[Column] Byron Mudhune: AFCFTA and competitive advantage: Danger signals ahead
AFCFTA or the Africa’s continental free trade agreement is essentially an opportunity for African enterprises to export directly to the rest of Africa, goods and services freely, encouraging trade, growth and development of African enterprises in general.
Statistics from UNCTAD as at June 2019, the 10 leading intra-African exporters were Eswatini (70.6%), Namibia (52.9%), Zimbabwe (51.6%), Uganda (51.4%), Togo (51.1%), Senegal (45.6%), Djibouti (41.9%), Lesotho (39.9%), Kenya (39.3%) and Malawi (38.3%) whereas the 10 countries with the lowest share of intra-African exports were Chad (0.2%), Guinea (1.6%), Eritrea (2.3%), Equatorial Guinea (3.5%), Cabo Verde (3.6%), Angola (3.9%), Libya (4.5%), Guinea Bissau (4.7%), Liberia (5.1%) and Algeria (5.5%).
Experts say that these figures are significantly understated as most of the trade statistics from the larger informal sector still goes unreported in most countries. Nevertheless, food, drinks, tobacco, sugar, cattle, and meat dominate most of the trade.
To wait for the market in front, large enterprises are ideally expected to organize many trade promotion activities and attended large fairs and exhibitions across Africa to conduct surveys, or establish joint-ventures and association, and open representative offices in certain countries of interest. These are companies with high competitive advantages after the ACFTA comes into effect.
For example, South Africa would explore vehicle spare parts and distribution centers across East and Central Africa, or Nigeria would explore petroleum byproducts across Central and Southern Africa and Tanzania would explore agricultural products across East and Southern Africa each approaching directly and effectively working with selected partners, studying the needs, requirements, and trade habits, and gradually upgrading production, processing, standards, and technology to satisfy those markets.
However, ACFTA also creates competitive pressure, especially for domestic small and medium-sized enterprises. Of critical importance is the estimation that SMEs still account for 90 percent of all businesses in Africa. This will be a challenge for many such enterprises that cannot invest to conform to Pan African reality and compete fairly with other countries
. For example, Uganda is a low cost country when it comes to food production, Zimbabwe and Tanzania’s agricultural sector is one of the most diverse in East and Southern Africa, Nigeria’s music, arts and creative industry is unrivalled across Africa and South Africa’s trade dominance within SADC business community is simply uncontestable etc.
And there are other similar citations across the continent where significant entry barriers exist. It can thus be said that this is going to be a huge pressure on industry competition when deploying trade promotion and marketing strategies especially for the small – medium sized enterprises.
If these 90% of the businesses in Africa i.e. small medium sized enterprises do not restrategise, invest, and operate professionally in readiness for ACFTA, and work their way up creatively, they will face many difficulties or even be eliminated altogether.