Going forward, the following considerations must be taken into account… The first is to ensure that the provisions of the agreement are implemented in an effective and business-friendly manner… private-sector operators need to be afforded ample policy maneuvering space in making the provisions of the agreement meaningful in an African context and for their day-to-day transactions.
On January 1, the African Continental Free Trade Area (AfCFTA) became operational, creating a new trade dynamic on the continent of Africa with a single market of 1.3 billion people and a combined GDP of approximately US$3.4 trillion. The AfCFTA is a rare exemplar of consensus building among African states of all sizes on the idea that Africa’s development is primarily based on the development of trade between African countries. This unprecedented achievement is attributable, for the most part, to the commitment of the institutional bureaucracy within the African Union (AU) and the cooperation amongst individual national governments. However, the promise of the AfCFTA in engendering shared prosperity will remain illusory in the absence of the full participation of African economic operators – the private-sector players, who have to operationalise the agreement.
It is the expectation that upon full implementation, the AfCFTA will contribute to reinvigorating Africa’s structural transformation and will reshape markets and economies across the region. However, no matter how well-intentioned the AfCFTA objectives are, they will remain elusive if African businesses are unable to take full advantage of the opportunities offered by the AfCFTA in terms of trade and investment. Therefore, it is critical that the private sector is effectively engaged in the implementation process, with the active support of governments, the African Union (AU), and development partners.
Thus far, there is a general apprehension that the private sector has not been adequately engaged, with three wide categories of private sector players broadly identified. The first is the AfCFTA enthusiasts who desperately want the single market to succeed and view its emergence as a tremendous opportunity for accelerated growth. The second belong to the category of pessimists who view the AfCFTA as anti-growth and believe that it seeks to circumscribe national regulatory competence. The third and perhaps largest group includes private sector actors that are indifferent about the agreement’s prospects or scope. A common thread in the conversation around the lack of eagerness to engage is the issue of confidence in the ability of the agreement to accelerate the continent’s economic transformation.
All things considered, there is the need to engender a more inclusive implementation process by stimulating further interrogation of the impediments to the private sector’s participation in the AfCFTA and highlighting opportunities for accentuating the productive capacities of the private sector in deepening trade integration. Going forward, the following considerations must be taken into account:
The first is to ensure that the provisions of the agreement are implemented in an effective and business-friendly manner. Indeed, because the AfCFTA was inspired by similar agreements designed for more advanced markets, from an infrastructure and free-movement readiness perspective, the private-sector operators need to be afforded ample policy maneuvering space in making the provisions of the agreement meaningful in an African context and for their day-to-day transactions.
…there must be deliberate consensus-building on the need for cross-border collaborations, as there is no dearth of skills or competencies in Africa. Thus, the real challenge lies in encouraging sustained cooperation between firms and constantly reminding African private sector operators that they must be more audacious in their aspirations.
Second, given the fact that the private sector did not fully participate in the negotiations of the AfCFTA, national governments must, in developing their Action Plans, mainstream the interests of domestic industries through extensive consultation with stakeholders. Thankfully, Phase II of the negotiations covering investment, intellectual property, competition policy, and e-commerce are ongoing and should be driven by the private sectors as the outcome of this Phase would directly impact the effective functioning of the single market and the operations of private businesses.
Third, while the free movement of goods, services, and capital are at the core of the agreement’s first focus, its real potential in triggering shared prosperity can only be fully achieved when key complementary policy enablers, such as the AU’s Single African Air Transport Market (SAATM) and the Protocol on the Free Movement of Persons, Right of Residence, and Right of Establishment are fully institutionalised. On these fronts, the private sector must be fully involved and their interests taken into account in formulating national positions.
Fourth, the successful implementation of the AfCFTA is also dependent on a private sector-led logistics and connectivity framework that would facilitate the free movement of goods. Success on this score requires the involvement of transport operators, companies active in supply-chain traceability, and infrastructure developers. Power infrastructure, multimodal transport platforms, and digital connectivity are also key to translating the agreement’s promise to reality.
Fifth, there must be deliberate consensus-building on the need for cross-border collaborations, as there is no dearth of skills or competencies in Africa. Thus, the real challenge lies in encouraging sustained cooperation between firms and constantly reminding African private sector operators that they must be more audacious in their aspirations. Although operating in a bigger market inexorably brings increased competition, it provides opportunities for optimising revenues through the agglomeration of economies of scale.
Deepening private sector engagement and commitment to moving the AfCFTA from agreement to impact will not happen by default or chance. Investment decisions are typically based on clear information, a favourable business climate, and a clear articulation of investment opportunities. These three considerations underpin the AfroChampions Initiative’s efforts, a public-private partnership designed to galvanise African resources and institutions to support the emergence and success of African private sector multinational champions in the regional and global spheres. The Initiative, driven by the AfroChampions Organisation, is co-chaired by former President Thabo Mbeki and Aliko Dangote, President and CEO of Dangote Group.
As part of its strategic engagement efforts, the AfroChampions Initiative has made a commitment to stimulate at least $1 trillion in the private sector-led AfCFTA certified investments by 2030. The AfroChampions framework is meant to allow project developers, investors, small and medium-sized enterprises (SMEs), and multinationals to take full advantage of the AfCFTA…
Since coming into force of the agreement, the AfroChampions and its strategic partners have embarked on sensitisation campaigns on the agreement’s content and its potential impacts. Worth highlighting are engagements by the AU, the Coalition for Dialogue on Africa (CoDA), national business groups such as the Manufacturers Association of Nigeria (MAN), technical assistance programmes by the United Nations Economic Commission for Africa (UNECA), and related bodies.
As part of its strategic engagement efforts, the AfroChampions Initiative has made a commitment to stimulate at least $1 trillion in the private sector-led AfCFTA certified investments by 2030. The AfroChampions framework is meant to allow project developers, investors, small and medium-sized enterprises (SMEs), and multinationals to take full advantage of the AfCFTA to invest in major AfCFTA enabling projects. It is structured around:
A fund to be supported by private actors and financing institutions (banks, sovereign wealth funds, pension funds, etc.);
Certification mechanism for AfCFTA certified investment projects;
A long-term project selection and impact evaluation process;
Regular assessment efforts to ensure regulatory convergence and transposition of AfCFTA provisions into national law, encouraging a climate conducive to investment.
Beyond the bold move by AfroChampions to build a private sector buy-in within the context of the AfCFTA, there remains the need for strategic communication on key AfCFTA provisions, the ramping up of deal structuring capabilities, expanding access to financing, reducing cost of credit and scaling up the manufacturing capacity of Africa’s private sector for the AfCFTA to achieve its objective of engendering shared prosperity. Private sector leaders across the continent can replicate the AfroChampions Investment Syndication Framework in their respective countries, as it speaks to the businesses in a language they can understand – and hopefully, this can elicit a more profound commitment to delivering on the promises of the AfCFTA.
Ese Owie, an international trade lawyer and trade policy expert, is President of the Cavendish Institute. He tweets @dreseowie