Private sector has key role to play in realizing AfCFTA’s promise
Trade agreement creates opportunity for investment, involvement on a continental basis
The long-negotiated African Continental Free-Trade Agreement (AfCFTA), signed by African states in March 2018 and coming into force in July 2019, marks a new trade dynamic on the continent. It is a rare example of consensus 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 owes a great deal to the commitment of many experts and senior officials in the African Union (AU) and within individual governments. However, there can be no AfCFTA without the full participation of African economic operators - namely, private-sector players, who have to operationalize the agreement.
Doing so is, first, about ensuring that the provisions of the treaty are effective and business-relevant. The AfCFTA is inspired by similar accords designed for more mature markets – from an infrastructure and free-movement readiness perspective – than the current African continent. Private-sector operators need to appropriate its provisions and make them meaningful in an African context and for their day-to-day business routines.
Some important issues – such as the definition of infant industries excluded from the removal of tariff and non-tariff barriers per the schedule of tariff concessions – require extensive consultation with business federations. Others, such as intellectual property and competition policy, will only be decided after at least another year.
This is an opportunity to provide feedback on currently challenging situations, such as public procurement lists being selectively opened to private operators and limited access to value chains, while defining a competition law that is business-enabling.
While the free movement of goods is the agreement’s first focus, it can only take full effect when there is progress on some complementary issues: free movement of people via an African passport, effectiveness of the open-skies agreement and provisions relating to the freedom of establishment. On these fronts, the private sector can and should have a say.
Making the AfCFTA work is also about setting up a proper logistics and connectivity framework allowing the free movement of goods - which requires involvement from transport operators, companies active in supply-chain traceability and infrastructure developers. Electrification, transport infrastructure, multimodal platforms, connectivity: these are the priority areas to make the agreement’s promise a reality.
If we take as an example internet connectivity, projects like the West African Digital Pool include all the features of these new AfCFTA-enabling infrastructure projects. It is cross-border; designed as a technical partnership; structured for public-private partnerships (PPPs); and designed from the outset at scale to have a greater impact1.
We don’t lack skills or competencies in Africa. Our real challenge is perhaps to encourage more cooperation between companies and to constantly remind African private operators that they should think bigger and bolder. Operating in a bigger market certainly means facing increased competition, but it also includes opportunities for increasing revenues through joining forces with peers or those who can successfully complement expertise.
Operationalizing the AfCFTA is ultimatey about: refocussing on the continent and scaling up investments. This is one of the most critical challenges to be addressed considering:
- up to $67 billion leaves the African continent via illicit flows each year
- profits of foreign multinationals are repatriated out of the continent up to $32 billion every year
- $500 billion is held outside the continent in welcoming tax jurisdictions
DRIVING PRIVATE-SECTOR COMMITMENT THROUGH OPPORTUNITY
There can be no AfCFTA if we do not manage to re-direct more money – primarily more African money – to the continent, notably to support major infrastructure project financing and delivery.2
Getting the African private sector to commit fully to trading and investing in the AfCFTA will not happen by default. Investment decisions are typically based on clear information, a favourable business climate and a clear presentation of available investment project opportunities. These three key aspects drive the AfroChampions Initiative’s efforts to mobilize the private sector regarding the AfCFTA. To date, doing so has primarily taken the form of sensitization campaigns on the agreement’s content and likely impacts. Worth highlighting are sensitizations by the AU, the Coalition for Dialogue on Africa (CoDA) and national level business associations, research programmes by the United Nations Economic Commission for Africa (UNECA) and documentation on the accord.
As a complementary approach, the AfroChampions Initiative – a private-sector led platform – has structured an AfCFTA Trillion Dollar Investment Framework, formally presented in Kigali in October 2019 and currently being discussed by African Union trade ministers. It aims to stimulate at least $1 trillion in AfCFTA certified investments by 2030.
The 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:
(1) a fund to be supported by private actors and financing institutions (banks, sovereign wealth funds, pension funds)
(2) a certification mechanism for AfCFTA certified investment projects
(3) a long-term project selection and impact evaluation process
(4) regular assessment efforts to ensure regulatory convergence and transposition of AfCFTA provisions into national law, encouraging a climate conducive to investment.
Strategic information, properly packaged opportunities, access to financing, pooling of funds and scaling up: the AfroChampions Trillion Dollar Investment Framework speaks to the private sector in a language it can understand - and which can hopefully drive more commitment to deliver on the promises of the AfCFTA.
2 References in this paragraph: Honest account
Reports, 2017 data, by Global Justice - https://www.globaljustice.org.uk/sites/default/files/files/resources/honest_accounts_2017_