Understanding the participation of the private sector in the AfCFTA

The narrative surrounding the successful African Continental Free Trade Area (AfCFTA)—its potential to increase intra-African trade by 15 to 25 percent, or $50 billion to $70 billion—is promising, but if African businesses do not take advantage of this remarkable agreement, its ultimate success will be limited. will be. As the private sector is directly involved in cross-border trade, it is a major stakeholder and beneficiary of the AfCFTA. Therefore, to better understand how African businesses are approaching AfCFTA and more importantly, how AfCFTA can best support those businesses through trade, the United Nations Economic Commission for Africa (ECA) AfCFTA Country Trade Index (ACBI)

ACBI is a new AfCFTA-focused, easy-to-use index based on a strong theoretical framework and data collection process. It will enable relevant policy makers to identify barriers to trade in Africa at the country level, which will inform the barriers to effective implementation of the AfCFTA from a private sector perspective. It aims to inform African policymakers about trade barriers and guide AfCFTA national strategies. ACBI aims to ensure that the African Continental Free Trade Area delivers on the anticipated sustainable development prospects, particularly for women-owned and small and medium-sized enterprises (SMEs).

ACBI holds three Dimensions relevant to the understanding of the AfCFTA and related negotiations:

1. ease of trade in goods across Africa;
2. African firm understanding and use Free Trade Agreements (FTAs) and AfCFTA;
3. Business environment related to trade in services, intra-African investment, intellectual property rights and competition policy.

For a robust discussion of the ACBI strategy, see the bottom of this blog.

High ACBI findings: How do African businesses perceive trade in Africa?

The first round of ACBI (covering the seven countries Angola, Côte d’Ivoire, Gabon, Kenya, Nigeria, Namibia and South Africa) reveals several important trends in the understanding and use of AfCFTA by African businesses. Here are the main findings:

In general, the businesses surveyed stated that they are independent of their home country to trade and invest in goods across African borders. That is, on average, firms feel neither positively nor negatively about the ease of doing business in Africa (Figure 1). Following the submission of the African Union’s ratification documents by these seven member states, the bottleneck is not due to legislation, but to the lack of enterprise support in identifying strategic needs and market opportunities for the private sector to fully benefit. AfCFTA.

Especially as the research shows Related insights to the Trading in goods (Fig 2) There are big challenges in terms of trade in the continent. Some of them They are mostly identified Constraints include Unauthorized payments (Bribery A country’s border posts or transport routes) and other fees on business (Additional customs, border and production surcharges, price controls, reference prices, variable surcharges on goods, statistical taxes, import license fees, etc.).

Companies seem to have a positive perception of sanitary and phytosanitary measures and technical barriers – indicating that these measures are not a barrier to trade in Africa. This finding is interesting as some experts dispute these. Steps and obstacles are often the main obstacles. Business competitiveness and international trade for Africa.

The study found “Regarding the understanding and use of FTAs”. Most organizations are well aware of their country’s participation in different regional economic communities, but who do not have much information about their country’s participation in the AfCFTA (Figure 3). In other words, African businesses do not have a clear understanding of the functioning of the AfCFTA and the market opportunities at the continental level.

Importantly, the organizations surveyed often named FTA compliance Rules of origin Requirements that determine how goods are shipped to the country The most binding restrictions on trade may qualify for free or preferential import tariffs. Businesses often face difficulties in complying with these regulations, and their complexity can be particularly difficult for informal traders. Rules of origin must be simple, practical and trade-friendly in order for African businesses to maximize the trade gains expected from the AfCFTA. At the same time, rules of origin should lead to a transformation process that generates value through intellectual property gains and/or new operations.

Regarding the “business environment,” companies reported being largely neutral in their understanding of the investment, competition, and intellectual property rights policies included in the AfCFTA. One possible explanation is that the AfCFTA protocols governing these policies are still under negotiation. For this reason, Negotiators and African governments should prioritize the design of implementation strategies that include concrete measures to facilitate access to African markets, reduce service costs and harmonize regulations related to the business environment.

Finally, Attitudes towards business differ significantly between male- and female-owned businesses, as well as between SMEs (Figure 5). For example, women-owned firms and SMEs often cite cross-border trade as a major challenge to growing their businesses. This finding is consistent with the literature: female-owned businesses are, on average, more negatively affected by tariff and non-tariff barriers.

Conclusion and recommendations

ECA envisions the ACBI as a monitoring and evaluation tool for African countries to understand and address the challenges faced by businesses in their countries as they implement the AfCFTA. The active participation of the private sector is critical to inform national and regional strategies for the AfCFTA and to realize the expected benefits of the AfCFTA. Expanding the ACBI to all African countries will support the implementation of the AfCFTA by identifying major trade barriers at country and regional levels. It is equally important to build strong partnerships with national and regional trade associations and share best practices across countries and regions to support ACBI’s excellence.

ACBI’s findings will significantly contribute to the African Development Agenda 2063 and the 2030 Agenda for Sustainable Development by identifying trade system bottlenecks that need to be addressed to ensure more inclusive trade under the AfCFTA. Indeed, ACBI results indicate the need to supplement the AfCFTA with specific trade facilitation policies to ensure more inclusive trade under the AfCFTA.

Most medium, small and micro enterprises in Africa are owned by women. It is therefore important to ensure a favorable national but also regional regulatory framework to enable them to participate effectively, efficiently and competitively. Therefore, African countries should design different policy responses They support the comprehensive implementation of the AfCFTA.

In addition, an important and urgent point of action is to raise awareness of AfCFTA opportunities and mechanisms at the national and continental levels. This ultimate goal can be achieved by developing national and regional AfCFTA implementation strategies through deep engagement with the private sector and business associations and by widely disseminating these implementation strategies to create the necessary ecosystem for business.

ACBI Approach and Methodology: An Index Driven by Private Sector Insights

ACBI differs from other business and integration indices in that 1) it is based on private sector attitudes collected from primary surveys rather than secondary data, and 2) it focuses on African integration by targeting businesses based in trade (and investment). Africa. It is the first index based on a robust methodological framework and data collection process that interprets the opinions of businesses regarding trade restrictions under the AfCFTA. The dimensions that ACBI focuses on (see Table 1) are closely linked to the AfCFTA negotiations and outcomes, all focusing on the continent’s deeper integration.

Table 1. ACBI dimensions and subscales

Source: ECA based on ACBI study

ACBI’s survey is based on a minimum target of 50 completed responses in each country and is primarily low-level.Supplementing through online channels, telephone and face-to-face interviews as needed.

Firm perceptions are collected on a 0 to 10 perception scale (Likert). Index, Dimension, and Subdimension Scores Aggregate these perception scores to give each country a higher total score on a scale of 0 to 10. It shows how well a country is perceived by businesses in the country to be doing in terms of addressing trade, investment and integration issues in Africa.

For the ACBI, each dimension is weighted equally within the index, and each subscale is equally weighted within each dimension. As an awareness index, the results can be interpreted based on a solid understanding of the various issues surrounding trade and investment across Africa’s borders. A score of 5 reflects a neutral perception (ie, on average, companies feel neither positively nor negatively about the niche). A score below 5 indicates that, on average, companies have a negative view of the demand environment. Conversely, a score greater than 5 indicates that firms positively view that area as part of their business operations, or their trading capabilities and investments across borders.

Note:

This contribution represents the personal views of members of the United Nations Economic Commission for Africa (ECA) and is not intended to represent the position or the ECA or its members, nor does it represent the official position of any staff member.

The authors would like to acknowledge Mama Keita, David Luke, Komi Tsou, Jamie McLeod, Yash Ramkolowan, Jean Moolman, Thomas Yapo, Matthew Stern, Linton Reddy, Baneng Naape, Kendall Rynders, Jenny Jones and others who have contributed to various ACBI work. Micaela Mooloo.