What is AfCFTA?
The African continental Free Trade Area (AfCFTA) was established in 2018. It was chompioned by the African Union, UNDP and the United Nations Economic Commission of Africa. So far 54 countries signed the agreement out of 55 (Eritheria refused to sign) with 22 countries ratified it. Ghana is the host of the Secretariat making Accra Africa Trade Hub. 1st January, 2021 trading activities were officially commenced. The current Secretary General is His Excellency Wamkele Mene. He is a South African National. The AfCFTA is the world’s largest trade area with a population of 2.6 billion people with a combine GDP of 4 Trillion United States Dollars.
Purpose of the AfCFT
✓To increase intra-Africa trade
✓Remove tariffs and create one custom system
✓Boost Economic Growth
✓Free movement of persons
Ideally, the goal is to remove tariffs totally but admittedly they are targeting 90% tariffs removal.
Free movement of persons? I find this difficult:
This is a difficult area but they are working on removing barriers. It doesn’t make any sense for Africans to acquire visas before visiting sister African countries. The free movement of persons will be applied to business persons and gradually everyone.
What promises does this monumental agreement hold for young Africans?
Intra-Africa trade at the moment is around 17% which represents some 50 Billion dollars according to World Economic Forum. World Bank and UNECA are projecting that, the AfCFTA will increase intra-Africa trade from 17% to 25% by 2040. Which is subject to the full implementation of the AfCFTA. Also, the AfCFTA is expected to drive and increase inflow of foreign direct investment FDI across sectors.
Agriculture sector is expected to see a surge and manufacturing industry as well. Fintech, logistics, transportation and aviation industries are expected to see significant growth moving forward. Entrepreneurs and young people who are mostly into Small And medium Scale Businesses will gain access to a larger market of some 2.6 billion potential customers across the continent. This is a huge market and a promising future for Entrepreneurs to extend their services and products to other African countries.
Another major opportunity for Entrepreneurs is funding. Entrepreneurs will attract International Investment. The AfCFTA will open doors for entrepreneurs to access funding from venture capitalists, Angel Investors and international loans to expand and scale their ventures to other countries. Intra-Africa trade will mean that movement of capital is will be very important. It is a great opportunity for tech startups in the fintect industry. Fintect is an abréviation for Financial Technology. Examples are online payments systems like paystack, flutterwave, Digital banking, International Remittance platforms e.t.c Recently, flutterwave was able to raise close to 1 billion dollars, Stripe bought paystack at 200 million dollars and Jeff Benzos invested chipper cash. All these are because of the opportunities availed by the AfCATA. The movement of goods across border open doors for entrepreneurs to take advantage of establishing logistics management systems, delivery companies, warehousing, e.t.c. Agribusiness: Agricultural sector is going to be lucrative soon since we can export directly to other african countries and entrepreneurs Should look into finding themselves a niche that will generate them foreign exchange. For instance, Ghana is blessed with a lot fertile lands for food crops production. Ghanaian Entrepreneurs can look at exporting food to countries like Sudan and Niger.
As promising as this agreement seems, what are the challenges that are likely to impede its effectiveness?
Well, let me add that in asmuch as the AfCFTA has a lot of benefits, it also raises some questions and challenges that need to be solved. Some can be resolved with sound policies and some by Entrepreneurial concerted efforts. These are some of the challenges:1. Payment across borders
2. Transportation of goods (poor roads network and lack of railway network for fast transportation)
3. Meeting international Standards
4. Protection of patents and intellectual property
5. Ability to regulate at each country level, the importation of Chinese cheap products.
It is clear that payment across borders is an opportunity for Entrepreneurs to Develop payment processors.
6. Protection of intellectual property is purely policy based those blockchain Technology can be used to complement.
At country level, what is Ghana doing?
Obviously it has to take commitment from each country to ensure that this agreement materializes. Yes of course. At the country level, the Ministry of Trade and Industry and Ghana Investment and Promotion Center are leading the sensitization but they are not doing enough. One can access information from the African Trade House. You will need to book an appointment with them or probably have your questions answered at their front desk. Ghanaian Businesses need to be aware and prepare for possible competition from other countries in the future. For Instance, if you are manufacturing shoes, very soon shoe manufacturers in egypt can also export to Ghana so we need to inform our people to be resilient.
I will conclude by saying that, we extend what we learnt today to others and take the opportunities availed by the AfCATA. Expand our businesses, create jobs, reduce unemployment and help develop the continent.
Thank you so much.
We encourage you to read the AfCFTA and explore its diverse opportunities.