Posted on Apr 13, 2018
The signing of the African Continental Free Trade Area agreement (AfCFTA) by 44 African countries at a summit of the African Union (AU) in Kigali, Rwanda last month marked an historic moment. The AfCFTA has the potential to bring over 1.2bn people together into the same market, worth trillions of dollars in GDP. The bloc would be the largest in the world by member states, eclipsing the European Single Market, writes Emmanuel Dupuy, President of the Institute for Prospective and Security studies in Europe (Institut Prospective et Sécurité en Europe - IPSE)
However, more work is to be done. South Africa, the continent’s most advanced economy, and Nigeria, its largest, did not sign the agreement. Africa needs free trade for many reasons, not least to accelerate economic development. The EU in its role as a principle partner with Africa for trade, development and humanitarian assistance, and world’s premier example of a functional trading bloc, has an obligation to facilitate the finalisation of the AfCFTA, ensuring the significant economic, social, and political benefits of the agreement are maximised.
For African businesses, the initial agreement is without doubt a significant milestone. By reducing barriers to trade, such as removing import duties and non-tariff barriers, African countries hope to boost intra-continental business – replicating the success of the European model. The summit was also a step forward for the AU's 2063 project for closer African integration, with 27 member states also signing a commitment for the free movement of persons which would dwarf the Schengen Agreement.
The failure of some of Africa’s leading economies to sign up to the AfCFTA brings into question the responsibility of the state to create conducive conditions for businesses to thrive. African governments, more than most, face the daunting challenge of tackling structural problems including unemployment rates well above the global average. A lack of intellectual property rights and enforcement, outdated and under-developed infrastructure, and an over-reliance on natural resources remain significant challenges throughout the continent.
While governments have a responsibility to facilitate development, it is African businesses that have the greatest capacity to deliver enduring economic growth. Over the past decade, a significant number of African enterprises have demonstrated their capacity to significantly outperform rival international businesses in the provision of vital goods and services. Some of these businesses are at the forefront of cutting edge technology. In principle, if AfCFTA were adopted by all African countries, these businesses would be able to enter new markets more easily, opening doors to further growth.
One such example is the Bigen Group from South Africa. Established in 1971, it has transformed itself into one of Africa's leading infrastructure development businesses. Their focus is on African solutions to the economic challenges the continent faces across real estate, energy, water, health, and transportation. Executive Chairperson Snowy Khoza counts herself as part of the 5% of the CEOs of major groups that are women.
MBI Group based in Lusaka, Zambia, is another key example of a successful African business group. The group, operates throughout the southern African market focussing on five core sectors; mining, energy, agriculture, fast-moving consumer goods and soft drinks. The group is chaired by Zuneid Yousuf, who has worked extensively with academics and independent specialists around the world to develop new approaches to tackle the immense challenge of producing food for an ever-growing population. Following the severe food shortages facing Southern Africa in 2015 in the aftermath of the El Nino storm, astonishingly Zambia was able to produce a food surplus, in large part due to Neria’s Investments (a subsidiary of the MBI Group) efficient supply of fertilizer on a credit basis under the Zambian Farmer Input Subsidy.
The intra-trade dream across the continent would not be possible without the commitment of African-led multinational business groups, who have often thrived despite significant structural challenges.
AfCFTA is an obvious step in the right direction, delivering new opportunities and benefits for businesses across the continent, but it is only the first step. The Joint Africa-EU Strategy (JAES) remains the backbone of Europe’s strategy across Africa, forming long-term goals and a framework for bilateral relations. JAES undoubtedly needs re-working to incorporate the AU’s 2063 vision, however urgent steps are needed right away if the EU is to encourage the completion of AfCFTA. We need European countries to invest all over Africa, not just their traditional “comfort zone” because the continent, with its sub-regional diversity, offers many business opportunities. A case in point is France, which historically had its strongest presence in Western and Northern Africa, but which is now starting to realise that there is plenty to be done with well established companies in the parts of the continent that it had overlooked for so long.
History has been made through its establishment, but for the trade bloc to deliver the greatest possible impact, as shown in Europe, every effort must be taken to encourage economic powerhouses to sign up to the deal. It is vital for the growth of African business that the EU offers its complete backing to the agreement, helping to ensure the development of the continent in the coming decades.
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