‘Free trade, tech the missing pieces in Africa’s growth puzzle’
… as AfCFTA eyes $1bn financing for SMEs
To crack the next growth market for African businesses, the continent must leverage more on digital technology and remove obstruction to the free trade pact to promote wealth creation and employment generation post-Covid-19, African policymakers and business leaders have said.
At BusinessDay’s African Business Convention, held virtually on Tuesday, some of the continent’s top business leaders, policymakers and investors offered unique insight into the prevailing challenges confronting businesses on the continent as well as emerging opportunities in a post-Covid-19 era.
To unlock the barriers to trade that have kept African economies in silos of underperformance, they said the business environment must not only adopt more digital technology but also promote the free movement of Africans around the continent, as well as dismantle the requirement of up to 54 visas for travel across Africa.
“The adoption of Trade liberalisation and embracing of digitisation makes economic integration much easier for countries to attract investments and increase the volume of businesses across the continent,” Fabian Ajogwu, founding partner, Kenna Partners, said.
He noted that Africa countries must ensure its fiscal and monetary channel authorities channel liquidity to SMEs, households and informal workers, especially in the most vulnerable economies, within a coordinated global response to the crisis, which will hasten more trade.
“We cannot have free trade if we lock up borders if it is difficult to move services across or if it is difficult to do things because of tariffs,” Ajogwu noted, saying, “We hope the free trade deal will solve all of these problems.”
Most of the business leaders believe the African Continental Free Trade Area (AfCFTA) presents a major opportunity for African nations to bring 30 million people out of extreme poverty, and raise the incomes of 68 million others who live on less than $5.50 per day.
“The trade agreement has given Africa a golden opportunity to get out of poverty and create growth,” Enobong Umoessien, head of Business and Enterprise Promotion at Economic Community of West African States (ECOWAS), said at the virtual event.
Umoessien explained that the rising opportunity from the trade agreement alongside the Covid-19 pandemic had shown the need for technology to improve Africa’s production capacity and competitiveness.
Africa today accounts for around 17 percent of the world’s population, but only about 3 percent of global GDP. These statistics not only attest to a failure to tap the continent’s developmental potential but also highlight the tremendous opportunities and risks ahead.
In a move to allow more firms leverage more opportunities, Wamkeke Mene, the secretary-general of the AfCFTA, said the treaty is proposing to establish a $1 billion trade financing facility for Small and Medium Enterprises (SMEs) or exporters willing to expand their business.
“We are in conversation with a number of commercial banks including Standard Bank with a view to establishing a $1 billion trade financing facility primary for SMEs or exporters that need capital to expand a new market planning to operate in the trade agreement,” Mene said.
Mene complained about the multiple currencies across Africa, which he claimed would continue to be a menace for most businesses unless tackled.
“We have 42 currencies in Africa, which alone is a restriction to trade and making business difficult,” he said.
Kuseni Dlamini, chairman of South Africa-based Massmart Holdings & Aspen Pharmacare Limited, said Africa must build structures that would make African firms to be more competitive in the global economy.
For Nigeria, Adeniyi Adebayo, minister of industry, trade and investment, said the country’s manufacturing sector aims to ride on AfCFTA’s pendulum to become the supply source for the entire African market.
“Nigeria is conscious of the size of its economy, therefore wants to play a greater role or take advantage of the huge potentials in the Africa market,” Adebayo said.
According to Adebayo, AfCFTA is a herculean task that wants to lift 30 million Africans out of poverty by 2035. However, he believes “they are attainable.”
“We desire to make Nigeria’s manufacturing sector the supply source for the entire African market,” Adebayo said.
Other business leaders at the event said Africa must leverage the continental free trade pact to reduce poverty, promote wealth creation and employment generation post-Covid pandemic.
Millions of Africans lived in difficulty even before the global pandemic. Some estimates note more than 400 million people lived in extreme poverty while others expect a job shortage of about 350 million by 2035.
Also, the World Bank forecasts a slow recovery for sub-Saharan Africa with a growth rate seen at 2.7 percent this year.
The institution said the downward revision in growth for this part of Africa was due to the harsh effects the coronavirus pandemic has had on many economies in the region.
Despite the forecasts, Sola David-Borha, CEO, Africa Regions at the Standard Bank Groups, said African businesses must imbibe three critical attributes, which are good governance, partnerships, and technology for the continental trade to thrive in the post-Covid era.
According to David-Borha, there are trillions of dollars looking for a home and they need a well-run governance structure, and this will attract capital, build resilience and allow the company to operate sustainably.
On partnerships, she said in thinking of the future of African business, partnerships are needed for success.
She said Standard Bank had achieved success through partnerships building strong compliance with regulatory requirements, robust IT infrastructure, in-country professional teams, ethical core investors, and thorough due diligence to achieve this.
“Covid-19 has taught us that we need each other and we cannot solve the problem of the world alone. Private sector-led economic growth, enabled by market-friendly policies should be the template for public-private partnership in Africa,” she said.
For most African countries, Covid-19 is an existential crisis. It is severely testing Africa’s social, economic and political resilience, as the business leaders say the continent will have to rethink many prior assumptions and find new balances for individual and collective behaviour.