More than 80% of Africa’s senior executives are optimistic about the impact of the African Continental Free Trade Area (AfCFTA) on their firms, according to a report released this week.
The Africa CEO Trade Survey Report 2023 is an initiative by the Pan-African Private Sector Trade and Investment Committee (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 a pan-African level.
Currently on its third edition, the report is the culmination of a survey that received over 1000 responses from senior executives across Africa. The report saw the continent’s private sector express their views on Trade, Africa’s Economic Outlook and the impact of the AfCFTA. The survey was conducted in partnership with African Export–Import Bank (Afreximbank), African Business, Botho Emerging Markets Group, AfCFTA Secretariat, International Islamic Trade Finance Corporation, International Trade Centre and AUDA-NEPAD.
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. The respondents, which represented predominantly small and medium-sized enterprises, were located in 48 different countries, 44 of which were in Africa.
“A majority of respondents in the 2023 PAFTRAC survey are optimistic that the AfCFTA will have a positive effect on their businesses. This has been underpinned by the AfCFTA’s commitment to ease access to markets and foster trade and economic growth. However, this optimism can only be realised if the necessary support required by respondents to benefit from AfCFTA is extended to them by regulators, and with aid from the developmental institutions to push for enabling policies,” said Prof. Patrick Utomi, Chairperson of PAFTRAC.
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 – a centralized payment and settlement system for intra-African trade in goods and services – and a similar number were unaware of the AfCFTA’s 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 a lack of awareness of the measures in place to protect vulnerable markets in the early stages of implementation.
“One thing seems clear from the results of our survey: more information on the AfCFTA and its operational instruments is needed to allow African companies of all sizes to take advantage of the opportunities on offer. Many of the participants said that they had little or no knowledge of key aspects of the free trade area, meaning that they are unable to take full advantage of it. They cannot make use of easier trade conduits and reduced barriers to trade if they are not aware that they exist. Here too, digital technology offers the ideal solution but a combination of adequate funding and promotion by the AfCFTA Secretariat or other relevant bodies is needed to make it effective,” the authors write.
More information on growing trade and market opportunities is regarded as by far the most important form of support companies need 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.
“Of great importance is access to information, credit and improving the trading landscape through a focus on training, investments and trade-friendly regulations and regulators in order to allow SMEs to take advantage of the AfCFTA,” says Prof. Utomi.
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.
Despite the headwinds generated by high inflation, debt levels and interest rates, 80.1% of survey participants said that they were confident about Africa’s economic outlook for this year, albeit only 14.2% described themselves as very confident. These figures are roughly on a par with last year’s results, suggesting general optimism over the continent’s economic prospects.
“The road to implementing the AfCFTA successfully is still long, but through the collaboration of the public and private sector, a successful, Africa-wide free trade area can become a reality,” said Prof. Utomi.
The PAFTRAC Africa CEO Trade Survey report can be downloaded from https://bit.ly/3FYdjvc