AfCFTA: ‘It has been a game changer’ – Groupe Filatex’s George Conde

In depth
This article is part of the dossier: Africa must invest in Africa

By Marshall Van Valen
Posted on Thursday, 30 June 2022 19:32, updated on Tuesday, 5 July 2022 15:03

George Conde, CIO Groupe Filatex. All rights reserved.

Groupe Filatex’s chief investment officer George Conde talks to The Africa Report about how the African Continental Free Trade Area (AfCFTA) is changing business on the continent. Filatex is based in Madagascar, and its activities are focused on energy, free zones, real estate and venture capital.

The Africa Report: Has the AfCFTA changed the way you do business since its launch?

George Conde: It has been a game changer for us in the sense that we went from being mainly focused on local development to seek strategic international partnerships that can help us access new competencies, innovation and lift our market development. We are also looking at expanding into mainland Africa.

What will it take for the AfCFTA to have an impact on your business?

Somehow, we already see the benefits. Despite the global crisis triggered by the Covid-19 pandemic, from the second quarter of 2021 we have seen an increased demand for industrial parks in Madagascar. Secondly, any effort to promote economic growth and development, through trade and industrialisation, increases CO2 emissions and simultaneously increases energy demand. Therefore, in consideration of the potential impacts of the AfCFTA on industrialisation and structural transformation in Africa, we have shifted all our energy production towards renewable energy and looking at innovative solutions that can have a direct impact on businesses and not only the national energy mix.

What is on your wish list for the AfCFTA’s development?

What is needed to make free trade more effective? The need to boost intra-African trade and regional integration as a basis for achieving structural transformation, poverty reduction and long- term sustainable development was the motivation for the AfCFTA. The difficulty is how to harmonise Africa’s heterogeneous economies under one single agreement. Opening the door to large African economies such as Nigeria or Egypt to enter under the same market terms such as Burkina Faso, Mali or even Madagascar, can have a detrimental impact for small scale local producers, especially small family farmers. It will be very difficult for them to compete against large agri-businesses in high-income African countries unless the right policies are put in place to insure local SMEs protection, human rights, labour practices and workers’ rights, gender considerations and inclusivity, and environmental impacts.

Does your company have any plans for investments that would benefit from the AfCFTA?

All the projects that we are currently assessing to develop in partnership with foreign entities have one thing in common; They are all analysed with the same strategic footing: what is the export potential on the African continent, what are the barriers to entry and which strategic partner can best answer this…

What are the most important elements of the AfCFTA to your business/industry?

The AfCFTA has a strong link to the UN’s Sustainable Development Goals (SDGs), which are in line with and, thus, support our own endeavours. Specifically, it corresponds to Goal 17 of the SDGs, which advocates for strengthening global partnerships for sustainable development. It seeks to encourage regional cooperation and development among nations. Also, the AfCFTA is in support of Goal 9, which is about building resilient infrastructure, promoting inclusive and sustainable industrialisation, and fostering innovation.

Do you think Madagascar will benefit from the AfCFTA? How? Will it be hurt by the trade deal? If so, how?

Madagascar has two key ingredients which will help the country benefit from the AfCFTA: one of the lowest labour costs in the world and 75% of its population is under 25 years old. According to the World Bank, manufacturing represents only about 10% of total GDP in Africa, on average, well below any developing region. I believe a successful free trade agreement can help reduce this gap using our market competitiveness to grow our manufacturing sector to more skilled or specialised manufacturing that will lead to more well-paid jobs, especially for young people, thereby alleviating poverty in Madagascar.

There is no doubt in my opinion that AfCFTA will benefit Africa in terms of welfare gains, but unfortunately these gains will not be proportionally distributed. Consequently, as I’ve said in one of the questions above, it’s mandatory to push for complimentary policies to be implemented to support countries that will experience economic and welfare losses as a result of the agreement.

Is there a risk that African producers will be undercut by foreign producers setting up in Africa to take advantage of the AfCFTA?

This is a possibility, like with any other free trade agreement. Nonetheless, it offers great for local producers. In my opinion, the benefits outweigh the risk. With restrictions lifted, you encourage foreign investments. This fresh entry of capital allows local industries – through partnerships with foreign investors – to access core competencies and develop new capabilities to quickly expand and compete in new markets whilst boosting domestic economies.

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