SMEs and women-led businesses must leverage the benefits of the AfCFTA

The African Continental Free Trade Area (AfCFTA) was formed with the intention of boosting intra-African trade to accelerate growth and facilitate investment on the continent. This was done with the pan-African vision of an integrated, peaceful, and prosperous continent. While the more established names within the trade space may very well be capable of capitalising on the potential gain from the agreement, the benefits of the AfCFTA are not confined to those at the very top of the industrial ladder. Small and medium enterprises (SMEs) and women-led, informal businesses have also been tipped as potential beneficiaries of the free trade area.

SMEs account for approximately 80% of Africa’s employment and 50% of its GDP. In South Africa, they provide employment to 47% of the workforce and account for around 20% of GDP. In terms of informal cross-border traders, women account for around 70%. Despite the large contribution to their relevant subcategories, these entities remain among the most vulnerable to economic shocks and their ability to engage in cross-border trade remains limited. Exacerbating these issues further, without a doubt, is the ongoing COVID-19 pandemic. Following the launch of the AfCFTA on 1 January 2021, this could likely change.

By reducing trade barriers and simplifying the trade process, the AfCFTA will enable African businesses to progressively gain access to the continental market. While it is not expected that SMEs will commence with immediate transcontinental trade, for those entities that are not quite adept at cross-border trade, the AfCFTA provides an opportunity to tap into regional markets before proceeding further. Likewise, for informal, women-led businesses, that currently face harassment, violence, and confiscation of goods and imprisonment, the AfCFTA will provide an opportunity to operate through more formal and well-protected channels. These will, in turn, allow for a scaling up of (international) business operations, an increase in innovation, and, where possible, embracing digitisation.

As expected, however, due to the small- and, often, the informal scale of operations, SMEs and related entities may not be fully capable of leveraging the benefits presented by the free trade area. This has not gone unrecognised by the AfCFTA or the relevant stakeholders. There have been calls from relevant national ministries for programs aimed at addressing the issues facing SMEs, such as market access, education, and information, financing and credit facilities,

The African Continental Free Trade Area (AfCFTA) was formed with the intention of boosting intra-African trade to accelerate growth and facilitate investment on the continent.  This was done with the pan-African vision of an integrated, peaceful, and prosperous continent. While the more established names within the trade space may very well be capable of capitalising on potential gains from the agreement, benefits of the AfCFTA are not confined to those at the very top of the industrial ladder. Small and medium enterprises (SMEs) and women-led, informal businesses have also been tipped as potential beneficiaries of the free trade area.

SMEs account for approximately 80% of Africa’s employment and 50% of its GDP.[1] In South Africa, they provide employment to 47% of the workforce and account for around 20% of GDP. [2]  In terms of informal cross-border traders, women account for around 70%.[3] Despite the large contribution to their relevant subcategories, these entities remain among the most vulnerable to economic shocks and their ability to engage in cross-border trade remains limited. Exacerbating these issues further, without a doubt, is the ongoing COVID-19 pandemic. Following the launch of the AfCFTA on 1 January 2021, this could likely change.

By reducing trade barriers and simplifying the trade process, the AfCFTA will enable African businesses to progressively gain access to the continental market. While it is not expected that SMEs will commence with immediate transcontinental trade, for those entities that are not quite adept at cross-border trade, the AfCFTA provides an opportunity to tap into regional markets before proceeding further.  Likewise, for informal, women-led businesses, that currently face harassment, violence, and confiscation of goods and imprisonment, the AfCFTA will provide an opportunity to operate through more formal and well-protected channels.[4] These will, in turn, allow for a scaling up of (international) business operations, an increase in innovation, and, where possible, embracing digitisation.

As expected, however, due to the small and, often, informal scale of operations, SMEs and related entities may not be fully capable of leveraging the benefits presented by the free trade area. This has not gone unrecognised by the AfCFTA or the relevant stakeholders. There have been calls from relevant national ministries for programmes aimed at addressing the issues facing SMEs, such as market access, education and information, financing and credit facilities, access to innovative technologies, access to energy, infrastructure, and marketing networks.[5]

Considering the issues facing less well-established businesses, tangible attempts have been made at assisting smaller businesses improve their capacity. Among these is the recently launched eTradehub- a sort of “one-stop-shop” for small business to gain trade information and the related trade management tools. This online portal was launched by the Women Traders in the AfCFTA partnership with the intention of increasing the participation of women-led SMEs in the AfCFTA.[6],[7]

Almost equally as recent, MTN SA entered a USD 2 million partnership with the International Finance Corporation to broaden mobile financial services inclusion in South Africa. Although this partnership is not explicitly related to the AfCFTA, it is imperative that the intended beneficiaries capitalise on the potential gains to improve on their capacity to trade across borders.[8]

It is on this note that this piece concludes. Ultimately, all the efforts in the world would be in vain if there is no willingness, from the intended beneficiaries, to participate. As such, SMEs, and those representing them, are called to action to drive the inclusion agenda further.[9]

 

[1] Rilwan Akeyewale, ‘Who are the winners and losers in Africa’s Continental Free Trade area?’, World Economic Forum, https://www.weforum.org/agenda/2018/10/africa-continental-free-trade-afcfta-sme-business/.

[2] Simone Liedtke, ‘SME sector ‘critical’ to growing South Africa’s economy – Pityana’, Engineering News, April 11, 2019, https://www.engineeringnews.co.za/article/sme-sector-critical-to-growing-south-africas-economy-pityana-2019-04-11#.

[3] Nghinomenwa Erastus, ‘AfCFTA potential benefits to SMEs, women’, The Namibian, May 12, 2021, https://www.namibian.com.na/101588/read/Afcfta-potential-benefits-to-SMEs-women.

[4] Op. cit.

[5] APO Group, ‘South African women’s minister seeks voice for women in AfCFTA’, Africa News, https://www.africanews.com/2021/02/24/south-africa-s-women-s-minister-seeks-voice-for-women-in-afcfta/

[6] Women Traders in the AfCFTA is a partnership formed by the International Chamber of Commerce (ICC), Trade Law Centre (TRALAC), United Parcel Service (UPS), and West Blue Consulting.

[7] International Chamber of Commerce, ‘Launch of eTradeHubs to simplify trade processes for woman small business owners in AfCFTA’, https://iccwbo.org/media-wall/news-speeches/launch-of-etradehubs-to-simplify-trade-processes-for-woman-small-business-owners-in-afcfta/.

[8] Given Majola, ‘MTN’s MoMo gets its mojo in SA with IFC partnership’, IOL, May 20, 2021, https://www.iol.co.za/business-report/companies/mtns-momo-gets-its-mojo-in-sa-with-ifc-partnership-22b1472c-6057-4fcd-aaaf-8bf9fafb9b7f.

[9] ‘SAZ challenges women to grab AfCFTA opporutnities’, Chronicle, September 2, 2020, https://www.chronicle.co.zw/saz-challenges-women-to-grab-afcfta-opportunities/.

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