What Africa Continental Free Trade Agreement (AfCTA) means to Tech ecosystems and companies in Africa

[Want to get automatic updates on ethel cofie’s blog post of Africa, technology, ecosystems and doing business in Africa sign up here ]

The technology private sector  and key ecosystem partners , are often not in the room  when African Union / Regional block conversation that affect them are had , one of the more important African Union policies that when implemented will have fundamental changes to technology ecosystems is the  Africa Continental Free Trade Agreement (AfCTA)

The African Union( AU)  is the Africa regional body which  encompasses all 55 African governments  with the main goal to accelerating the process of integration in the continent  to enable  Africa become an economic power house while dealing with social , economic and political problems on the continent .

It is also aimed at promoting cooperation and development across African nations while promoting sovereignty and territorial integrity  for its member states

[want to get automatic updates on ethel cofie’s blog post of Africa, technology, ecosystems and doing business in Africa sign up here ]

As part of this mandate The AU developed Agenda 2063 , As described by the AU Agenda 2063 as “a strategic framework for the socio-economic transformation of the continent over the next 50 years. It’s builds on, and seeks to accelerate the implementation of past and existing continental initiatives for growth and sustainable development.”

 One of the key projects out of the Agenda 2063 is the Africa Continental Free Trade Agreement (AfCTA)

According to the agreement establishing the African Continental Free Trade area:

“The general objectives of the AfCFTA are to:

 (a) create a single market for goods, services, facilitated by movement of persons in order to deepen the economic integration of the African continent and in accordance with the Pan African Vision of “An integrated, prosperous and peaceful Africa” enshrined in Agenda 2063;

[Want to get automatic updates on ethel cofie’s blog post of Africa, technology, ecosystems and doing business in Africa sign up here ]

 (b) create a liberalised market for goods and services through successive rounds of negotiations;

(c) contribute to the movement of capital and natural persons and facilitate investments building on the initiatives and developments in the State Parties and RECs;

(d) lay the foundation for the establishment of a Continental Customs Union at a later stage;

(e) promote and attain sustainable and inclusive socio-economic development, gender equality and structural transformation of the State Parties;

 (f) enhance the competitiveness of the economies of State Parties within the continent and the global market;

(g) promote industrial development through diversification and regional value chain development, agricultural development and food security; andsolve the challenges of multiple and overlapping memberships and expedite the regional and continental integration processes.

Governement states  will achieve AfCTFA by :

(a) Progressively eliminate tariffs and non-tariff barriers to trade in goods;

(b) Progressively liberalize trade in services;

(c) Cooperate on investment, intellectual property rights and competition policy;

(d) Cooperate on all trade-related areas;

(e) Cooperate on customs matters and the implementation of trade facilitation measures;

(f) Establish a mechanism for the settlement of disputes concerning their rights and obligations; and

(g) Establish and maintain an institutional framework for the implementation and administration of the AfCFTA.”

 

AfCTFA was an opportunity to unlock a 1.2 billion people opportunity with a combined GDP of 3.4 trillion USD  , the United Nations Economic Commission on Africa projects a 52.3% increase of the intra Africa trade  and  increase opportunities of scale , bring down the barriers for market access and enhance competitiveness across the African continent

This agreement would become the largest free trade area since the World Trade Organization once it is ratify . The AU need 22 members state out of the 49 that have signed the agreement to ratify it before it can come into force, and as at Jan 2019  15 out 22 countries  have done so.

The aim is to hit the ratifications targets by 2020.

The AfCFTA hopes to double intra-African trade, which currently accounts for 16% of overall trade, by removing non-tariff and tariff barriers on a wide range of goods and services. The free trade area would ensure mutual recognition of standards, licensing and dispute mechanisms for key industries, making it easier for African companies to leverage economies of scale in new markets.

What Africa Continental Free Trade Agreement (AfCTA) means to Tech ecosystems and companies in Africa

The good

As I mentioned access to 1.2 billion people with a combined 3.4 trillion USD will create new market entry opportunities across manufacturing and technology and agriculture and many more sectors

I believe the biggest impact will be in ecommerce sector, the standardization of customs practices and tariffs will mean it, will be much easier  and cheaper for buying online goods for transportation across African countries, the scale that ensues will ensure lower cost of transportation of goods and lowering of costs passed on to the consumer.

The harmonization’s of trade regulations and the lowering of tariffs barriers access to Africa as single market is cheaper and easier and for online service providers who seem to be boxed in their home countries or regional economic groups

The current investments will have access to scaling, easier and cheaper across the continent, enabling more inflow of foreign direct investment and allowing better quality startup exits.

The economic integration I believe will also prompt a wider discussion on regulatory barriers for fintech providers across the African continent

The bad

The lowering tariff barriers ensure that a large number of tech startups can begin to scale across the African continent cheaper and faster, however the opening up of markets and in the influx of new players may squeeze out smaller and less established local players.

 

 

[want to get automatic updates on ethel cofie’s blog post of Africa, technology, ecosystems and doing business in Africa sign up here ]