Risk managers urged to look ahead as private sector set to be boosted by African free trade deal

Risk managers across Africa should prepare for a possible sea-change in trade across Africa, after the African Continental Free Trade Area (AfCFTA) went live on 30 May. After 40 years in talks, the plan was refreshed and boosted by Rwanda President Paul Kagame as head of the African Union last year. Since then, the deal has achieved the required number of signatories and now moves are underway across the continent to bring the trading pact into force. The UN summed it up thus: “Covering a dynamic market of 1.2 billion people and a gross domestic product (GDP) of $2.5trn, the AfCFTA can be a game-changer for the private sector in the sub-region in terms of export, diversification, structural transformation and job creation.” Meetings have been underway across the continent to kick-start the deal. For example, a two-day Regional Trade forum to examine the tangible implications of the AfCFTA for west and central Africa was held in Senegal. Senegal President Macky Sall reaffirmed his commitment “to support the Senegalese private sector in the quest for new areas of business opportunities”, and urged the sector to “take ownership of all components of the AfCFTA”. He cautioned that Africans will not reap the benefits of the AfCFTA without building regional or sub-regional champions, stating: “The quality of our industry is such that if we want the AfCFTA to fully benefit Africa, we need to build these African champions. In that context, SMEs will receive special attention.” Mauritania’s Prime Minister, Mohamed Salem Ould Bechir, underlined his country’s efforts to create an enabling environment for the private sector and cautioned that the AfCFTA alone will not solve the issue of intra-African trade. Meanwhile, the UN Economic Commission for Africa (ECA) estimates an increase of intra-African exports from east Africa of more than $1bn. For Rwanda, much of that would be explained by increased trade with its neighbour, the Democratic Republic of Congo (DRC). Andrew Mold, acting director of ECA in east Africa, revealed preliminary simulation results showing that Rwandan exports to the DRC would increase by more than $56m, once the AfCFTA is fully implemented. At a regional level, he stressed that the beneficiary sectors would principally be employment-creating sectors like processed foods, light manufacturing and textiles, creating an additional two million jobs in east Africa. Stephen Ruzibiza, CEO of PSF, encouraged business owners and entrepreneurs to take advantage of the potential 1.2 billion customers and work together as they identify their future areas of growth. “Collectively, we have enormous potential to tap into this continental market,” he said. In southern Africa, Said Adejumobi, ECA regional director for the region, said: “Zimbabwe, having the second-largest platinum and chrome deposits and fifth-largest lithium in the world can attract investment capital across the continent as the barriers to free trade and investments are deconstructed through the AfCFTA.” On the practical next steps, central African countries were recently urged to align their external trade data classification system with the 2017 World Customs Organization’s Harmonized System (HS17) for clearly identifying products that will be categorised as ‘free’, ‘sensitive’ and ‘excluded’, within the AfCFTA regime. Experts have examined and validated a list of 379 products termed sensitive (7% of tradeable products as per the HS17), 172 products considered excluded (3% of tradeable products) and the rest of the products termed free (90% of tradeable products), to be presented to the next AfCFTA negotiating rounds, as the consensual taxonomy for free and restricted items to be traded in central Africa. According to the experts, with the fast-approaching operationalisation of the AfCFTA, central African states, just like countries belonging to other regional economic communities, need to carefully consider totally shielding certain goods and partially protecting others from free trade, as part of measures towards maintaining a certain level of stability in fiscal income, food security and the promotion of industrialisation. Examples of excluded goods proposed are meat, fish and cocoa, while some goods considered sensitive include live poultry, crude palm oil and milk.

Risk managers urged to look ahead as private sector set to be boosted by African free trade deal

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