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10 Fast Facts About the AfCFTA

10 Fast Facts About the AfCFTA

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10 Fast Facts about the Africa Continental Free Trade Area (AfCFTA)

By: Shira Aliza Petrack

  1. The AfCFTA stands for the Africa Continental Free Trade Area.

  2. The main objectives of the AfCFTA are to create a single continental market for goods and services, with free movement of business persons and investments.

  3. The AfCFTA negotiations were originally launched as an AU project and are member-driven, so all AU members participate in the negotiations, including those members that have not ratified the Agreement.

  4. The AfCFTA will eventually comprise several legal instruments covering trade in goods, trade in services, dispute settlement, investment, competition policy and intellectual property rights.

  5. In terms of numbers of participating countries, the AfCFTA will be the world’s largest free trade area since the formation of the World Trade Organization.

  6. Eritrea is the only African country not to have signed the AfCFTA Agreement (yet).

  7. The African Continental Free Trade Area Agreement entered into force on 30 May 2019 for those countries that had deposited their instruments of ratification before this date.

  8. Schedules of preferential tariff concessions and preferential rules of origin are still being finalized.

  9. Trading under the AfCFTA Agreement was due to commence on 1 July 2020, but as a result of the COVID-19 global pandemic, this date was postponed. The new date for operationalisation has been set for 1 January 2021 – even though trading can’t commence without a decision on tariff concessions and preferential rules of origin.

  10. The institutions responsible for the implementation, facilitation, administration, monitoring and evaluation of the AfCFTA include the Assembly, the Council of Ministers, the Committee of Senior Trade Officials, the Secretariat and various technical committees.

    • The Assembly of the AfCFTA is the AU Assembly consisting of all AU Heads of State and Government. It provides oversight and guidance on the AfCFTA.

    • The Council of Ministers comprises Ministers for Trade of the State Parties. It will take decisions on all matters under the AfCFTA Agreement, and reports to the Assembly through the Executive Council of the AU.

    • The Committee of Senior Trade Officials comprises Permanent Secretaries or other officials designated by State Parties. It is responsible for the development of programmes and action plans for the implementation of the AfCFTA Agreement.

    • The Secretariat is the administrative organ to coordinate the implementation of the AfCFTA. It is expected to be functional by 31st March 2020. It will be based in Accra, Ghana.

Sources: 

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Increasing Women’s Access to Finance in Africa is Good for Business

Increasing Women's Access to Finance in Africa is Good for Business

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Increasing Women's Access to Finance in Africa is Good for Business

By: Elenah Kimaru

There is an estimated USD 42 billion financing gap for women in Africa today. As a result, many female-owned businesses do not actualize their potential; and many investors miss profitable investment opportunities.  

Empowering women and girls also helps economic growth and development. Gender equality is one of the UN’s seventeen Sustainable Economic Goals (SDGs) that establish a blueprint to achieve a better and more sustainable future for all. Gender equality, SDG goal no. 5 is

"Not only a fundamental human right but a necessary foundation for a peaceful, prosperous, and sustainable world."


Although Africa has made significant progress in increasing gender equality over the past decade, progress has stalled in recent years – although some countries fare better than others. According to
McKinsey, South Africa has the highest gender parity score in the region; Mauritius, Niger, and Mali have the lowest. 

Increasing gender equality in the region would require a multi-pronged approach supported by all key stakeholders since discrimination against women takes on multiple shapes and forms. One significant way the private sector can get involved is by increasing women’s access to capital and credit. 

Financing Gap Between Men and Women 

Women in Africa today lack access to capital compared to men. This gap adversely affects women, their families, and their communities. It also means that investors overlook many potentially lucrative ventures.

Sub-saharan Africa is the only region in the world where more women than men become entrepreneurs. But when it comes to access to capital, the situation looks less rosy. On average, women in Africa own fewer assets than men, often due to discriminations encoded in property laws, and so they lack the collateral necessary to secure larger loans. And women are sometimes required to present more significant collateral for the same size loan, further inhibiting their access to capital. 

The higher-than-average interest rates throughout the continent also discourage women from applying for credit to grow their business. Since female decision-makers tend to be more risk-averse than their male counterparts, women are less likely to take a high-interest loan. A study conducted by the AfDB found that 13.1% of women compared with just 8.2% of men cited high interest rates as the reason they did not apply for a loan. 

The high collateral requirements and high interest rates hamper the women’s profit-making capacity since they cannot make the investments required to grow their business. But institutional obstacles are not the only issue. According to a survey conducted by the African Development Bank (AFDB) in 47 African countries, African women often self-select out of the credit market. This means that women perceive their credit-worthiness as lower than it is, so they do not even bother to apply. As a result, women turn to their informal networks for finance rather than rely on institutional investors. 

Supporting Female Entrepreneurs

Increasing women’s financial literacy on the continent could help close part of the financing gap. Roughly 35 million women in Africa today are not signed up for any financial service (such as a bank or mobile money account.) Banks and digital financial services can establish programs teaching basic financial literacy to their clients. Through these programs, financial service providers can grow their client base, create greater customer loyalty, and ensure more reliable returns. 

Another way to encourage female entrepreneurship is for investors and credit institutions to proactively seek out women entrepreneurs. The AfDB has set up a “Gender Equality Trust Fund” that will finance women-owned SMEs throughout the continent. The Bank has also established a risk-sharing mechanism that will de-risk investment in women-owned businesses to encourage more private-sector investment in women. 

Looking Ahead

Women form Africa’s economic backbone. Their full economic empowerment is “crucial to increase productivity levels, enhance economic efficiency, and improve overall development outcomes to achieve inclusive growth.” Supporting female entrepreneurs on the continent is not just good for women and investors: it is also crucial to Africa’s sustainable economic development. 

 

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Empower Africa’s Forum, Virtual Global-Expo Botswana

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Empower Africa's Forum During the Virtual Global-Expo Botswana

November 17-20, 2020

Online Event

Empower Africa hosted an entire business forum during the 2020 Virtual Global-Expo Botswana. For your convenience, below are the recordings from the event.

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Invest in Manufacturing to Meet Africa’s Booming Consumer Demand

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Invest in Manufacturing to Meet Africa's Booming Consumer Demand

By: Leah Ngari

Manufacturing in Africa is growing. Increasing urbanization and access to electricity has increased the demand for manufactured goods and the continent’s capacity to produce them. From car assembly to ceramics, textiles, and mattresses, industrial production is taking off.

Africa’s Consumer Market Biggest Draw for African Manufacturers 

Many businesspeople share the misconception that manufacturing in Africa is only profitable if they sell the manufactured products outside the continent.  In fact, international companies now building factories on the continent are often trying to meet the demand of Africa’s rapidly growing consumer market.  Those who understand the opportunity can thrive while contributing to Africa’s sustainable economic development. Sun Jian, a Chinese ceramics manufacturer, recognized the local market’s potential after visiting Nigeria to explore cheaper relocation alternatives for his Chinese manufacturing operations. Despite his higher electricity costs, the ceramics manufacturing plant he established in Nigeria now enjoys a 2% increase in profit margins compared to what its Chinese counterpart. 

Volkswagen is another international company that has been setting up shops in strategic locations all over the continent. With vehicle assembly facilities in Ghana, Nigeria, Ethiopia, and Rwanda, Volkswagen is targeting areas where the local market for vehicles is growing steadily. And as locals’ purchasing power increases, local demand for products will continue to rise.  

Intra-African trade has been growing and is expected to increase further thanks to the passage of the African Continental Free Trade Agreement, which went into force last year. The AfCTA will give African manufacturers access to a sizable, readily available market. Although trading under the AfCTA was slated to begin July 1st, the date was postponed due to the COVID-19 pandemic. Nevertheless, once implemented, the agreement is expected to increase the market size for companies based in Africa and will propel the continent’s industrialization forward.

Potential Challenges

Despite the recent manufacturing growth, several challenges still hold manufacturers back from venturing into Africa. Most African countries do not yet have the infrastructure capable of sustaining large scale manufacturing and relatively high labor and capital costs. As a result, manufacturing on the continent is concentrated in only a small number of countries

The increasing automation of many low-skilled processes may also make Africa less attractive as a manufacturing destination, since automation-heavy factories require an abundance of electricity. And with robots replacing human workers, companies might stop outsourcing production abroad

Now is the Time for Investments in African Manufacturing 

Automation also creates opportunities. Manufacturing companies can strategically involve themselves in developing infrastructure on the continent and use the latest tools and techniques to build functioning roads and ports. Private investment in African infrastructure can yield profits while contributing to the continent’s economic success. The trend away from production outsourcing should not affect manufacturing companies that focus on meeting the increasing demand for consumer products on the continent. Governments can choose to nurture specific sub-sectors, as Nigeria did with cement, to grow their competitive advantage. Entrepreneurs can draw on their creativity and innovation to face the infrastructure challenge and leapfrog over outdated production and distribution processes. Companies that enter the market now may well enjoy a first-mover advantage as they contribute to building Africa’s long term production capacities.

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