African countries have been urged to take advantage of the African Continental Free Trade Area (AfCFTA) and adopt a lasting solution to the financial challenges that have bedevilled trade export among member countries.
David Ofosu-Dorte, Senior Partner at AB and David Africa, who gave this advice says the time has come for countries on the continent to form a united front and implement a single financing framework to boost trade economic growth in sub-Saharan Africa.
Speaking on the on-air series of the Citi Business Festival on the topic; “Understanding the AfCFTA and the opportunities for your business”, Mr. Ofosu-Dorte said the outbreak of the COVID-19 pandemic in China, which led to the halt in trading activities across the globe is an indication that Africa must explore avenues to mitigate the pandemic’s effects going forward.
“Most of our leaders go to China and take money from the Exim Bank. China’s Exim Bank just started the way Ghana’s Exim Bank has started. But today, it’s able to finance export in many African countries and has made China a global player and the second-largest economy in the world. When COVID-19 started in China, we have all seen that it is enough to cut supply to a lot of countries in the world because its factories closed down. That is what one country is able to do. How much more if collectively, we have 55 countries coming together to decide to improve their trade and have one voice in negotiation?”
He continued to highlight that intra-African trade could receive a major boost and cut the over-dependence on foreign goods from the Western countries because “if you put Africa’s economy together, our purchasing power parity makes us the eighth largest economy in the world. But as individual countries, we remain very insignificant. We then go to G-20 summits and come back home to remain poor.”
David Ofosu-Dorte who is with policy and advocacy think tank, AfroChampions also mentioned that the coronavirus outbreak must not negatively impact the AfCFTA which has been described as the game-changer for Africa’s socio-economic development.
He says the crisis rather provides an opportunity for the continent to take more concrete steps towards addressing other hurdles such as the huge export trade credits and how financial institutions can repose confidence in African business in order to support them.
“The challenges that are faced by traders include export credit and export financing. Among many of the problems are trade disputes. Financing is one of the outstanding issues on the continent. With AfCFTA coming into force, it gives much bigger opportunities for countries to take advantage of both the financing and marketing opportunities. Much as they do not have much money to give out, I do believe that they are constantly exploring such opportunities for pro-financing. Ordinarily, banks will look at the market by assessing feasibility reports–they are looking at whether countries will pay the money back and the only way they arrive at that is when they see that there is a ready market for goods to be sold. With a marched market and production, countries can achieve a lot,” he added.
According to Mr. Dorte, it is imperative for African economies to use Small and Medium Enterprises (SMEs) as a means of diversification and strengthen other key areas of the economy.
He was optimistic that Africa is well-positioned to leverage its natural resources by coming together to find favourable trade-related regulations and financing schemes to remove their associated bottlenecks.
“For instance, the banking market for SMEs is US$86 billion if we decide to explore the opportunities alone. The amount of money held by Africa Central Bank alone is over US$400 million alone on the continent. So a consolidated and concerted effort when worked together, can create fine financing opportunities to enable money to revolve around the continent and finance trade, give opportunities to SMEs in a well-coordinated manner between each individual country to do export trade. So it is doable.”
The AfCFTA, which is expected to take off in July this year, seeks to among other things establish a single market for goods and services across 54 countries, allow the free movement of business travellers and investments, and create a continental customs union to streamline trade – and attract long-term investment.