[Column] Anne Wambui Gaitha: African Trade Agreement key to Financial Services, Logistics, Tourism industries
I believe that the African Continental Free Trade Agreement (AfCFTA) is a game changer in international trade and will be an amazing opportunity for African brands. Traditionally the trade flows in Africa have revolved around exporting raw materials to Europe and the Far East and then importing value added products from global trade partners. This has not benefited many African businesses, especially the SMEs as they have not been able to compete with the multinational companies. I think AfCFTA will now give SMEs, who are the engines of economic growth, the opportunity to reach the huge African market of over one billion citizens.
The signing of the AfCFTA was the first step in opening up borders where the flow of African goods and services will happen with other African states, but more work needs to be done to create continental focused infrastructure like the LAPPSET project which connects Kenya, Ethiopia and South Sudan. Beyond road and rail infrastructure which will create jobs and wealth for the African businesses that are given this opportunity for construction, I believe we will begin to see the connectivity happen in the Financial Service industry i.e. banking, capital markets, payments, investing etc., I do see many African businesses who are in the Financial services, Logistics and Tourism industry becoming more continental brands as they are able to provide local interconnected solutions, linking one African state to the other.
I single out the Financial Services, Logistics and Tourism industries because for the AfCFTA to succeed we will need to see more innovation in trade finance and payments and that is where we will be able to see the development of African regional/continental currencies, African Crypto currencies, Block Chain solutions around smart contracts and the rise of the capital markets where more and more African businesses will be able to raise capital or exit their business investments as envisioned. Businesses in the logistics industry will benefit because of the rise of more goods being transported and the rise of e-commerce based on the youth who are able to purchase goods and services from anywhere in the world 24/7. Tourism will also be a major beneficiary of the AfCFTA because as more jobs are created on the continent, you will have more business people travelling from one state to another for business and experiencing Africa as a whole and in the case of leisure travel, more Africans will have more disposable income which will allow them the luxury to travel and explore the continent. These are just some of the industries that I believe will benefit highly from the AfCFTA, but I know based on the huge developmental needs on the continent, all business owners on the continent will be able to benefit from the AfCFTA which has removed some of the barriers that businesses looking to expand continentally have faced previously.
With the signing of the AfCFTA we will see more African corporates emerging as they will be able to take on an expansion strategy that other global companies would be reluctant to take based on them not understanding the different African cultures. I see this opportunity as being a great benefit to more African businesses who are SMEs, as they are able to position themselves as part of the supply chain of a large African Corporate, and thus have the ability to reach a larger market beyond borders while only dealing with one partner. For example Tusky’s ,which is a Kenyan brand that is a supermarket in the retail trade industry, has continued to expand from the Kenyan market to the East African market. Should Tusky’s ever plan to expand continentally, then a SME business that supplies Tusky’s will be able to have a presence in other African countries by partnering with such a continental wide partner.
AfCFTA has brought about the Pan African spirit that was last seen when Africans were fighting colonialism and asking for independence in the 1950’s and 1960’s. This collaborative spirit will see more than one billion African consumers beginning to think “Buy Africa, Build Africa”. With this kind of loyal clientele, it will ensure that African businesses are put to the task to provide high quality, easily accessible and affordable goods and services that fit the African consumer.
The future benefits I foresee for African businesses that are presented by the signing of the AfCFTA is more standardization of products which makes it easier for businesses to sell their products without having to customize for each African state. I also see more jobs created because Africans will be able to serve a larger market size which improves business performance through economies of scale. The benefits of the AfCFTA are endless, and will be the start of the eradication of poverty on the African continent, as governments, business owners and the population focus on Trade and not AID.
This column a contribution to [Africa CEO Forum] What are the opportunities that AfCFTA brings for business?
You will find this forum here.