Critical Role for Small Business as Continental Trade Pact Takes Shape

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With the Africa Continental Free Trade Agreement (AfCFTA) coming into full force, there are hopes that the resulting economic transformation will lead to vitally-needed job creation for the  region’s exploding population of youth.

“Africa is the only world region projected to have strong population growth for the rest of this century,” according to a Pew Reach Center report published in June.  “Between 2020 and 2100, Africa’s population is expected to increase from 1.3 billion to 4.3 billion,” Pew reports.

Employment is the critical ingredient that will change the lives of young Africans and grow Africa’s middle class, estimated to exceed 300 million. Like in other world regions, small businesses are fundamental to development, trade, and job creation – to growing the continent’s middle class, which is already taking place.  As these numbers rise, it is crucial that quality of life is improved and that there is movement out of poverty for millions of impoverished Africans.

The adoption of the AfCFTA has increased expectations that  jobs will follow, as free movement of goods and services increases. To make this happen, it will be crucial to include special initiatives for small and medium size enterprises, or SMEs.  Thus far, SMEs are discussed little in the context of the AfCFTA.

What is required to make this happen are special trade facilities for SMEs to assist with cross-border and regional trade. One example would be a one-stop window to help SMEs navigate through the new processes and/or benefits of the agreement. Additionally, giving SMEs a seat at the table in all AfCFTA meetings, as will the creation of an SME Office in the new AfCFTA secretariat – headquartered in Accra and vested with coordination responsibilities.

AfCFTA was signed on March 21, 2018, in Kigali, with an initial 22 countries taking part. By July 2019, all 54 African nations had signed – making the continent potentially a $2.4 trillion trading block. The rather quick turn-around signing by 54 nations in slightly over a year was an achievement skeptics had no thought possible.

So, what’s next? There remains a lot of ‘filling in the blanks’ to accomplish. First steps for this mega-trade behemoth include these trifold challenges:

Policy formulation, including harmonizing trade tariffs;

Infrastructure development, including the building of the Ghana HQ, and;

Technical assistance, including on how to run a large trade organization.

The three areas must be managed with vision by the leadership of Africa nations.

Underlying questions remain as to how Africa’s leading partners – the United States, among them – are going to engage with the AfCFTA, given the number of existing bilateral trade arrangements, plus those that are being courted for the future.

For the United States, the annual African Growth and Opportunity Act (Agoa) Forum is the meeting with trade ministers of all African governments qualified for Agoa. The latest took place last month in Abidjan, where the importance of the AFCTA again was extensively discussed. What was widely agreed is that we all must do the utmost to see that AfCFTA succeeds.

This success is critical for Africa and serves U.S. interests as well, as we seek sustainable trading relationships, markets for our products and services and consumers for our manufacturing goods.

Remember the three points mentioned above – policy formulation, infrastructure development, and technical assistance – with an emphasis on SMEs.

These are areas where U.S. assistance can make a contribution. We must be at the tables with our African partners as they establish one of the most important trade institutions since the creation of the World Trade Organization in 1995.

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