA. “Botswana’s penetration into other African countries largely remains untapped,” he says. While he acknowledges that increased production for exports will not happen in a vacuum, he believes that the AfCFTA presents the local business community and entrepreneurs to examine challenges of local businesses and highlight what needs to be done in order to benefit from the new market.
“In order for countries to capitalise on opportunities, there is a pressing need to improve ability to produce goods and provide services as demanded in the AfCFTA market,” he says.
He is convinced that Botswana stands a better chance to take advantage of the AfCFTA as the local economy
rebounds after a significant setback following the Covid- 19 pandemic and the recession it caused in 2020, when the economy contracted by over seven percent in 2020/ 21.
“Botswana’s longstanding track record of sound macroeconomic policies and good governance enabled the country to build strong buffers that helped to navigate the severe impacts of the pandemic”, he observes, cautioning however, that the economy, remains vulnerable to external shocks including those of global commodities market.
Economic recovery is currently underway in Botswana and is expected to register a growth of 8.3 percent in 2021.
Mene says to unlock inclusive economic growth, boost sustainability, increase and enhance competitiveness and create opportunities for young en
trepreneurs and women in trade, there should be deliberate efforts to integrate all these segments of society, including Small, Medium Enterprises ( SMEs), into regional and continental value chains so that they too can benefit.
In addition, Mene recommends that young entrepreneurs, women in trade and SMEs need to be empowered with skills and knowledge capabilities.
In his view, the AfCFTA, which was launched in January 2020, is more than a trade agreement. He believes the agreement is Africa’s last opportunity of market integration, creating jobs, establishing favourable investment climate both for domestic African investors, as well as foreign investors coming into the continent.
He bemoaned the fact that Africa has for a long time been characterised and in some cases continues to be characterised by smallness of national economies, lack of economies of scale, fragmentation of markets, different rules in different regions of the continent, shallow production capacities, shallow manufacturing capacity and continued reliance on the export of primary commodities.
In his view, this has kept Africa trapped in the colonial economic model over the last 65 years.
His view is that this character of Africa’s economy is in part why intraAfrica trade is 18 percent, relative to intra- European trade, which stands at 70 percent and above and relative to intra- North America trade, which is over 60 percent.
“We have to change this pattern and connect better with the rest of the world,” he says. He is convinced that intra- regional trade has to improve if the continent wants to boost intraAfrica trade. He believes that there is not a single region on the African continent that can trade itself out of poverty.
“It is not SADC, not ECOWAS, not EAC. Similarly there is no single country on the African continent that can trade itself out of poverty,” he says, adding that, that is why this market of over 1.3 billion people and combined GDP of US$ 3.4 trillion is critical.
“It is through the leveraging of this large market that our continent will one day become competitive.”
He says that scaling up production for the AfCFTA market will require that African countries boost their production, and manufacturing capacities significantly. He adds that today, all 55 African countries combined contribution to global trade and output is about 2.5 percent, while the contribution to global output and global trade of Singapore is about six percent, notwithstanding the fact that Singapore is a city, and an island. He attributes this to Africa’s lack of productive capacity and lack of manufacturing capacities, shallow manufacturing base, as well as over reliance of export of primary commodities. Mene adds that potentially, Africa can be and has capacity to be competitive as China in 20 to 30 years time provided the continent does the right things collectively, and actively as one. “AfCFTA is an opportunity for us to fundamentally restructure Africa’s economy, by focusing on productive sectors that would create jobs for young Africans and enable the continent to be more competitive”.