The African Continental Free Trade Area (AfCFTA) since its commencement in January 2021, has recorded very little impact in boosting trade activities across the continent. According to experts, the sub-optimal impact of AfCFTA despite its potential rides on the back of a number of things including slow documentation, challenging payment systems, logistics challenges, among other things.
Speaking at the Africa Business Convention 2022 recently organized by BusinessDay themed, ‘Africa recovery’, economic experts unanimously agreed that the trade agreement provides an opportunity for Africa to accelerate its economic recovery leveraging trade.
A caveat to this however was that the provisions of the trade agreement be effectively and efficiently implemented optimizing three key tools which are industrialization, value addition and technology.
Industrialization
According to experts, the outcome of the AfCFTA will depend on how African countries embrace industrialization and focus on increasing their productive capabilities in a highly competitive global landscape.
Peter Quartey, a professor in the institution of statistical, social and economic research, University of Ghana, said the trade agreement provides a larger market but available products need to be differentiated and with good quality and variety which is the only way benefits can be enjoyed.
“Many African countries have become import-dependent, with less production, less manufacturing and more consumption and have become distribution networks. We need to transform the industries in Africa, that’s where we will find the jobs,” Quartey said.
He added that if Africa fails to pay attention to industrialization, it will only be creating jobs for others who have developed their countries
Value addition
Kunle Elebute, chairman, KPMG Africa said that African countries, including Nigeria, are commodity-based, but lack the capacity for processing and manufacturing. Consequently this results into a poor export receipt laced with an uncompetitive ability
“AfCFTA is a great initiative, but what can we describe as the underlying economic activity that can be exchanged under trade? Africa is simply the domain for the global economy to take out commodities and process,” Elebute said.
Report by the Nigerian Export-Import Bank (NEXIM), shows that the global value of raw cocoa export is $10 billion while the total value of all finished goods from cocoa annually is $200 billion with chocolates alone having $100 billion.
Read also: What to know about AfCFTA’ $10bn adjustment facility
Switzerland, which is one of the largest producers of chocolate globally with about 180,000 tons of chocolate per year and earns around $1.5 billion from it, relies on African countries like Ghana and Ivory to get its major raw material which is cocoa.
Elebute advised that African countries need to adopt value addition practices that will enhance the competitiveness of their products while boosting regional trade activities and reducing reliance on imports from foreign countries.
Technology adoption
Post-pandemic, technology is fast becoming the mainstay and is developing rapidly. Experts said the use of technology will resolve a lot of challenges and create a level playground for businesses particularly the Micro, Small and Medium scale enterprises
“Technology will play a huge role in providing an easy payment platform, we need to strengthen the payment system and get more partners on board. If we can achieve that then we can go with the regional currency,” Kelvin Uwaibi, managing director, Edo State Investment Promotion Office, said.
Some of the advantages of technology adoption for African countries include improved payment system, wider market reach, cost-effective processes, capacity building, demolishing diverse barriers, among other things.
