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Understanding Private Sector Engagement in AfCFTA

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The story of the success of the African Continental Free Trade Area (AfCFTA) — with the potential to increase intra-African trade by 15 to 25 percent, or $50 billion to $70 billion — is promising, but it is not clear that African companies will be able to take this breakthrough. Without efficient use of consensus, its ultimate success is limited. The private sector is a key stakeholder and beneficiary of the AfCFTA as it is directly involved in cross-border trade. Therefore, to better understand how African companies are approaching his AfCFTA and, more importantly, how the AfCFTA can support these companies through trade, the United Nations Economic Commissioner for Africa Association (ECA) AfCFTA Country Business Index (ACBI).

The ACBI is a new ease of doing business indicator focused on AfCFTA and is based on a robust theoretical framework and data collection process. This will enable relevant policy makers to identify intra-African trade bottlenecks at the country level, and from a private sector perspective he will be aware of the barriers that are preventing effective implementation of the AfCFTA. . It aims to inform African policy makers about trade barriers and guide AfCFTA national strategies. ACBI aims to ensure that the African Continental Free Trade Area delivers on its planned sustainable development commitments, especially for women-owned small and medium enterprises (SMEs).

Capturing ACBI three Aspects relevant to understanding the AfCFTA and related negotiations:

  1. Ease of trading commodities across Africa.
  2. Solid recognition and use of African languages Free Trade Agreement (FTA) and AfCFTA;
  3. Business environment related to trade in services, intra-African investment, intellectual property rights, and competition policy.

See the bottom of this blog for a detailed discussion of the ACBI methodology.

ACBI Key Findings: How do African companies perceive intra-African trading?

First round of ACBI ( Angola, Ivory Coast, Gabon, Kenya, Nigeria, Namibia, South Africa) reveals some important trends in the understanding and use of the AfCFTA by African businesses. Key findings include:

Overall, surveyed companies reported feeling neutral to their home country’s environment for trading and investing in commodities across African borders. So, on average, companies feel neither positive nor negative about the ease of doing business in Africa (Figure 1). Given that these seven Member States have deposited his AfCFTA instruments of ratification, the bottleneck is not in the legal side, but rather in order to allow the private sector to fully benefit. seems to lie in the lack of corporate support for identifying strategic interests and market opportunities. Af CFTA.

In particular, the study also reveals that perception is relevant To product trade-in (shape 2) This poses a major challenge for intra-continental trade. Several most commonly identified Bottlenecks include fraudulent billing (bribery Along border posts or transit routes) Other charges for trade (additional customs duties, border and product surcharges, price controls, reference prices, additional variable charges on goods, statistical taxes, import license fees, etc.).

Businesses appear to have a positive perception of sanitary and phytosanitary measures and technical barriers, suggesting that these measures will not hinder intra-African trade. Some experts Countermeasures and barriers are often the main constraints For African trade competitiveness and international trade.

The survey revealed the degree of recognition and utilization of FTAs. Most companies were strongly aware of their country’s participation It belongs to various regional economic communities, but little is known about its participation in the AfCFTA (Figure 3). In other words, African businesses do not have a clear understanding of the AfCFTA’s operational mechanisms and market opportunities at the continental level.

Importantly, FTA compliance was cited most frequently by the companies surveyed. rules of origin Requirements that determine how an export is shipped to a country It may be subject to free or preferential import duties, which are the most binding restrictions on trade. Businesses often face difficulties in complying with these rules, and the complexity can be especially daunting for informal traders. Rules of origin need to be simple, practical and business-friendly so that African companies can optimize the trade gains expected from the AfCFTA. At the same time, rules of origin must lead to transformational processes that create value through acquisition of intellectual property and new jobs.

Regarding the ‘commercial environment’, companies report being largely neutral about the investment, competition and intellectual property policies embedded in the AfCFTA. One possible explanation is that his AfCFTA protocol governing these policies is still under negotiation. For this, Negotiators and African governments will prioritize finalizing the design of implementation strategies on concrete measures to facilitate access to African markets, reduce service costs and harmonize regulations related to the business environment. need to do it.

finally, Perceptions of transactions vary significantly between male and female entrepreneurs, and between SMEs and large companies (Figure 5). For example, women-owned businesses and SMEs more frequently cite cross-border trade as a major challenge in growing their business. This finding is consistent with the literature. Women-owned businesses are, on average, more adversely affected by tariff and non-tariff barriers.

Conclusions and recommendations

The ECA intends the ACBI to be a monitoring and evaluation tool for African countries to understand and address the challenges faced by their businesses in implementing the AfCFTA. The active involvement of the private sector is essential to inform the AfCFTA’s national and regional strategies and to realize the expected benefits of the AfCFTA. Deploying an ACBI in all African countries will support the implementation of the AfCFTA by identifying key trade restrictions at national and regional levels. Equally important is building strong partnerships with national and regional business associations to support the deployment of ACBI and share best practices across countries and regions.

ACBI’s findings support Africa’s Development Planning Agenda 2063 and Sustainable Development Initiatives by identifying bottlenecks in the trading system that need to be addressed to ensure more inclusive trade under the AfCFTA. Make a significant contribution to the 2030 Agenda. Indeed, the ACBI results pinpoint the importance of complementing the AfCFTA with specific trade facilitation policies to ensure more inclusive trade under the AfCFTA.

In Africa, most SMEs and micro enterprises are women-owned. It is therefore important to ensure national as well as continental regulatory frameworks that enable participation in an efficient, effective and competitive manner.African countries therefore need to design concrete policy responses to: Support comprehensive implementation of the AfCFTA.

In addition, an important and immediate action point is to raise awareness of the AfCFTA opportunity and its operational mechanisms at both national and continental levels. This ultimate objective will be through greater engagement with the private sector and business bodies in developing national and regional AfCFTA implementation strategies, and the development of these implementation strategies as they are completed to create the necessary ecosystems for business. It can be achieved through wider dissemination.


ACBI Approach and Methodology: Indicators Based on Private Sector Perceptions

The ACBI is 1) based on private sector perceptions gathered through primary research rather than secondary data, and 2) focused on African integration by targeting companies based on intra-African trade (and investment). It is different from other business and aggregate indices because it focuses on Africa. This is the first index based on a robust methodological framework and data collection process that reflects company views on trade constraints under the AfCFTA. Aspects of ACBI focus (see Table 1) are closely related to AfCFTA negotiations and outcomes, all of which focus on deepening integration across the continent.

Table 1. ACBI dimensions and subdimensions

Purpose sub-dimension
Product Constraints and Costs Assess the extent to which firms see trade in goods as a significant challenge to intra-African trade tariff barrier
Customs
technical barriers to trade
sanitary and phytosanitary measures
certain restrictions
additional fee
fraud and corruption
Knowledge and utilization of African FTAs Determining business views on FTA usability and perceptions of the AfCFTA Awareness of African FTAs
Ease of use of African FTAs
Access to information on African FTAs
FTA Rules of Origin
commercial environment Understand private sector perceptions of barriers to investment and service business environments, including competition policies and intellectual property rights investment
Trade-in service
cost of service
Intellectual property right
competition policy

Source: ECA based on ACBI research

The ACBI survey is based on a minimum target sample of 50 completed responses in each country and is primarilyConduct phone and face-to-face interviews as appropriate and research through online channels.

Company perceptions are collected by a perception ranking (Likert) scale ranging from 0 to 10. Index, dimension, and subdimension scores aggregate these recognition scores to provide an aggregate score for each country ranging from 0 to 10. means that a country is perceived by its companies to be a better ‘performer’ in tackling trade, investment and integration issues in Africa.

For ACBI, each dimension is weighted equally within the index and each subdimension is weighted equally within each dimension. As a perception index, the results can be interpreted on the basis of firm perceptions of various aspects related to cross-border trade and investment in Africa. A score of 5 represents a neutral perception (i.e., on average, companies feel neither positive nor negative about a particular area). A score below 5 indicates that, on average, the company has a negative perception of the area of ​​interest. Conversely, a score above 5 indicates that companies are committed to the region’s impact on their business and their ability to conduct cross-border transactions and investments.

Note:

This post represents the personal opinions of individual staff members of the United Nations Economic Commission for Africa (ECA) and does not represent the position of the ECA or its members, nor does it represent the official position of any staff member. There is none.

The authors acknowledge various contributors to ACBI’s work, namely Mama Keita, David Luke, Komi Tsowou, Jamie MacLeod, Yash Ramkolowan, Jean Moolman, Thomas Yapo, Matthew Stern, Linton Reddy, Baneng Naape, Kendall Rÿnders, Jenni Jones, and Michaela Mourou.