Economy on growth path as AfCFTA enables new ways of doing business

The economy of Africa and particularly Nigerian is today on the path of growth as the African Continental Free Trade Agreement (AfCFTA) becomes an enabler or catalyst for new ways of doing business on the continent.

Recent findings by Microsoft 4Afrika shows that despite the challenges that the Covid-19 pandemic has presented to Africa, there are many exciting changes happening and just a few are potentially more impactful than AfCFTA.

The continental trade agreement is designed to create the largest free trade area in the world measured by the number of countries participating. Signing on to the agreement means new ways of producing, working and trading within Africa and with the rest of the world.

AfCFTA has been described as an exciting game changer for the countries who are signatories. Currently, Africa accounts for just 2 percent of global trade. And only 17 percent of African exports are intra-continental, compared with 59 percent in Asia and 68 percent in Europe.

AfCFTA is out to change all that and Amrote Abdella, Regional Director, Microsoft 4Afrika, sees this change through the prism of a pact that connects 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at $3.4 trillion.

“It will boost regional income by 7 percent or $450 billion, and lift 30 million people out of extreme poverty by 2035. Wages for both skilled and unskilled workers will also be boosted by 10.3 percent for unskilled workers, and 9.8 percent for skilled workers,” he explained.

While the Covid-19 pandemic has thrown a harsh spotlight on the vulnerabilities of global supply chains, the putting in place of AfCFTA couldn’t be more timely for Africa. It highlights the significant and increasing commitment of the African Union to reducing poverty through trade.

As Ngozi Okonjo-Iweala, the WTO Director General, recently stated, “trade is a force for good, and properly harnessed can help lift millions out of poverty and bring shared prosperity.”

One area where AfCFTA will play a significant role is in SMEs which, according to Abdella, stands to benefit from the trade agreement.

“AfCFTA can play the role of unlocking innovation, growth and productivity across the continent, but significantly, for its SME segment, by translating spending power into economic development. Cutting red tape and simplifying customs procedures could bring significant income gains for SMEs,” he said..

“By improving their ability to quickly scale up using digital skills, SMEs have the chance to capitalise on the potential trade boom,” he added, noting that this is particularly important when we consider that SMEs represent about 90 percent of businesses and more than 50 percent of employment worldwide.

Formal SMEs contribute up to 40 percent of national income (GDP) in emerging economies, and these numbers rise significantly if informal SMEs are included. In emerging markets, most formal jobs are generated by SMEs, which create 7 out of 10 jobs.

Abdella noted further that digital skills were essential for any organisation to grow, and we want to encourage technology adoption and skills development in every organisation.

He disclosed that Microsoft 4Afrika’s unconventional partnerships with SMEs and Telco’s have proven successful in supporting SMEs on their path to success, adding that their partnership with First Bank, Vodacom, MTN and Liquid Telecom has facilitated extending cloud services to SMEs, supporting their growth.

“To date, 4Afrika has reached 1.7 million SMEs and brought 728k online’ digital platforms are effective enablers for positive change. A powerful force expediting cross-border trade is the accelerating progress of digital technology in areas spanning trade logistics, automated processing and e-payments,” he said.