Time to listen and respond to the needs of African Small and Medium Enterprises
June 3, 2020
By Wamkele Mene & Frank Matsaert
2021 marked the beginning of a monumental milestone in Africa’s history, as the continent opened
its markets under the African Continental Free Trade Area (AfCFTA). The move represents a
phenomenal opportunity to expand trade, attract new investment and accelerate broad-based
growth.
One year on, efforts to support the implementation of the AfCFTA are well underway and partners
are actively contributing to the drive to try and accelerate progress, with the UK government
recently pledging £35 million.
Currently, Africa accounts for just 2.9% of global trade, while only 17% of African exports are intra-
continental, a paltry sum when compared with Asia’s 59% and Europe’s 68%. Yet UNECA estimates
that, once fully implemented, the AfCFTA could grow Africa’s GDP from US$ 2trillion to around
US$3.4 trillion, generate employment growth of 1.17% and boost welfare gains by an additional
$16bn annually by 2030.
The AfCFTA is projected to deliver huge benefits for people and businesses across the African
continent, as well as for its key trading partners of the EU, UK and US. Successes are being targeted
through the agreement’s aim of reducing trade costs and enabling Africa to integrate further into
global supply chains, eliminating 90% of tariffs with a focus on outstanding non-tariff barriers,
creating a single market with the free movement of goods, services, people and labour.
While the proliferation of regional trade blocs has started the process of harmonisation, they have
also, in some instances, led to higher export tariffs. With the aid of initiatives like one-stop border
posts, the AfCFTA will, in principle, remove these impediments to trade. Accompanying regional
programmes to the AfCFTA, like the African Union’s Action Plan for Boosting Intra-Africa Trade,
should help accelerate progress.
Nonetheless, the challenge remains of building a single market comprising 55 countries with more
than 1.3 billion people becomes a reality. While 41 countries have deposited their instruments of
ratification, not a single trade has occurred within its terms as a result of political disagreements.
COVID-19 compounded such issues, grinding international commerce to a halt as governments
sought to prevent the exponential spread of the virus. The severity of its social and economic impact
has necessitated a proven, ‘plug and play’ solution, that can be deployed quickly and at scale.
We know such solutions exist to these problems. As a multi-donor, not-for-profit, aid-for-trade
organisation, TradeMark East Africa (TMEA) has already started work on the goals of the AfCFTA by
removing both tariff and non-tariff barriers across the East and Southern Africa regions for more
than a decade, whilst also digitising the trade process to increase the speed of intra-continental
trade. While the UK took the lead in establishing TMEA, most recently pledging funds to the
organisation to facilitate trade within the AfCFTA, the US and EU are now also major investors,
growing the organisational firepower to more than US$1 billion over the last 10 years.
TMEA’s investments in the region’s trade infrastructure, such as at the ports of Mombasa and Dar es
Salaam, has improved both capacity and efficiency, while its support of the construction of one-
stop border posts have reduced the time it takes traders to cross from one country to another by an
average of 70%, lowering costs by more than US$100 million annually.
With its extensive donor network spanning five of the G7 members, existing capabilities and
unrivaled track record, TMEA is uniquely placed to help meet demand in supporting the
implementation of the AfCFTA. A key priority now is to scale-up TMEA’s operations to West and
Central Africa, recreating its model across the continent and leveraging its best-of-class capabilities
in aid-for-trade. With the support of the UK government’s £35 million pledge, TMEA can continue to
forge its way in improving intra-continental trade on the African continent as part of the AfCFTA.
Leveraging continental partnerships
To realise the benefits of the AfCFTA, the continued support and increased engagement of key
strategic partners are required. For the US, the AfCFTA neatly aligns with the principles of their
flagship African Growth and Opportunities Act (AGOA) – empowering big and small nations alike
across the continent. AGOA, underpinned by a ‘trade not aid’ philosophy, provides the perfect
platform from which the AfCFTA can help supercharge African trade with the US.
Across the Atlantic, the free trade area will help graduate the continent’s relationship with Europe to
a genuine two-way economic partnership of equals. The rhetoric from recent EU-Africa summits
underscores the political will that exists. Channeling active European support on helping Africa fast-
track delivery of the AfCFTA will be key to achieving that vision.
The initiative also provides a strong fit with the UK, and its stated aim of becoming Africa’s
“investment partner of choice”. By allowing both parties to capitalise on trade deals the UK has
signed with over a dozen African countries since it left the EU, the agreement will undoubtedly yield
greater investment, adding to the multi-billion pound deals facilitated by the UK-Africa Investment
summits between 2020 and 2022.
Delivering on the potential of the African single market will require a concerted effort and
investment. African leaders have set the blueprint; now the international community must support
them to help move Africa’s economic recovery into the fast lane.
