The African Continental Free Trade Area (AfCFTA) Agreement is regarded as the leading and most important flagship project under the African Union’s Agenda 2063 to transform the continent of Africa into a global powerhouse.
The World Bank reports that the Agreement has the potential to create the largest free trade area in the world with 1.3 billion people across 55 countries and a combined gross domestic product (GDP) valued at US$3.4 trillion, with the potential to lift 30 million out of extreme poverty. Among its stated objectives include the opportunity to create a single market for goods and services facilitated by the free movement of persons and goods across borders to deepen the economic integration of the African continent and accordingly promote the Pan-African vision of achieving an integrated, prosperous, and peaceful Africa contained in Agenda 2063.
Also, the Agreement seeks to eliminate trade barriers, boost intra-Africa trade, and contribute to establishing regional value chains that enable investment and job creation as well as build long-term sustainable growth and increased economic development across various sectors of the African market.
The AfCFTA initiative signed up to by 54 African Union member states no doubt presents considerable opportunities for businesses across the African market for the trade in goods and services which could be leveraged by the multifaceted initiatives under the agreement including the removal of trade barriers and facilitation of the free movement of goods and services across the African continent. Entrepreneurs and small business owners in Ghana can therefore take advantage of some of the incredible opportunities under the AfCFTA Agreement and make the most out of these opportunities to grow their businesses beyond the borders of Ghana in 2024.
As part of its commitment to accelerate the growth of businesses and trade under the AfCFTA framework, the Secretariat has put in place several measures to promote free trade within the African market including the AfCFTA e-tariff Book, which is a digital platform to ensure that tariff concession schedules are easily accessible to trade and customs authorities; a Non-Tariff Barriers (NTBs) – which is intended to help remove trade barriers by allowing traders to report any challenges they face in moving goods and services within the African market.
Also, the Pan-African Payment and Settlement System (PAPSS), which is a centralized Financial Market has been rolled out to help secure real-time payments for goods and services across the continent.
Therefore, in this write-up, I shall endeavor to highlight how entrepreneurs and small business owners can leverage these initiatives. This is particularly important because of the commanding hold that SMEs have on African economies. The Economic Commission for Africa has previously reported that SMEs account for about 85% of employment and contribute about 35% to GDP in Africa. The World Bank has also underscored the growing importance of SMEs and estimates that SMEs represent about 90% of businesses and more than 50% of employment worldwide with the formal SME sector contributing up to 40% of national income (GDP) in emerging economies.
SOME OPPORTUNITIES FOR SMEs UNDER AfCFTA
- Firstly, the AfCFTA initiative has created the opportunity for enhanced access to a larger market. As noted earlier, the overall mandate of the AfCFTA is to create a single continental market with a population of about 1.3 billion people and a combined GDP of approximately US$ 3.4 trillion. To achieve this, the elimination of trade barriers and boosting intra-Africa trade have become a key priority for governments. In particular, governments across the continent are aiming to advance trade in value-added production across all service sectors of the African economy. In the process, a common market for the free movement of goods and services will be created leading to an increase in new market opportunities that meet the criteria under the Agreement. A common market no doubt will create a large market for Ghanaian businesses which means the opportunity to build strong standards and offer competitive products and services in the free trade area. Therefore, SMEs and business owners must prioritize developing products and designing services that exceed the required standards under AfCFTA and compete in the expanded market.
- Secondly, AfCFTA has created the opportunity for the free movement of goods and services. This is intended to create a visa-free zone within the AfCFTA countries to allow for easy movement of goods and services. This means that not only has access to new markets been created, but also the opportunity to trade in goods and services in other African markets has significantly been made easier with the commitment to enable the free movement of goods and services within the common market. Ghanaian businesses can therefore expect to benefit from the free movement of goods and services and must leverage this to ship their products across the common area.
- Thirdly, AfCFTA has created the opportunity for partnership and collaboration across the continent. This opportunity has the potential to create new partnerships in production, marketing, sales, distribution, and customer service among others. Therefore, for Ghanaian businesses that cannot be in every AfCFTA market directly, there is the opportunity to partner with other businesses in chosen markets to scale up and meet the needs of a larger, more diverse, and wider market. Businesses in 2024 must begin exploring partnership opportunities that leverage complementary and unique business propositions to drive the AfCFTA agenda.
- Fourthly, AfCFTA has created the potential for increased access to funding and investment for SMEs. The introduction and adoption of the AfCFTA has opened the African market to a wide range of economic interests in various areas across the global economy. With the assurance of a ready market, the wider investor community is now very much aware of the potential of the new markets and Ghanaian businesses should find it relatively easier to attract investors to invest in their products and services that seek to take full advantage of the enlarged market and the free movement of goods and services. This goal should be aggressively pursued in 2024 to draw in additional funding and remain in operation during the difficult economic times.
- Fifthly, there is the opportunity for healthy competition that leads to better, and quality products and services. With the increase in market access and free movement of goods and services, Ghanaian businesses and entrepreneurs need to be aware of the fact that the agreement not only allows Ghanaian businesses to trade across borders and have access to foreign markets but also permits businesses in other jurisdictions to have equal and unfettered access to the Ghanaian market. Therefore, there is the need to reposition Ghanaian businesses and build relevant capacity to meet the standardization and certification requirements under the AfCFTA protocol so as not to be disadvantaged. Most importantly, the competition from other businesses and jurisdictions should also be seen as an opportunity to continue to innovate to remain competitive in the wider market.
CONCLUSION
AfCFTA represents by far the single most audacious plan for a continental free trade commitment, globally. With a market size of more than a billion individuals, the AfCFTA market remains the largest free trade area in the world, not just in terms of the number of people but also the potential volume of trade and tradable goods and services.
Its protocol has deliberate mechanisms to promote open market access, free movement of goods and services, reduce trade tariffs, and enhance the infrastructure for the transport of both humans and goods. Given the pronounced role of the SME sector in the Ghanaian economy and its contribution to job creation, it is expected that the sector will take full advantage of the opportunities created under AfCFTA to enhance the prospect for growth and business sustainability, particularly across new markets within the continent. Some of these opportunities have been discussed above. However, for Ghanaian businesses to take full advantage of these enormous opportunities, there is a need to address the funding and knowledge gap that continues to plague Ghanaian businesses. We also need to educate Ghanaian businesses on the modalities for trading under AfCFTA to promote compliance with the legal and regulatory compliance regimes including the tax implications of cross-border trading and dispute settlement mechanism under the protocol.
ABOUT THE AUTHOR
GAFARU ALI is a Senior Associate at SUSTINERI ATTORNEYS PRUC (www.sustineriattorneys.com) a client-centric law firm specializing in transactions, corporate legal services, dispute resolutions, and tax. His practice areas include Disputes Resolution, Tax, Natural Resources, and Energy including Renewables, and Mining. He welcomes views on this article at gafaru@sustineriattorneys.com
