Make the most of the opportunities AfCFTA presents- private sector urged

International and local business players are pointing to the African Continental Free Trade Area (AfCFTA) as one of the potential biggest breaks for local businesses. 

David Ofosu-Dorte (Senior Partner, AB& David), Michael Kottoh (Executive Director, AfroChampions) and Tony Oteng Gyasi (CEO, Tropical Cable and Conductor Ltd) made these remarks at the 7^th edition of Crystal Ball Africa, held in Accra on January 16, 2020.

Sharing their investment notes on Africa, they explained that the AfCFTA presents extraordinary opportunities for the private sector to transform the continent by investing in infrastructure and industries to increase intra-Africa trade and create wealth.

The African Continental Free Trade Area (AfCFTA) seeks the progressive elimination of tariffs on 90 per cent of products within 5–15 years depending on the economic status of each participating country, and the liberalisation of even more tariffs on other “sensitive goods” within 10–13 years.

The agreement also aims to remove non-tariff barriers through the creation of a single market of about 1.2 billion persons for the trading in goods and services. If fully implemented, the AfCFTA is estimated by IHS Markit to contribute to a 32 per cent increase in total trade in goods between its members and trade between AfCFTA countries that do not currently share an FTA would also increase from $13 billion to $32.5 billion. 

Regional trade in Africa remains low despite efforts by African Governments to boost intra-regional trade. Since 2010, only about 12 per cent of Africa’s total trade took place within the continent, according to the United Nations Conference on Trade and Development (UNCTAD). One of the major reasons for the weakness in the continent’s regional trade performance has been the lack of a private sector that is dynamic and vibrant enough to seize existing opportunities in the trading system.

Challenges the African private sector face include high and rising informality, small size of enterprises, weak inter-firm linkages, low level of export competitiveness and low innovation capabilities. These challenges are compounded by the fact that regional integration initiatives aimed at promoting trade tend to focus on processes, such as the removal of trade barriers, without the commensurate attention to the building of productive capacities and private sector development that would effectively address the consequent weaknesses. There is certainly a need to shift away from this linear and process-based approach towards a greater development focus, international trade and investments experts have argued.

R-L: Catherine Krobeh Edusei (MD, Edentree Ltd), Tony Oteng-Gyasi (CEO, Tropical Cable & Conductor Ltd), Engr. Mansur Ahmed (Prez, Manufacturers Assoc, Nigeria), Samuel Appenteng (MD, Joissam Gh. Ltd) and Nick Opoku (moderator). 

The private sector has a crucial role to play in making regional integration work for Africa because, though trade agreements are signed by governments, it is the private sector that understands the constraints facing enterprises and is in a position to take advantage of the opportunities created by such agreements and regional trade initiatives.

Some indicators of core opportunity areas (current and future)

1.      Feeding the People

- Africa’s annual food import bill is $35 billion

- Africa’s annual food important bill is estimated to reach $110 billion per annum by 2025

- Agriculture represents 15% of the continent’s GDP, or more than $100 billion annually

- Africa’s total urban food market is estimated to reach $150 billion by 2030

- Agribusiness sector is estimated at $1 trillion by 2030

- Africa’s financial needs for irrigation is up to $65 billion investment in irrigation in suitable areas in sub-Saharan Africa (from 5% to 15% total cultivate area)

- The total smallholder financing need for Agriculture in Africa is estimated at $450 billion

2.      Clothing the People

-          1.6 billion people will need clothing by 2030

3.      Moving people and goods

-          $200 billion worth of trade in Africa is carried by the region’s trunk road network

-          Africa’s aviation sector contributes $72.5 billion to economy

4.      Telecommunication

-          Broadband connections in Africa by 2022 projected to be 1.07 billion broadband

-          Africa’s smartphone market penetration by 2035 projected to be 636 million

5.      Manufacturing  and Value-addition

-          Business-to-business spending in manufacturing in Africa is projected to reach $666.3 billion by 2030

-          African manufacturing output by 2025 if all 55 countries join AfCFTA estimated at $1 trillion

6.      Tourism and creative industries

-          By 2030, consumer spending on tourism, hospitality and recreation in Africa is projected to reach about $261.77 billion

7.      Education, Skills and healthcare

-          Africa has a financing gap of 40 billion to achieve the SDGs for education by 2030

-          Africa’s pharmaceutical market is estimated to be worth $160 billion by 2024

-          Business opportunities in the health care and wellness sector in Africa will reach $259 billion by 2030

8.      Financial services

-          Africa’s Central banks hold more than $400 billion in international reserves.

-          Africa’s banking market is approximately $86 billion in revenues before risk cost

9.      Housing the People

Crystal Ball Africa is an annual pan-African business forum organized by AB& David for business people and professionals currently doing or seeking to do business in Africa where advance knowledge on key policies, legislations and other related matters that will impact businesses in the year is/are shared. This year’s event held at the Labadi Beach Hotel, Accra, was on the theme: ‘The AfCFTA and business without borders: the game changer’. The programme was moderated by Nick Opoku and Bernard Avle.

Credit: Additional files from AB& David and the AfroChampions Initiative