The African Continental Free Trade Area (AfCFTA) prioritises the private sector to drive African industrialisation and intra-African trade.
That is because the private sector in Africa accounts for 80 per cent of total production, two-thirds of investment, and employs 90 per cent of the working-age population, according to the United Nations Economic Commission for Africa (UNECA).
However, experts say there are many challenges that still limit the role of the private sector on the continent. These challenges, if addressed, will enable the continent to realise its full potential.
According to Claudia Lina Asiimwe, Programme Manager at the Uganda-based Eastern African Sub-Regional Support Initiative for the Advancement of Women (EASSI), lack of vital information is one of the challenges that the private sector faces.
"In my experience working with women entrepreneurs in Eastern Africa, I have seen that access to information is a big problem, with many of them unaware of the trade opportunities within the AfCFTA Guided Trade Initiative," Asiimwe told The New Times adding that the available information is complex and in a language most of the traders do not understand.
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A survey conducted by the International Trade Centre (ITC) and the AfCFTA Secretariat shows that 75 per cent of businesses in Francophone Africa have yet to hear about the AfCFTA.
Asiimwe also noted that movement of people and goods across Africa is a huge barrier for the private sector.
"The cost of transporting goods from one country to another is too high, not to mention the visa fees that traders have to pay to enter some of the countries on the continent," she said.
Although most African countries signed the African Union protocol on Free Movement of Persons, few have ratified it and even fewer are implementing it, preventing free and easy movement of people, goods, and services across the continent.
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According to Kennedy Kenyi Lodiong, General Secretary of South Sudan Manufacturers Association (SSMA), countries across Africa must prioritise support towards manufacturing to boost production capacities.
"There are some key challenges that deter industrialisation and manufacturing in Africa, including poor infrastructure and high energy costs that increase the cost of production," he said.
Funding, taxation key challenges
Lodiong cited access to finance as one of the challenges facing most manufacturers across the continent, crippling their ability to increase their production capacity. He called for fair and favourable taxation regimes to boost manufacturing on the continent.
"Taxation for imported commodities in most African countries are substantially subsidised compared to the locally manufactured goods, creating unfair competition when it comes to pricing of the goods in the market," he noted, urging African governments to harmonise taxes.
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Tax harmonisation is one of the key objectives of the AfCFTA, however, it remains a complex process involving various stakeholders and requiring the development of common tax policies and regulations.
The private sector is calling for training and capacity building to equip them with the knowledge and the necessary skills to effectively promote and support the implementation of the AfCFTA.
"It's up to the private sector to ensure that they get the right skills and knowledge to effectively leverage the opportunities available in the AfCFTA," said John Bosco Kalisa, the Executive Chairman of the East Africa Business and Investment Advisory Council, a business advisory firm based in Rwanda.
Experts also assert that getting the rules of origin right will enable AfCFTA to take off. The AfCFTA provides African firms with tariff-free market access as long as they meet the rules of origins requirement specified in the agreement.
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The primary objective of the rules of origin is to offer preferential tariff benefits exclusively to AfCFTA member countries, while preventing trade flows on the same tariffs from non-member states.
According to the United Nations Conference on Trade and Development (UNCTAD), rules of origin could make or break the AfCFTA and should be made simple and business friendly to ensure its success.
The AfCFTA Private Sector strategy has identified four promising priority sectors; pharmaceuticals, automotive, agro-processing and transport & logistics.
If trade barriers are addressed, the potential of these sectors which, according to the World Economic Forum, have a combined worth of $130 billion, can be effectively harnessed.
