African Apex Organizations will be the catalyst for ACFTA Successful Implementation by Samuel Mwamburi Mwale

October 29, 2020     / / / / / / / /

The Africa Continental Free Trade Agreement (ACFTA) provides a unique opportunity to transform the continent’s economic and political future in the 21st century. For too long, Africa has traded with the rest of the world. Intra continental trade in exports was at about 17 percent for Africa in 2017. For the Asia, intra-regional exports trade was 60 percent, and between 50 and 75 percent for the European Union. In North America, 85 percent of exports for Canada and Mexico went to the US. Globally, it is mainly Africa, Latin America, and Oceania that trade more with the rest of the world than within the region.

The good news is that ACFTA treaty has been signed by fifty-four and ratified by twenty-eight African countries, and in 2021, ACFTA will come into operation. This will represent unprecedented opportunities for African businesses to grow their markets on the continent, by competitively directing the African consumers wallet towards preferring their goods and services. In other words, African businesses engaging in intra-regional trade will have to produce goods and services at the quality, quantity and price that will win more dollars from the ordinary African consumer’s wallet than the global competition.

The challenge for many African businesses is that they are often at the periphery of global value and supply chains. Unlike the competition, their productivity and competitiveness have not been tempered and matured by the global value and supply chain crucibles. By necessity and through learning by doing, deepening Africa regional trade integration will provide the necessary impetus in African value and supply chains for more businesses to change from the current status as sources of raw materials for exports and consumers of imported final goods into providers of value addition from raw materials to final goods within the continent. It will allow African companies to scale continentally, as goods and services flow freely between countries based on supply and demand. As African consumers increasingly turn to buying and consuming competitive goods and services from African businesses, the economies will enjoy greater employment, economic growth and wealth creation. Additionally, some African businesses will rise to become players in the global value and supply chains, boosted by their success on the continental markets.

While the vision and benefits are clear at a continental scale, the granular national and sectoral details matter for its realization. It is here where political and business will be most needed. Each country, while seeing and acknowledging the benefits of the continental gains, also wants to be assured that its own national coffers, businesses, people and economy will enjoy net gains from the continental free trade markets. For some countries, it is managing the public expectations and sentiment, when they are “swamped” by a neighboring country’s goods and services, instead of the traditional European or more recently Chinese offerings. For others, it is filling the hole in public coffers caused by revenues lost from not collecting tariffs. For many, fellow African businesses, goods, and services are no less foreign than those from the rest of the world. These are not easy issues to deal with nor are they insurmountable. They need clarity in vision, leadership and action by political and business leaders.

The African political leaders to their credit have taken the first two steps. All the countries except Eritrea having signed the ACFTA treaty, and more than half have ratified it in their legislatures. The next steps will be to get their national bureaucracies on board, and create a strong continental sentiment that essentially says “buy African” is as good as “buy Nigerian” or “buy South African.” African governments will also have to invest, nationally and regionally in transport infrastructure, common customs and border clearance systems, clear trade laws and regulations, and sustained political commitment to seamless market integration.

The businesses must now show their true continental colors, by welcoming African competitors into their national markets, even as they seek to compete in other African markets. African apex business organizations will be expected to take the lead in this, persuading their members that open African markets for all African companies, gives competitive African businesses opportunity to reach a billion continental instead of a few million national consumers. If they chose to protect their own businesses and markets above all, they will strangle the ACFTA. If they chose to compete in a fraternal attitude with fellow African businesses for the home markets knowing that they will receive reciprocity in away markets, the apex business organizations will be the catalyst that makes it possible for ACFTA to achieve the goal of a fully integrated African market.

About Author: Samuel Mwamburi Mwale is a Trustee/Advisor at the Kenya Private Sector Alliance (KEPSA), which is the apex business organization and voice of the private sector in Kenya, and its US Representative. The views presented here are personal and in no way reflect KEPSA’s official position.

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