In 1963, Dr Kwame Nkrumah called for a strong union of independent African states at a meeting of thirty-two African Heads of State and Government. As a result, the Organization of African Unity, which is what we now know as the African Union (AU), was formed. Decades later, his vision of a united Africa is slowly starting to become a reality with the creation of the African Continental Free Trade Area (AfCFTA), which came into force on the 1st of January 2021.
The AfCFTA promises unity in trade, resources, and capital (including human capital). With a population size of 1.3 billion people, AfCFTA is the world’s largest free trade area. This makes the African continent much more attractive to investments that will sustain economic growth and create the job opportunities the continent needs. Experts say it has the potential to lift 30 million people out of extreme poverty across the continent.
The AfCFTA also includes a protocol on the free movement of people between African states. This means that the young men and women we have been training on the skills of the future for over 5 years now have the opportunity to apply those skills on a continental scale.
Another element of the agreement that we are excited about is the increase in trade that will happen between African countries. As it stands, less than a fifth of all exports are from one African country to another. This means a lot more goods are exported to Europe and USA, sadly much of them as raw materials or unprocessed goods. One of the reasons for the low level of intra-African trade is the high levels of trade taxes but the agreement proposes to reduce all trade taxes by at least 90%. This is wonderful news for all the entrepreneurs that have gone through our programs including the Business Growth Program where, as the name suggests, the businesses are seeking growth strategies. Now they will have a potential ready market of 1.3billion customers.
As COVID-19 rages on, this agreement will give hope to many businesses that suffered in terms of trade during the worldwide lockdowns. New opportunities await them post-COVID and this is the time for them to strategize how they can expand into new markets. In support of the AfCFTA, the Afreximbank (African Export-Import Bank) pledged US$40 billion in inter-African trade and investment financing during the next 5 years. Again, great news for the entrepreneurs and the SME’s that want to increase capacity in order to supply the potential market. It’s not just about the finished product. Entrepreneurs and SME’s will now be able to effectively collaborate across different countries to combine resources that will then produce finished products that are of more value. These can then be traded within Africa or the rest of the world gaining a better value market.
The AfCFTA has even introduced tools that the entrepreneurs and SME’s can take advantage of such as the African Trade Observatory. This is a market intelligence system which tells you of the various opportunities and products which other countries might have or have interest in. Willie Shumba, who is the AU Commission senior customs expert and advisor at the AfCFTA, says “The African Trade Observatory is a market intelligence system that the Zimbabwe private sector should make use of to secure market niches across the continent.”
As we write this blog, we plan to have a series of public conversations with relevant authorities about this agreement and what it means for the entrepreneurs and SME’s of Zimbabwe. One thing for sure is that businesses with the right structures in place who take advantage of the information being awarded to them will benefit immensely. We hope to engage with you soon during these conversations. Stay positive and stay innovative!