Global Courant
In 2018, 44 African countries signed the African Continental Free Trade Agreement, brokered by the African Union (AU). The AfCFTA aimed at creating a single market for goods and services, facilitating the movement of people, promoting industrial development and sustainable and inclusive socio-economic growth, and solving the challenges of multiple and overlapping memberships in regional economic communities. The African Continental Free Trade Area connects more than 1.3 billion people to a single market, unlocking new opportunities for African and global businesses in key industries, with a combined GDP expected to reach US$16.2 trillion by 2035 . From cutting-edge technology to healthcare, the question remains: how can countries leverage the potential of frictionless African trade to become a major player in global supply chains?
Since 1971, the World Economic Forum (WEF) has brought together leaders from the public and private sectors, as well as civil society, to discuss and address global issues such as these. This year was no different. During a live session entitled An African Economy of Scale, this year Annual meeting in Davos, Switzerland, The WEF brought together leaders from the African economy to discuss the potential of frictionless African trade as a key player in global supply chains. Present at the roundtable were Wamkele Mene, Secretary General of the African Continental Free Trade Area Secretariat, Kashim Shettima, Vice President of Nigeria, Office of the Vice President of Nigeria, and Mary Vilakazi, CEO designate of FirstRand Ltd and Fernanda Lopes Larsen. , Executive Vice President for Africa and Asia, Yara International.
Mene highlighted the continent’s potential to become the seventh largest economy in less than two decades. Last year, seven countries participated in the pilot for trade under the rules of the AfCFTA. Mene shared how an exporter in Ghana is exporting ceramic tiles to Cameroon. Before the AfCFTA, the exporter traded on global routes, which meant no competitiveness. The AfCFTA allowed for a 20% reduction in excise duties, which translates into 20% competitiveness from the start of trade. Moreover, with an annual dairy surplus of 2 million liters, Uganda has carved out a surprising niche in the global market by exporting milk to Algeria, a country previously dependent on imports from Latin America. “We have seen the beginning of trading. Goods that cross borders. Not in the bundle we would like to see, as it is still in its early stages. Nevertheless, we have developed the rules and legal contract that allow an internal market to be effective through the participation of the private sector,” he said.
Agriculture as an integral part of Africa’s economic scale
One sector with enormous potential for Africa is agriculture. The sector employs about two-thirds of the continent’s workforce and contributes an average of 30 to 60 percent of gross domestic product for each country and about 30 percent of the value of exports. Yet the sector consists mainly of small farmers, and that brings numerous challenges. According to Fernanda Lopes Larsen, Executive Vice President for Africa and Asia at Yara InternationalOne of the recurring challenges is the amount of fertilizer. Africa uses 5 to 6 times less fertilizer per hectare than the global average. As a result, this not only depletes the nutrients from the soil, but also affects crop productivity for a long time. “Yet simply increasing fertilization is not enough,” says Larsen. “We need to increase yields more sustainably. We need to focus more on nutrients rather than over-fertilizing the soil. Today, a small farmer in Africa applies no more than two nutrients. That is not enough. We need to tailor solutions for farmers, like we did in Yara, where we developed something specifically for maize farmers that gives them at least four to five nutrients at a price they can afford.”
Larsen further highlighted what can be done to improve African agriculture. “It’s not just about the product, but also about the farmers,” she says. “There is still a knowledge gap among them, and we need to bridge it. How can we help them learn more about new practices, such as regenerative agriculture? Today, many farmers still practice agriculture as their parents and grandparents did. There needs to be a paradigm shift.” There is an urgent need to teach farmers how to grow crops while reducing emissions; how to better manage their soil resources; and how to use their input efficiently, not just nutrients but also water. “Most of Africa’s agriculture is rain-fed, so we need to find better ways to conserve and use water, as well as protect biodiversity. All we do is improve farmers’ livelihoods. If they don’t win, we don’t win,” Larsen added.
Harnessing the potential of Africa’s human resources
Nigeria’s Vice President Kashim Shettima believes that Africa’s human resources have the potential to scale up the economy. “The beauty of Africa, in addition to its vast natural resources, is our human resource. We are the youngest continent in the world. For example, the average age of the Nigerian population is 19 years. Africa’s youth growth can be turned into a demographic dividend,” he said. Shettimas optimism comes from a projected global talent shortage of 65 million by 2035. Even India, the outsourcing queen, will only have a talent surplus of one million people. “Africa,” Shettima declared, “is perfectly positioned to benefit from the digital revolution.” To further underline the power of human capital, he points to India’s projected $100 billion windfall from talent outsourcing by 2024. $35 billion.”
However, Shettima recognizes the need for transformation and partnerships. Transforming Africa’s young population into a productive force requires investments in education, skills development and digital infrastructure. Addressing this will not only boost Nigeria’s economic growth but also contribute to the prosperity of the entire continent. As Shettima aptly said, “When Nigeria works, Africa works.”
Mary Vilakazi, CEO-designate of FirstRand Ltd, agrees on the importance of structure and reform within the continent. “There are many structural reforms that have been needed for some time and have not received enough attention. Now you can say that they are getting the attention they deserve. You’re looking at some of the structural reforms that are happening in South Africa. We are one of the most industrialized countries on the continent, but we know the impact of the lack of energy and what it has done to our economy.”
Unlocking the potential of frictionless African trade by 2024
“One way to stimulate growth in any economy is to decongest trade,” Vilakazi rightly noted about the potential of frictionless African trade. This year, the AfCFTA aims to accelerate implementation. 31 countries will participate in the guided trade initiatives, applying the AfCFTA rules for trade. Mene further emphasized that the intensified efforts this year will be on the services sector – sectors such as tourism and banking – within the framework of the supervised training initiative and associated resources. One of the instruments intended to accelerate the AfCFTA is the Pan-African Payments and Settlement System system launched by the African Export-Import Bank (Afreximbank) and the AfCFTA Secretariat to enable businesses and individuals in Africa to make and receive payments in their local currencies across the continent. “If you are in Ghana and want to buy from Kenya, you have to buy a third currency. That cost of currency convertibility has limited growth in Africa,” Mene said.
The second tool is digital trade. According to Mene, “it will further increase the competitiveness of African trade. As we all know, Africa has an advantage in digital innovation. The Protocol will leverage that potential and provide that regulatory framework to enable Africa’s digital economy to continue moving forward.” Mene further stated that trade ministers across the continent will soon finalize the protocol on digital trade. “So far, we have learned that the private sector is poised to benefit from the AFCTA. Governments must act faster,” he said.
Vilakazi sees plenty of reasons for optimism about the coming decade. “There’s a lot you can look at and be encouraged by about what the next decade would be,” she noted. While referring to an incident that took place in 2000, when the global magazine The Economist had a map of Africa on its cover with the inscription Tthe hopeless continent (although they have since tried to redeem themselves), Mene said: “What they projected is completely different from what every African believes. And that is the enormous potential that Africa has.”
