Geographies in Depth

Africa is creating one of the world's largest single markets. What does this mean for entrepreneurs?

A customer counts money inside a textile shop in Idumota Market, in Nigeria's commercial capital of Lagos, Nigeria February 11, 2019. REUTERS/Nyancho NwaNri - RC1A016FA600

The Africa Continental Free Trade Area will boost African entrepreneurship Image: REUTERS/Nyancho NwaNri

Gerald Chirinda
Executive Director, Tapiwa Capital
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The Africa Continental Free Trade Area (AfCFTA) is set to launch on 30th May. If every African country joins, it’s expected to be one of the world’s largest single markets, accounting for $4 trillion in spending and investment across the 54 countries.

The AfCFTA will give entrepreneurs across the continent access to a much larger market. It's therefore important that young African entrepreneurs understand how the AfCFTA could benefit them and their ventures. As awareness is raised, entrepreneurs should begin crafting new trade roadmaps for their businesses, informed by the agreement.

It's envisioned that the free trade area will lead to increased competition, innovation and prosperity for Africa’s people in the long term. But for the AfCFTA’s gains to be realized, entrepreneurs and policy-makers must be aligned. They must engage with each other to provide structure and clarity around how goods and services will move, and around the benefits that the agreement will bring to business. These discussions between entrepreneurs and the trade ministries of their country will also enable the review and updating of national trade policies, discussions which will benefit both the government and business communities.

Digital platforms are increasingly making trading easier by promoting digital, financial and social inclusion. This can lead to significant growth in business that can be generated domestically and across the continent. It must be noted however, that for a business to succeed outside its borders, it must first receive adequate local support, including favourable financing options, business support services, training and a conducive environment that promotes growth.

In some African countries, entrepreneurs still find it difficult to access adequate government support, as well as effective platforms on which they can co-design alongside government. This means they are lacking the environment to thrive. This has led to many entrepreneurs failing to scale their operations, and in some cases being relegated or forced to operate in the ‘informal sector’.

The consequences of failing to address entrepreneurs’ concerns locally will result in failure to access the gains of the AfCFTA, and will lead to a burgeoning informal sector. According to the International Labour Organization (ILO), it is estimated that the informal sector accounts for more than 66% of total employment in sub-Saharan Africa and 52% in North Africa. If collaboration increases between entrepreneurs and their governments, with the state and private sector supporting entrepreneurs by offering training, access to technology platforms and financing, operators in the informal sector will transition to the formal one, increasing their chances of success in the larger market.

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This formalization will also bring other benefits, such as improved quality and quantity of employment, increase in fiscal revenue and overall improvement in quality of life. Governments need to begin investing in national support programmes for SMEs to build their capacity and provide business growth, so they are able to produce export-ready products and services for a much larger market.

At Future Africa Forum, through our Intra-Africa Trade expert network, we are currently working on informing, motivating, enabling and providing access to networks. We are helping to facilitate trade and investor missions for young entrepreneurs on the continent who are looking to expand their markets. We have seen the amount of talent and potential that exists in Africa, but realise that without a platform, it will be difficult for some of this talent to scale beyond their communities, let alone the continent. However, before we can discuss scale, we must ensure that:

- Entrepreneurs are adequately trained in selling their products and services to international markets

- Entrepreneurs are well informed of export procedures, including customs processes and quality requirements

- Entrepreneurs understand financing facilities available for export businesses

- Entrepreneurs produce goods and services that are in demand beyond their communities

The International Trade Centre has developed a trade accelerator for young entrepreneurs which, if domesticated, could hugely benefit a significant number of people on the continent. It covers four key business support categories: training, coaching/mentoring, institutional support and facilitating access to finance.

At a regional level, organizations such as Trade Mark East Africa, are also playing a huge role in increasing access to markets, enhancing the trade environment and improving business competitiveness within the East African region.

As we look at the benefits of the AfCFTA for young entrepreneurs, it is important that we keep gender equality in mind. Women have been known to be the leaders in cross-border trading, with women in the SADC region constituting 70% of informal cross-border traders. Women should therefore play a leading role in articulating the challenges that they face, as well as the assistance that they require across the value chain, to enable them to become more efficient and prosperous in their ventures.

The movement of goods and services involves an entire value chain. This value chain involves: work and services that take place within the country of origin; the movement and transport of these goods and services using various channels; and clearing processes at ports of entry and exit that lead to delivery and payment of high-quality services that arrive on time.

With further alignment and better coordination of this value chain, we should hopefully begin to witness an increase in intra-African trade. Other issues that need to be addressed include safeguarding against potential xenophobic threats which we have already seen manifesting in certain parts of the continent, and ensuring access to social services, such as healthcare, for entrepreneurs as they travel across borders.

Technology is integral to the movement of goods and services, especially with the introduction of pan-African business-to-business (B2B) and business-to-consumer (B2C) platforms. Examples including Jumia, Kenya’s MPESA and Zimbabwe’s ECoCash already show that Africa is truly becoming one market.

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Related topics:
Geographies in DepthTrade and InvestmentSupply Chains and TransportationBusiness
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