AfCFTA’s $3.4trn potential gets global CEOs keen interest

BY BEN EGUZOZIE

• On the card are 4 key sectors worth $130bn

• High-potential for coys looking to invest in Africa

A potential trade volume estimated at $3.4 trillion packed into the African Continental Free Trade Area (AfCFTA) has now effectively received the attention and keen interest of ranking global chief executive officers (CEOs) from around the world, further putting the pressure to deliver on African political and business leaders who will now have to do right by the pact, seen to have travelled rather too slowly on delivering quick wins since it was launched.

The chief executive officers of some of the leading global companies when meeting recently at the World Economic Forum (WEF) in Davos, Switzerland, drummed up massive support for strategies to unlock this potential seen through the AfCFTA arrangement.

A report by WEF released during the meeting had been upfront in highlighting the support of the CEOs, but it had also gone on to underscore what it described as the high potential for companies investing in the new free trade area, now considered the world’s largest free trade area.

The agreements to pursue the delivery of the $3.4 trillion potential had been forged between African heads of state and the global CEOs attending the meeting when the first of its kind report on how public-private partnerships can support the implementation of the AfCFTA was launched.

The AfCFTA, by area and number of participating countries, is the largest free trade area in the world. Once fully implemented, it will be the fifth-largest economy in the world with the potential to have a combined GDP of more than $3.4 trillion. The free trade area was conceived in 2018, it now has 54 national economies in Africa. It could attract billions in foreign investment, boost overseas exports by a third, double intra-continental trade, raise incomes by 8% and lift 50 million people out of poverty.

The global CEOs and the African leaders collaborating to push this are looking at four sectors, according to the report. The areas are automotive; agriculture and agro-processing; pharmaceuticals; and transport and logistics. They say these have the most potential to boost trade. Global businesses have an important role to play in accelerating the implementation of the AfCFTA, it is now becoming clearer following the release of that report.

AfCFTA is regarded as a new era for global business and investment in Africa. It outlines high-potential sectors, initiatives to support business and investment, operational tools to facilitate the free trade area, and illustrative examples from successful businesses in Africa to guide businesses in entering and expanding in this area.

The idea behind the report released at WEF appears to help provide a pathway for global businesses and investors to understand the biggest trends, opportunities and strategies to successfully invest and achieve high returns in Africa, developing local, subregional and continental value chains and accelerating industrialization, all of which go hand in hand with the success of the AfCFTA. To ease the pain of transition to its new single market, Africa has learned from trade liberalisation in North America and Europe.

According to Børge Brende, president of World Economic Forum, “our wide range of partners and experience can help anticipate and mitigate potential disruptions in business and production dynamics.”

He said the Forum’s initiatives will help to ease physical, capital and digital flows in Africa through stakeholder collaboration, private-public collaboration and information-sharing.

Given the continent’s historically low foreign direct investment relative to other regions, the report highlights the sense of excitement as the AfCFTA lowers or removes barriers to trade and competitiveness.

Chido Munyati, head of regional agenda, Africa, World Economic Forum, said the promising gains from an integrated African market should be a signal to investors around the world that the continent is ripe for business creation, integration and expansion.

The report focuses on four key sectors that have a combined worth of $130 billion and represent high-potential opportunities for companies looking to invest in Africa: automotive; agriculture and agro-processing; pharmaceuticals; and transport and logistics.

For Wamkele Mene, secretary-general of AfCFTA Secretariat, “macro trends in the four key sectors and across Africa’s growth potential reveal tremendous opportunities for business expansion as population, income and connectivity are on the rise”.

Landry Signé, executive director and professor, Thunderbird School of Global Management and co-chair, World Economic Forum Regional Action Group for Africa, said: “These projections reveal an unprecedented opportunity for local and global businesses to invest in African countries and play a vital role in the development of crucial local and regional value chains on the continent”.

The WEF is actively working towards implementing trade and investment tools through initiatives, such as Friends of the Africa Continental Free Trade Area, to align with the negotiation process of the AfCFTA. It identifies areas where public-private collaboration can help reduce barriers and facilitate investment from international firms.