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Free trade area needs continental businesses to become a reality

David Himbara
By David Himbara

Professor of international development based at Centennial College, Toronto, Canada.

Posted on Monday, 9 March 2020 11:31

The continental free trade deal is one of the African Union's top priorities. REUTERS/Tiksa Negeri

For the African Continental Free Trade Area (AfCFTA) to materialize, Africa needs business leaders capable of investing and operating beyond their domestic markets.

The good news is that a small number of African corporates with a continental footprint already exists. The bad news is that the enabling environment that permits the private sector to play its historic role of wealth-creation is still missing.

AfCFTA to date has been a political project led by African politicians. Corporate Africa now has to play its own role of spreading investment and expertise beyond national borders.

READ MORE African Union: behind-the-scenes battle for leadership of the AfCFTA

This is a considerable challenge.

Not only is corporate Africa tiny, the number of African business leaders that operate beyond their domestic markets is even smaller. This can easily change, if African governments improve business environments. African business leaders operating beyond their home markets already exist: more can join them if the right steps are taken.

READ MORE AfroChampions Initiative aims to create a new generation of big African firms

Corporate South Africa leads the way in integrating the continent due its comparatively more sophisticated business environment. For example, South Africa’s Standard Bank, which has a worldwide footprint, operates in the majority of sub-Saharan African countries including Mauritius, Ghana, Nigeria, Kenya and the whole of southern Africa.

Similarly, South Africa’s two mobile phone technology companies, Vodacom and MTN Group, operate Africa-wide. South Africa’s Shoprite Group is the largest supermarket retailer on the African continent with a network of distribution centres across 15 states. The country is also home to Raymond Ackerman and his Pick ’n Pay, which has expanded to become the largest online grocery business in Africa.

In Nigeria there is Aliko Dangote, the founder of the Dangote Group, the country’s largest industrial conglomerate. Its operations span sugar production, flour, and cement in nearly a dozen African countries.

Besides manufacturing cement in Obajana, Nigeria, Dangote Cement operates plants in countries including Zambia, Senegal, Ethiopia and Tanzania.

Tribert Rujugiro Ayabatwa, who hails from Rwanda, manufactures cement and tobacco products in Burundi, the Democratic Republic of Congo, Angola, Uganda, South Sudan, and Nigeria.

Ayabatwa’s PTG-Holding trades across eastern, central, southern and western Africa. In Zimbabwe, there is Strive Masiyiwa, the founder of Econet Wireless. Econet operates in Lesotho, Burundi, Kenya, Botswana, Rwanda and Nigeria.

Such companies, however, remain the exception rather than the rule.

READ MORE The AfCFTA is a giant step forward. But it remains just the start.

Reforms Needed

Unleashing AfCFTA above all requires radical reforms of business regulations. There are many businessmen and women capable of turning AfCFTA from dream into reality.

However, if South African President Cyril Ramaphosa’s claim that “there has never been a better time to invest in Africa” is to have substance, African governments must remove persistent hindrances to doing business.

Let us be clear – the business environment is a discouraging proposition in most African countries.

Setting up or dissolving a company can be a nightmare. Even where a one-stop centre already exists for easier and quicker business registration, commitment to such mechanisms remains questionable.

The key question about AfCFTA, therefore, still revolves around African political leaders’ commitment to regulatory reforms. The most urgently needed reforms include protecting investors’ rights, enforcing contracts and creating insolvency frameworks.

Put another way, to give AfCFTA a real chance to deliver prosperity, African governments have to undergo a revolutionary mindset change that allows genuine partnership with their business counterparts.

This task is demonstrated by the World Bank’s Doing Business Report that annually reviews the state of the regulatory environment of 190 countries.

Africa’s largest economy, Nigeria, is ranked 131st, while South Africa, the continent’s second-largest is ranked 84th. The overwhelming majority of African countries are ranked between 100 and 190, thereby making Africa the world’s least attractive region in terms of doing business.

There lies Africa’s challenge.

 

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