Wamkele Mene: The business outlook and the impacts of the African Continental Free Trade Area: Challenges and Opportunities

This is the keynote address by H.E. Mr Wamkele Mene, Secretary-General of the AfCFTA Secretariat on occasion of the 8^th Edition of the Southern Africa-Europe CEO Dialogue held on 25 November 2021 in Johannesburg, South Africa.

1. At the outset, allow me to thank the organisers for inviting and affording me an opportunity to make an opening statement at this session of the Southern Africa-Europe CEO Dialogue, 8^th Edition.

• I wish to commend the organizers for the focus of the session: “The Business Outlook and the Impacts of the African Continental Free Trade Area: Challenges and Opportunities”.

• I consider this a strategic session as it seeks to rally the private sector in Southern Africa, and Africa in general, to interface with the European business community; an opportunity to explore how European and African companies will benefit from win-win business partnerships and share experiences on best practices from the European internal market.

• Indeed, the operationalisation of the AfCFTA in January this year, presents huge opportunities for African and EU businesses.

• Africa and the EU have enjoyed historic ties with the continent benefiting from the steady support through international assistance from the EU and the member states. 

• I am sure you will agree with me that, the potential exists for a more robust partnership that brings more trade and investment to spur sustainable and inclusive development in Africa, while at the same time contributing to EU countries’ economic growth.

• Today, we have a platform, the African Continental Free Trade Area (AfCFTA), that can be one place to promote both sides, and to deepen the cooperation between the EU and Africa.

Distinguished Ladies and Gentlemen

• Since 1^st January this year, it became possible for State Parties whose customs procedures are ready, to trade under the AfCFTA preferential terms. Currently, 42(76%) of the AU Member States have ratified the agreement, with 39 State Parties,having legally accepted the obligations to open their markets, reduce their barriers to trade, reduce barriers to investment and to adhere to the single set of rules for trade and investment on the African continent. 

• As you may well know, Africa is a big market but fragmented into small countries: Almost half (47%) of the 55 African countries have populations of under 10 million people. Trade is obstructed by over 100 unique land borders among the countries and trade rules diverge across regulatory standards, competition, investment, intellectual property rights, and services making the scaling up of business across borders difficult. 

1. The AfCFTA by consolidating Africa into one trade area provides a platform where businesses and investors can play an important role in the economic development of Africa. This, undoubtedly  augurs well for Foreign Direct Investment (FDI) flows, including from the EU, to the continent. 

1. By providing a large and attractive market, with reduced cross border barriers, investors can undertake larger revenue projects on a regional rather than national scale. The AfCFTA, therefore, offers an apt response to the reluctance of investors to invest in small, fragmented and uncompetitive national markets.

1. As you may be aware, the AfCFTA negotiations are progressing in phases. Phase I negotiations covering the protocols on trade in goods, trade in services, and rules and procedures for the settlement of disputes have been concluded. There are, however, few outstanding issues pertaining to the AfCFTA rules of origin (RoO) and submission of initial tariff and service offers, which we expect to be concluded as soon as possible.

1. Preliminary work has already commenced on the Phase II negotiations covering Competition Policy; Investment; Intellectual Property Rights; Digital Trade; and Women and Youth in Trade. We are doing our very best to expedite the negotiations, given all the challenges caused by the on-going Covid-19 pandemic. 

1. It is worth underscoring that, the AfCFTA is complemented by other continental initiatives; including the Single African Air Transport Market, Programme for Infrastructure Development in Africa, and the Protocol on the Free Movement of persons, among others. The AfCFTA is being implemented alongside these initiatives to address Africa’s developmental challenges and realise better economic benefits for the continent.

Ladies and Gentlemen

1. While Africa, as other continents in the world, has been severely impacted by the Covid-19 pandemic, it is well placed now, than ever before, to rebound better and stronger and achieve the transformation desired for the Africa we want.

1. Today, the case for investing in Africa is stronger than ever. Africa will remain a competitive investment destination for decades to come because of its continental integration, improving relative risk profiles, and demography.  

1. Having witnessed its worst recession in over 25 years in 2020 when GDP declined by 2.1%, Africa’s economy is forecast to register an encouraging growth of 3.4% and 4.5% in 2021 and 2022 respectively.

1. Indeed, countries across the continent are taking policy actions to create an environment in which businesses can thrive; adopting macroeconomic and industrial policies essential for a stable macroeconomic environment that avoids and smooths out volatility in prices, sharp deteriorations in the current account and budget deficits and rapid accumulation in debt burdens.

1. The UN predicts that by 2050 there will be 2.5 billion Africans, one quarter of the global population, and also the youngest. Africa is expected to be the world’s fastest-urbanizing region, and by 2045 it will have a larger urban population than China or India. The rate and scale of urbanization will be transformative and could make African consumers more connected to the global market. 

• These demographic changes will continue to outpace those of similarly positioned economies such as India and China in the coming decades, securing Africa’s position as the most demographically attractive investment destination in the world.

• Digital and mobile access is rapidly increasing and, thus, Africa’s young population is more connected than ever before. According to data from GSMA Intelligence, there will be significant growth in internet and smartphone usage by 2025, with the number of connected smartphones projected to increase from 250 million in 2017 to 690 million in 2025. Better access to the internet will enable these users to take advantage of e-commerce platforms for goods and services.

• Significantly, the continued development and growth of the AfCFTA market will create enormous purchasing power, providing new market space for both Africa and the rest of the world – including the EU. 

Distinguished Ladies and Gentlemen

• Indeed, there are huge opportunities for EU investors in the AfCFTA market. 

• To qualify for the preferences and benefit from the AfCFTA market, EU investors will need to ensure that their production involves sufficient transformation or value-addition in an AfCFTA state Party so as to be considered as ‘originating’ from those AfCFTA countries. 

• EU-based businesses can also benefit from the AfCFTA by linking up with African businesses and contributing inputs, intermediate goods and supportive services, of course mindful of the AfCFTA rules of origin, by ensuring that sufficient value-addition or transformation occurs within an AfCFTA state Party. 

Distinguished Ladies and Gentlemen

• There is now reason to believe in a brighter outlook for doing business in Africa, due in large part to the operationalisation of the AfCFTA. 

• Of course, there are challenges to be overcome to fully obtain the potential of the AfCFTA project and these include: inadequate infrastructure, different customs procedures and trade facilitation issues, and trade finance. 

• The AfCFTA Secretariat and its partners, the African Union Commission, and member states are making determined efforts to address these constraints at the continental, regional and national levels to facilitate the free flow of cross-border trade and the successful implementation of the AfCFTA.

• I encourage the Southern African private and public sectors to work with their EU counterparts in identifying the missing links and filling in the gaps in the EU-Southern Africa trade relationship. 

• As Secretariat, we are ready to work and partner with organisations such as the Southern Africa-Europe CEO Dialogue, in the successful implementation of the AfCFTA.

• With these brief remarks, I wish you fruitful deliberations. 

Thank you