On African businesses on AfCFTA!

Nov 10, 2023, 10:47 AM | Article By: EDITORIAL

A survey of African business executives finds that most expect the African Continental Free Trade Area to have a positive effect on their firm, but that more information is needed for companies to benefit from the opportunities it will provide.

More than 80% of respondents were optimistic about the way they expected the African Continental Free Trade Area (AfCFTA) to affect their firms in a survey of over 800 business executives to be published later this month. The survey, conducted in both English and French, was carried out by IC Publications (publishers of African Business) in conjunction with Botho Emerging Markets Group on behalf of PAFTRAC, an organisation that seeks to gather the views of the African private sector and bring them to bear on trade and investment policy issues at the pan-African level.

The businesses, which were predominantly small and medium-sized enterprises, were located in 48 different countries, 44 of which were in Africa.

However, the survey found that 72.9% of respondents had a low to moderate level of awareness of the AfCFTA, with low access to information about it. Some 49% had not heard about the Pan-African Payment and Settlements System and a similar number were unaware of the AfCFTAs work on reducing non-tariff barriers, two of its most important operational instruments. In a similar vein, large numbers expressed concern about the threat of increased competition, reflecting lack of awareness of the measures in place to protect vulnerable markets in the early stages of implementation.

Some 56% of respondents expect the AfCFTA to have a very positive effect on their businesses, while 24% think it will have a moderately positive effect. Only 1% expect a very negative effect. This confidence is underpinned by the AfCFTA’s commitment to ease access to markets and foster trade and economic growth. However, the figure represents a fall from the figure in last year’s survey, when 93% of respondents expressed optimism, and reflects a general waning in confidence about the continent’s economic future in the face of headwinds generated by high inflation, debt levels and interest rates.

More information on growing trade and market opportunities was regarded as by far the most important form of support companies need in order to benefit from the AfCFTA. Greater access to credit and an improved trading landscape through a focus on training, investments and regulations are all regarded as being beneficial, but none come close to the information deficit in terms of perceived benefit.

The main perceived benefits of the AfCFTA on business prospects are increased market size, the potential for new investments and better access to raw materials. However, the eroding of both tariff and non-tariff barriers is also regarded as the biggest threat that the AfCFTA could pose because of the increased competition it could bring, as cited by 27% of respondents.

A Guest Editorial