The rate of intra-continental trade in the economic unions and free-trade zones of the European Union, Asia and North America is 70%, 60% and 54% respectively, compared with just 15% in Africa. The Continental African Free Trade Area (CAFTA) aims to raise this rate to 52%. How can this be achieved? At a plenary session organized as part of the International Forum on Africa and Development (FIAD 2024), the presidents of African employers’ associations and the senior advisor for private-sector involvement at the FTAA Secretariat took stock of the progress made and some of the avenues to be explored. The theme was “Building opportunities: spotlight on the FTAA”.
ZLECAF represents a major step forward for trade on the continent. According to Cynthia Gnassingbé-Essonam, Senior Advisor for Private Sector Engagement at the ZLECAF Secretariat, this comprehensive and ambitious agreement, ratified by 47 countries, has harmonized rules of origin to facilitate intra-African trade.
Gnassingbé-Essonam points out that, before ZLECAF, an entrepreneur or industrialist had to comply with various regulations specific to each country when wishing to export his products. Today, “over 92% of products traded within the framework of intra-African trade are subject to harmonized rules of origin”, applicable to all 47 signatory countries. The textile and automotive sectors remain the exceptions to this harmonization.
Concrete achievements
Asked about the actual start-up of intra-African trade under the ZLECAF, Cynthia Gnassingbé-Essonam asserts that meaningful trade has indeed begun. To support the operational implementation of the agreement, it is essential to develop tools adapted to the specificities of African economies, she points out. One such tool is the Pan-African Payment and Settlement System, which enables cross-border payments to be made in real time, in different local currencies. Its gradual deployment across the continent is designed to facilitate commercial transactions, she explains.
In addition,” continues the Senior Advisor, “the FTAA has also set up an Adjustment Fund to compensate for revenue losses linked to the reduction or elimination of customs duties. This fund comprises three windows: a basic window, which allocates contributions from States Parties and provides grants and technical assistance to compensate for tariff revenue losses; a general window, which finances trade facilitation infrastructure projects at State or regional level; and a commercial window, which mobilizes funds to support the public and private sectors so that they can adapt and take advantage of the opportunities offered by the agreement.
In short, the FTAA is transforming the African trading landscape, as Cynthia Gnassingbé-Essonam argues. The measures adopted by this agreement create a harmonized and favorable environment for intra-African trade, while offering essential tools and financial support for successful implementation. The prospects offered by the FTAA are vast and promising, opening up new opportunities for trade and economic development on the African continent.
The need for African employers to access information
Michel Djombo, President of the Union Patronale et Interprofessionnelle du Congo (UNICONGO), emphasized the crucial importance of access to information for African business leaders. In his view, access to information is essential if business leaders are to adopt the global, strategic vision required on a continental scale.
A new vision for industrialization
Mr. Djombo also points out that industrial activities used to be developed primarily for local or sub-regional markets. However, it is now crucial to support investors, both current and future, to look beyond local markets and consider continent-wide deployment. “There are entire value chains that need to be rethought in order to make them more internationally oriented”, he points out, adding that the current challenge for African employers’ associations is to support their members in this rethinking and change of industrial approach.
What role for African employers’ associations?
African business leaders often “have their noses to the grindstone”, which can limit their strategic vision. In this respect, the President of UNICONGO points out that the role of employers’ associations is to “take a step back”, analyze trends and value chains, and provide relevant market information. The aim is to help investors reorient their strategies and internationalize their value chains.
Financing challenges and solutions
When it comes to financing, Djombo believes that, as in many parts of the continent, the options available are often short-term. Yet industrial development requires long-term resources. Banks focus mainly on trade finance, and are reluctant to go beyond this framework. This is why the President of the Congolese Employers’ Association maintains that it is essential to develop a long-term investment vision, and to work with financial structures to develop appropriate approaches. To this end, he advocates the development of financial mechanisms such as sovereign wealth funds and private equity to strengthen the financial market and enable the mobilization of long-term resources. This approach would be crucial to support industrial development on the continent.
Promoting “made in africa
The FTAA offers a unique opportunity for African countries to rethink and restructure their economic and trade relations. The President of the Confédération Générale des Entreprises du Maroc (CGEM), Chakib Alj, emphasizes the need to adopt a “made in Africa” approach. According to him, the CGEM, in collaboration with the African Development Bank (ADB), has carried out a study into the complementarities between African countries, the results of which will soon be unveiled.
According to Chakib Alj, the initial results of this study show that the potential for economic and commercial complementarity between African countries is vast. This integrated approach shows how African countries can leverage their individual strengths to create strong continental value chains. By combining the resources and skills of different countries, Africa can produce goods that are more competitive on international markets, while strengthening its local economies. To achieve this transformation, it is essential to move beyond old ways of thinking and focus on inter-African collaboration. That’s why the President of the CGEM is calling for a break with old ways of thinking.
