Strengthening the readiness of small businesses to participate in AfCFTA marketplaces
Posted August 4, 2022
Inclusive intra-African trade is a prerequisite to accelerate structural transformation and sustainable development in Africa. UNDP, through its Regional Bureau for Africa, supported this goal by providing technical and financial support to the 5th Pan-African Prosperity Africa Small Business Exporters Conference, held in Gaborone, Botswana, from 17-19 May 2022. The conference was co-organized by the Pan-African Chamber of Commerce and Industry (PACCI), the Association of SADC Chambers of Commerce and Industry (ASCCI) and Business Botswana, in partnership with several UN and non-UN institutions. The three-day hybrid conference brought together 110 participants in-person (65% from micro, small and medium enterprises (MSMEs) including representatives of over 25 business associations) and close to 400 virtual participants. Under the theme "Benefiting from the African Continental Free Trade Area (AfCFTA)," the conference was an opportunity to discuss key implementation issues and present UNDP’s ongoing programmes toward the realization of an inclusive African Continental Free Trade Area (AfCFTA).
Below are some reflections and outcomes of the conference:
Leveraging small and medium-sized business engagement will make the AfCFTA transformative
The Agreement establishing the AfCFTA is expected to be a game changer for development ambitions in Africa. It arrives at a crucial time, marked by increased poverty levels and socioeconomic setbacks facing African countries due to the COVID-19 pandemic, in addition to the Ukraine war with related financial, climatic and food shocks.
It is hoped that the AfCFTA can help drive the continent’s economic recovery from the recent pandemic and ongoing crisis while spurring transformation. The Agreement reflects an explicit commitment to create a framework for deeper socioeconomic integration and improved cooperation that enables trade, investment and peoples’ mobility to support industrialization and the development of a dynamic services sector. Such achievements can generate decent jobs and increase revenues, contributing to inclusive growth on the continent. If fully implemented, the AfCFTA has the potential to boost Africa’s regional income by US$450 billion and lift 30 million people out of extreme poverty by 2035.
Conference participants agreed that a greater emphasis on deeper intra-regional trade and cross-border investment are essential to the continent’s future. No matter how well grounded the AfCFTA objectives are, they will remain elusive if businesses — and in particular, micro, small and medium sized enterprises (MSMEs), which are the backbone of trade and production on the continent — are unable to take full advantage of emerging opportunities. It is critical that this segment of the private sector, paying particular attention to women and youth, is effectively engaged in the AfCFTA’ s implementation, and that it receives the active support of governments, regional and continental institutions and development partners.
Maximizing market opportunities will boost industrialization and trade on the continent
Drawing on the example of East African dairy products, which are traded mainly within regional markets, conference participants noted that other parts of the continent rely significantly on non-African countries to source processed milk and cream. This demonstrates that African markets for dairy products already exist and that African manufacturers could meet this market need if tariffs and non-tariffs barriers were removed, which is one objective of the AfCFTA. Other potential priority products range from agro-processed foods (cereals, sugar, cocoa products, edible oils) and textiles to cosmetics, among others. By harmonizing regulatory frameworks and opening up the services sector for more trade, the Agreement is likely to also boost intra-African trade in services in sectors such as transport and logistics, technology, financial services and education.
For the AfCFTA to become a game changer, opportunities for markets and value chain integration must be identified, especially for MSMEs. A deeper understanding of the AfCFTA instruments, rules and regulations will be critical, especially rules of origin and trade facilitation, certification requirements, services regulations, licensing and certification of service suppliers and modalities of liberalization of trade in goods and services. Important tools for MSMEs to prospect regional and continental markets will be trade fairs, trade exhibitions and conferences.
Promoting youth entrepreneurship to make the most of the AfCFTA
With so many new and expanded opportunities in sectors ranging from agro-food processing, textiles, leather value-added products, cosmetics and technology, young Africans have opportunities to embrace innovation and entrepreneurship. Their understanding of modern technologies gives them an advantage in rapidly changing marketplaces, provided that national, regional and continental enabling environments exist, such as is intended with the AfCFTA. For instance, new youth-led businesses can collaborate to create stronger "Made in Africa" brands leveraging the 4th industrial revolution. For youth participation to occur and expand, young entrepreneurs need access to skills and business training and assistance in obtaining capital while financial institutions must be willing to open their doors to startups and MSMEs.
Position small businesses to realize AfCFTA ambitions
Conference participants made a number or recommendations for integrating SMSEs into AfCFTA processes.
- Build the capacity of businesses to fully understand the AfCFTA Agreement. This is already started through the production of simplified guides, such as the UNDP-supported ECOWAS manual: Understanding the AfCFTA: Guide for Small and Medium-Sized Enterprises in the ECOWAS Region, and AfCFTA Secretariat and African Union materials such as the non-tariff barriers online reporting, monitoring and eliminating mechanism, African Trade Observatory, and the Pana-African Payment & Settlement System.
- Advocate in favor of efficient import/export processing mechanisms along with the development of the AfCFTA instruments to eliminate bottlenecks and facilitate the full realization of Africa’s trade integration agenda.
- Mobilize governments and business support organizations to strengthen national business chamber capacities to support their members and be the voice of businesses during the AfCFTA implementation process.
- Advance dialogue between governments and MSMEs to allow business associations, governments and other stakeholders to exchange views and address potential bottlenecks related to the implementation of the AfCFTA.
- Business associations, development partners and governments support MSMEs participation in trade fairs, such as the Intra-African Trade Fair.
- Provide more opportunities for MSMEs to engage various trade regulators through roundtables and trade forums on issues such as rules of origin, trade facilitation, services regulations, etc.
- Elaborate strategic frameworks to shape business associations, such as PACCI’s public awareness agenda on the implementation of the AfCFTA, and design business strategies to maximize opportunities in the AfCFTA.
- Encourage the government of Botswana and other African countries that have not yet ratified the AfCFTA agreement to do so.
- Encourage all African countries to effectively implement the AfCFTA so that trading can actually start under the preferential arrangements.
UNDP’s commitment to integrate MSMEs in the AfCFTA
Conference participants acknowledged the unique role of UNDP in ensuring MSMEs (especially women and youth) are not left out of AfCFTA marketplaces. Through its regional programmes and country level interventions, UNDP contributions to the realization of an inclusive Africa integration agenda will continue to revolve around strengthening the competitiveness of MSMEs to produce and/or trade in AfCFTA marketplaces. UNDP will also enhance the capacity of national and regional institutions to create conducive environments for this to happen.