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Boost local capacities to achieve AfCFTA potential

BY: Esther Lamiokor Mills
Mr Neme Wamkele (left), Secretary-General of AfCFTA
Mr Neme Wamkele (left), Secretary-General of AfCFTA

The African Continental Free Trade Area (AfCFTA) agreement is seen by many as an excellent strategy to develop Africa’s economy through its manufacturing sector, after many years of discussions about creating a common market.

The AfCFTA will boost the continent’s manufacturing sector by facilitating access to new markets for small and medium enterprises (SMEs), increasing economies of scale and facilitating export diversification.

It is also expected to boost intra-African trade, promote industrialisation, create jobs and improve the competitiveness of African industries on the global stage.

That is why a vibrant manufacturing sector is crucial to transforming economies on the continent in order to achieve sustained growth, create more jobs and achieve prosperity for all.

African nations currently trade more internationally than with one another. Intra-African trade accounted for 17 per cent of African exports, which is low, compared to 59 per cent for Asia and 68 per cent for Europe, according to the World Economic Forum.

But AfCFTA wants to do more than just boost trade in goods — its scope includes services, investment, intellectual property rights and competition policy, although some of these aspects are still under negotiation.

Since Africa officially started trading under AfCFTA in January 2021, the practical impact of the agreement has been minimal, while disruptions of global supply chains due to COVID-19 restrictions in 2020 have limited AfCFTA's potential.

The insignificant share of Africa in global trade and the relatively low level of intra-African trade can be attributed, to a large extent, to the inadequacy of productive capacity, especially in the dynamic sectors of global trade.

For us, one of the challenges that can hinder the realisation of a common market for the continent is the lack of capacity to add value to the continent’s raw materials.

In short, we simply export our products in raw form, thereby thwarting the growth of a common market.

This is because if other countries on the continent cannot access finished goods of African produce to import, they will be compelled to buy them from outside the continent.

The global chocolate industry is worth over $150 billion. While West Africa supplies 70 per cent of the cocoa beans, most of the value in a chocolate bar is generated in Europe and North America.

West African economies receive less than $6 billion, which is despite a growing demand for consumer chocolate in West Africa, some of which is satisfied through imports.

A typical example is the export of raw cocoa beans to Switzerland, which adds value to the beans and turns them into chocolate and derives an annual revenue of about $2 billion.

It is in this regard that the Daily Graphic supports the call by discussants at the recent Graphic Business/Stanbic Bank Dialogue that governments across the continent should boost the local capacities of their respective businesses in order to achieve the full potential of the continent’s common market aspirations.

For us in Ghana, we propose more investment in the local economies, especially at the level of the metropolitan, municipal and district assemblies, to create more efficient regional value chains to enhance competitiveness on the African market.

The boosting of intra-African trade and the enhancement of the share of Africa in global trade require the diversification of the economy and the enhancement of productive capacity.

The experience of other regions of the world that have succeeded in achieving high levels of intra-regional trade and significant shares of global trade indicates the importance of competitiveness and productive capacity in the dynamic sectors of global trade as a sure bet to realise the full potential of AfCFTA.