Africa has 107 unique land borders with varying regulatory standards making for a frustrating experience for those who need to do business across the continent.
However, the Africa Continental Free Trade Area (AfCFTA) consolidates these economies into a single US$2.3 trillion market of 1.3bn people. With the harmonised trade, the continent offers greater market opportunities at lower business costs which is attractive for those who would want to tap into these prospects.
With this, the International Trade Centre (ITC) has called on East Africa’s young people to embrace e-commerce and tap into global online sales worth US$26 million as the AfCFTA gets off the ground in 2021.
“Online marketplaces could drive inclusive growth across Africa, with e-commerce likely to create as many as 3 million jobs by 2025,” ITC Executive Director Pamela Coke-Hamilton says.
Speaking at a forum in Nairobi, this month, Coke-Hamilton told participants that ditching outmoded business models for e-commerce would drive intra-regional trade and attract benefits such as “opening markets to otherwise isolated rural communities, servicing Africa’s fast-growing consumer market, and offer women access to new business opportunities.”
While this sounds like a good deal, Kenya which seems to be caught between Africa and the West over its proposed US free trade agreement and another one with the EU says it has a strategy for the AfCFTA.
The country’s Ministry of Industrialization Trade and Enterprise Development Cabinet Secretary, Betty Maina, said that East Africa’s investment hub has developed a draft National AfCFTA strategy that aspires to contribute towards national development by securing markets for goods and services within the African region.
Kenyan President Uhuru Kenyatta and his American counterpart Donald Trump announced their intention to pursue a free trade agreement (FTA) in February this year and weeks later, Trump formally notified Congress of the plan.
The FTA with Kenya is the second after 2004’s pact between the US and Morocco.
A summary of the negotiating objectives were released in May where the US noted that it was seeking an equally beneficial trade agreement to serve as a model for additional agreements on the continent.
Kenya has been questioned about its commitment to the AfCFTA over this deal plans but it has assured stakeholders that the American deal will not jeopardise the country’s obligation to its African ideals.
On the other hand, the EU-Kenya deal has been criticised as one that will harm regional trade. Kenya remains adamant.
Back to the AfCFTA, UNCTAD Secretary-General Mukhisa Kituyi has emphasized the vital role of the free trade area in boosting growth opportunities across the continent.
“How the AfCFTA facilitates the revival and growth of African small businesses will be key to its success as an engine for Africa’s economic renaissance,” he said.
The implementation of the AfCFTA in Eastern Africa could result in welfare gains of US$1.8 billion, a boost to intra-African exports worth more than US$1.1 billion and the creation of more than 2 million new jobs, according to the UN Economic Commission for Africa (ECA) and Trademark East Africa.
Coke-Hamilton adds that the opportunities and challenges of e-commerce in Africa interplay with other policy issues. She called on the AfCFTA members to remove obstacles in the digital space with synchronized regulatory approaches that check the fracturing of African states by technology giants.
Maina said that for the free trade area to work optimally, there are many technical issues to be worked out. Key among them is putting in place cross-border payment systems to allow countries to trade in their currencies rather than reverting to international payment systems.
While digital trade offers an innovative tool for industrial leapfrogging and income convergence, some African countries lack the legal framework and enabling environment for digital trade to thrive under the AfCFTA, speakers said. Some African countries still grapple with a lack of adequate and affordable connectivity and thorny issues such as cybercrime and data privacy.
Sharing his perspectives bearing the experiences from the European Single Market, European Union Ambassador to Kenya, Simon Mordue said, “from our own experience in the EU we know that small and medium-sized enterprises (SMEs) can benefit greatly from a larger common market.
This will be no different in Africa. SMEs will prove to become the continental engine of economic prosperity because of the Africa Continental Free Trade Area, positively impacting millions.”
With a global digital order gradually taking shape, Coke Hamilton said that young people and women in business needed to take note urgently of the disruption of old business models.
“E-commerce can lower entry barriers and help connect MSMEs with global markets and value chains by providing the services needed to facilitate their exports,” she said.
As a strong advocate of MSMEs and the economic empowerment of women and young people, Coke-Hamilton said ITC was well-positioned to support the AfCFTA.
It plans to provide capacity building and advisory services that will enhance the continental business environment, strengthen national and regional trade support institutions, and improve the competitiveness of MSMEs and women and youth-led enterprises under its One Trade Africa programme.
She said that agribusiness, services and green technology sectors are core to the success of the AfCFTA, and these priorities were enshrined in the trade treaty. A key challenge to designing digital solutions for African businesses and consumers remains using the AfCFTA.