This is a “Preface” written by Landry Signé and Chido Munyati to the insight report, “AfCFTA: A New Era for Global Business and Investment in Africa”
By 2050, the continent will be home to 2.5 billion people, with its combined business and consumer spending reaching $16.12 trillion.3 The African Continental Free Trade Area (AfCFTA), which was signed in 2018, ratified in 2019 and officially launched in 2021, creates a single market in Africa, offering tremendous opportunity for unlocking business potential across Africa and the world. Taking into account the additional benefits from increased foreign direct investment (FDI) expected from the AfCFTA, the World Bank projects that the AfCFTA could lift 50 million people out of poverty, raise overall incomes by 8%, increase intra-African exports by up to 109% and increase international exports by 32% by 2035.4 These projections reveal an unprecedented opportunity for local and global businesses to invest in African countries and play a vital role in the development of crucial local and regional value chains on the continent.
*** Chido Munyati is the Head of Regional Agenda, Africa; Global Leadership Fellow, World Economic Forum***
Historically, Africa’s FDI, as well as its regional and global value chain participation, have been consistently low compared to the rest of the world, hampered by barriers to trade and competitiveness. The AfCFTA aims to remove many of these barriers and unlock opportunities for Africa to join regional and global value chains and integrate with international businesses. The promising gains from an integrated African market should be a signal to investors around the world that the continent is ripe for business creation, integration and expansion.
Moreover, investment in Africa under the AfCFTA is undoubtedly a path towards sustainable, equitable and inclusive prosperity, and represents an unprecedented opportunity for companies to have a lasting impact on the flourishing of the continent with the youngest average population in the world. Increased investment and the strengthening of value chains due to the AfCFTA’s promise of greater economic integration will bring much-needed jobs and increase wages for all, especially women. By 2035, wages for men are projected to increase by 8.5%, while wages for women should increase by 11.2% on average.5 Furthermore, in conjunction with the Fourth Industrial Revolution, the AfCFTA will enable Africa to both “leapfrog” certain industrial stages in which it has sometimes lagged and spur the job creation so essential to its young workforce.6 As the AfCFTA facilitates trade and thus accelerates industrialization, virtuous cycles will begin to emerge across the continent: increased manufacturing leading to high-skill jobs creation, bringing better educational training and educational opportunities, and finally the development and retention of local talent, leading to thriving local businesses that can partner with global leaders to the mutual benefit of African and international companies alike. It is this promise – the promise of a symbiotic relationship between international business and the people of the continent – that is at the root of the commitment to this project and report.
*** Landry Signé is the Executive Director and Professor, Thunderbird School of Global Management, Washington, DC; Co-Chair, World Economic Forum Regional Action Group for Africa ***
The report aims to provide a pathway for global businesses and investors to understand the biggest trends, opportunities and strategies to successfully invest and achieve high returns in Africa, developing local, subregional and continental value chains and accelerating industrialization, all of which go hand in hand with the success of the AfCFTA. To do so, it uses the work of Landry Signé (including his book Unlocking Africa’s Business Potential7
and his forthcoming work Africa’s Fourth Industrial Revolution) and that of the AfCFTA Secretariat, and cites illustrative cases from numerous multinational corporations and institutions. Global businesses and investors are encouraged to invest in the four priority sectors explored here (automotive; agriculture and agro-processing; pharmaceuticals; and transport and logistics), capitalizing on the various tools and strategies provided in this report. The examples set by the institutions and companies highlighted here are inspiring, having grasped so successfully what it means to invest in Africa, in every sense of the word. The insights provided will be of use in imagining and building Africa’s future in the era of the AfCFTA.