AfCFTA’s strategic implementation
MAXIMIZING ITS OBJECTIVES
In 1991, the member states of the then Organization of African Unity (OAU) met in Abuja and signed a treaty, and collectively agreed to create a road map for the creation of a common African market. Therefore, to ensure a full implementation of the Treaty and a formidable regional integration, the Trade Ministers of the African Union (AU) resolved to establish an African Continental Free Trade Area (AfCFTA). In 2015, the AfCFTA and AU began formal negotiations to define the scope and mandate of the AfCFTA.
In March 2018 at the AU Extraordinary Summit in Kigali, Rwanda, 44 member states, out of the 55 member states, signed the AfCFTA establishment document which highlighted the two phases of AfCFTA with few outstanding issues yet to be addressed.
With other ratifications that continued across the member states, the AfCFTA was to kickstart mid-2020, but due to the covid-19 pandemic with all the lockdowns and restrictions in movements, there was a delay in its launch until 1st of January 2021, when the AfCFTA officially kicked off with 54 countries in agreement.
Of a truth, the news of its launch brought a ray of hope across the continent, especially among players in the continental trade space. This is largely due to the expected objectives of establishing the AfCFTA.
The key objective of the AfCFTA is the elimination or reduction in tariff and nontariff barriers amongst the 54 countries that
agreed to be members of the bloc, by providing a single market for goods and services, orchestrated by free movement of persons so as to strengthen the economic integration and prosperity of the African continent.
Specifically, the AfCFTA achievement expectations are as follows:
To lay the foundation for the establishment of a Continental Customs Union
To promote and attain sustainable and inclusive socio-economic development, gender equality and structural transformation of member states
To enhance the competitiveness of the economies of member states within the continent and on global markets
To promote industrial development through diversification and regional value chain development, agricultural development and food security, and resolve the challenges of multiple and overlapping memberships, and expedite the regional and continental integration processes.
As part of the implementation process, the AfCFTA article 4 mandates all member states to ensure the following…
That all tariffs and non-tariff barriers to trade in goods are eliminated
They should progressively liberalize trade in services
That they should cooperate on investment, intellectual property rights and competition policy
That they should cooperate on all traderelated areas including customs matters and the implementation of trade facilitation measures
They should establish a mechanism for the settlement of disputes concerning their rights and obligations
They should establish and maintain an institutional framework for the implementation and administration of the AfCFTA.
As part of establishing its relevance, the United Nations reported that the African Continental Free Trade Area (AfCFTA) offers a great opportunity for African countries to bring 30 million people out of extreme poverty, and to raise the incomes of 68 million others who live on less than $5.50 per day.
Making reference that if strategically implemented, the AfCFTA will bring about trade facilitation measures that cut red tape and simplify customs procedures would drive $292 billion of the $450 billion in potential income gains across the continent, which would help usher in the kinds of deep reforms required to enhance long-term growth in African countries.
On the other hand, a World Bank report highlighted strategic decisions that African governments must take in order to see the proposed dividends of AfCFTA come to fruition. The continent must ensure a general reduction in all trade costs for member states as well as encouraging entrepreneurship to serve as a catalyst for the actualization of the AfCFTA mandate.
Entrepreneurship in Africa
The African Development Bank, AFDB, in June 2021, released a White Paper on 'Entrepreneurship and Free Trade: Africa’s Catalysts for a New Era of Economic Prosperity'. The agreement is that entrepreneurship must be at the heart of efforts to transform Africa’s economic prospects and to drive the AfCFTA mandate. The paper further posits that the Covid-19 pandemic has created obvious shifts that have opened up prospects for enhancing resilience and economic growth.
To further understand the place of entrepreneurship as a possible catalyst towards achieving the mandate of AfCFTA, it's important to answer the question of, "What really does entrepreneurship mean for Africans?"
Entrepreneurship in Africa isn't exactly the same as you have it in the Western World. In Africa, more than 60 percent of entrepreneurial activities are informal leaving around 40 percent to what you will want to clarify as entrepreneurship by Western definition. Also the mix of African entrepreneurs differs from what is obtainable in the Western World. For instance, African entrepreneurs mainly consist of the youths, who make up more than 60 percent of the population, and Women (adult female population) who make up 27 percent of the population.
Therefore in Africa, entrepreneurship isn't just about Startups (conventional businesses with legal and operational structures); rather it is more of the informal businesses that are hardly reported due to lack of adequate data. One can therefore define Entrepreneurship in
Africa as any venture within the confines of the law that provides alternative income other than a paid employment contract.
Of course the startup ecosystem, which is considered mainstream entrepreneurship by definition, has witnessed significant growth in the last decade. Today the continent can boast of 7 unicorns (Startups with $1 billion valuation) and other emerging ones, as more young entrepreneurs are taking the bull by the horn to create the future that they want without having to wait for the government.
However, to ensure that entrepreneurship in Africa serves as a catalyst towards achieving the AfCFTA mandate, the right interventions must be deployed. Three things that come highly recommended are:
Assisting the informal sector entrepreneurs to come to mainstream entrepreneurship through establishment of incubation hubs, specifically to transform them into structured enterprises with funding opportunities to scale, which aligns with the position of the African Development Bank that agrees on the need to mobilize financial and technical resources from partners to develop Africa’s private sector, with a focus on micro, small and medium enterprises (MSMEs).
Ensuring that the startup ecosystem receives adequate support in funding, as well as friendly policies to operate which will help build linkages with the large firms that are the key drivers of supply chains, to create jobs and revenues that will help scale up businesses as it aligns with the African Development Bank’s concept of coordinating more effective financial and non-financial support to young entrepreneurs through African youth entrepreneurship investment banks.
To encourage the adoption of entrepreneurship education as part of the national curriculum across the continent this will help serve as a human capital formation program for Africa.
Fundamentally, to make this work, there should be widespread youth inclusion consciousness across all member states, considering that Africa is more of a youth continent, as such any program that doesn't involve the youths is dead on arrival.
To buttress this, the position of Dr. Khaled Sherif, AfDB’s Vice-President for Regional Development, Integration and Business Delivery, African Development Bank position is glaring; that in driving the supply side of investment in entrepreneurial activities across Africa, will not only require more than relying on nearly 650 tech hubs including accelerators, incubators, university-linked start-up support labs, maker parks, and even co-working sites which are mostly in Egypt, Nigeria, Kenya and South Africa, but will require more intentional support programs for smaller countries in Africa that are yet to experience the success of these few countries.
On the other hand, from the demand side, Dr. Khaled Sherif hinted that both entrepreneurs and investors may need to scale back expectations, in terms of financing and revenue, to understand that change will be transformative and will not occur overnight, as innovations and digital apps alone will not take Africans to the promised Land of wealth and income stability, but that Investment systems, digital connectivity and infrastructure, as well as improved human capital are the true drivers for a sustainable Africa.
Basically, entrepreneurs have the potential of making the AfCFTA agenda work by forging new value chains and exploring opportunities to scale up via increased trade in regional markets with the right support.
Conclusively, the African Continental Free Trade Area (AfCFTA) agreement, when strategically implemented, will create the largest free trade area in the world measured by the number of countries participating as it will build a connecting trade link for 1.3 billion people across the 54 participating countries, with a combined gross domestic product (GDP) estimated at US$3.4 trillion. Millions will be lifted out of poverty, jobs will be created and the economy will be repositioned for trajectory growth.
My name is Faith Nwaobia (Dr.), and I lead a youth-focused social enterprise - Youthup Global, in the business of developing human capital, creating socially impactful opportunities and building empowerment platforms for youths in developing countries.