Business opportunities in Africa free trade area

The Nairobi skyline. FILE PHOTO | NMG

By CATHY MPUTHIA
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Summary

• The AFCTA has several goals including free movement of capital and persons within Africa.
• It is hoped that a single customs union will be formed and there will be collaborative efforts in industrial development, food security, intellectual property rights and competition.
• The AFCTA is the culmination of the African Union’s Vision 2063 where it is hoped that the continent will be united and that there will be a prosperous and peaceful Africa.

Africa has a reason to smile after the African Free Trade Area Agreement (AFCTA) trading phase began on January 1. The AFCTA is currently the largest trading bloc in the world, comprising 54 African nations. It is larger than the European Union in terms of geographical expansion and the number of member states.

The AFCTA has several goals including free movement of capital and persons within Africa. It is hoped that a single customs union will be formed and there will be collaborative efforts in industrial development, food security, intellectual property rights and competition.

The AFCTA is the culmination of the African Union’s Vision 2063 where it is hoped that the continent will be united and that there will be a prosperous and peaceful Africa.

The AFCTA provides for progressive liberalisation, which means the process will be done in phases. Liberalisation is supported by removal of tariff and non-tariff barriers to trade such as reduction or elimination of import tariffs. Harmonisation of import processes and regulations is another way that liberalisation can be achieved.

Well done Africa for achieving this milestone! However a lot more needs to be done before the AFCTA can attain the intended benefits. African nations have a lot of internal reforms to achieve if the benefits contained in the AFCTA will be attained. Corruption, bureaucracy and other bottlenecks to trade have to be dealt with.

African countries will have to put up a united front in reaching the goals set out in AFCTA and get rid of self-interest and too much national pride.

Are African nations really as pan-African as they claim to be? Do they have national interest at heart? One critique posed a question. How will the AFCTA work where other regional blocs may have failed? If the same goals have not been attained at a regional level, how then will the same goals be attained at continental level?

AFCTA is an initiative whose time is ripe and which if successful, may be the answer to the continent’s growth challenges.

The AFCTA will lead to a massive increase in intra-African trade. It will be easier and cheaper to export goods and services within Africa due to the elimination of trade barriers.

For some businesses, the AFCTA provides an opportunity for diversification and entry into new African markets. If ever there was a time to consider expansion into new African markets, this is the time.

Expansion needs not be physical expansion. Your business can consider accessing goods and services from other African countries. For example if you are in the fashion industry, AFCTA will most likely allow you to get cheaper Kente or Ankara fabric from West Africa due to the elimination of tariffs.

The consumers will also benefit as they will now have access to a wider range of goods and services from other African nations.

One downside of AFCTA is that it may lead to unhealthy competition between domestic goods and imports. An unhealthy balance in this competition could drastically affect domestic businesses.

AFCTA will also open up the service industry such that it will be easier to expand continentally.

AFCTA will be implemented progressively. However it is a welcome opportunity for diversification, access to new markets in Africa and opportunities for collaborations and partnerships. The AFCTA Secretariat is currently housed in Accra and its Secretary General is Wamkele Mene.

All the best to Africa and AFTCA Secretariat as the work begins.