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Ph:DR: “Accelerating the growth of intra-African trade as a driver of sustainable development…”
“The AfCFTA rules of origin must be simple, practical and business-friendly, especially SMEs, to enable them to perceive the economic and social gains expected from the AfCFTA”
The African Trade Policy Center (ATPC) of the United Nations Economic Commission for Africa (ECA) organized on May 17, 2023, a press briefing by videoconference, on the publication of the Report on Business Indexes by country of the African Continental Free Trade Area (ZLECAf) (ACBI). The survey conducted in the 13 pilot countries for the implementation of the ZLECAf in Africa reveals, for example, more or less optimistic prospects for certain countries such as Rwanda and pessimistic for others such as the DRCongo. However, the report hopes that Africa could well realize the benefits associated with the AfCFTA if, and only if, there is active private sector participation; which would increase the share of intra-African trade to 25% in 2045.
Aline ASSANKPON
Since 2018, ECA has developed a monitoring and evaluation tool titled, AfCFTA Country Business Index (ACBI). “The ACBI) is one of the main tools for companies to express their point of view on the implementation of the AfCFTA, by identifying the main commercial constraints” declared Mr. Melaki Desta at the opening of the meeting.
In his welcome remarks, Mr. Desta, Coordinator of the African Trade Policy Center (ATPC) – a Regional Integration and Trade Division of ECA – will introduce the presentation of the Country Business Index Report AfCFTA (ACBI). 13 African pilot countries are selected for the implementation of the ZLECAf. They are: Angola, Ivory Coast, DR Congo, Egypt, Gabon, Kenya, Morocco, Namibia, Nigeria, Rwanda, Senegal, South Africa and Tunisia. It was therefore a question of carrying out surveys on businessmen, companies, Small and medium-sized enterprises (SMEs), women entrepreneurs, on their knowledge of Free Trade Agreements in general and the ZLECAf in particular.
ZLECAf where are we? How to facilitate private sector engagement in regional trade? Why the ZLECAf Company-Index? What does the ACBI Report say and what is the methodology used? What are the indicators used in this survey? This is the substance of the report shared by Ms. Wafa AIDI, Economic Affairs Officer at the Regional Integration and Trade Division of the ECA.
A brief reminder of the history of the ZLECAf, allowed us to retain once again that: “The AfCFTA was adopted by African Heads of State and Government in Kigali, Rwanda, in March 2018. Signed by 54 of Africa’s 55 states. 47 countries have already ratified it and have deposited their instruments of ratification in accordance with the provisions of the Agreements”.
The terms of the agreement are as follows: a Framework Agreement and three (03) International Protocols relating to trade in goods; trade in services and dispute settlement. “Since February 2023, three (03) additional instruments have been adopted: these include the protocol for investment, the protocol on intellectual property and copyright and the protocol on the Rules of Origin (RO) ” points out Mr. Desta.
“Indeed, the ZLECAf is more focused on Trade in goods with 46 lists of tariff concessionaires received. Trade in services also includes 46 provisional lists, received from 04 customs unions; As for the rules of origin, they are negotiated at 88.3%. Phase II of ZLECAf is complete. From then on, the implementation of ZLECAf begins; more than 40 Member States are developing their trade strategies”.
Why a Business Index for the ZLECAf?
The author of the ACBI report, Dr Wafa AIDI will say that the ACBI is one of the main tools through which companies can express their views on the implementation of the AfCFTA. “The tool aggregates the views of African businesses and articulates them into an index that ranks countries on how well they are implementing the AfCFTA from a business perspective. One of the main objectives of ACBI is to understand business perceptions from a business perspective under the Free Trade Agreements (FTAs) already in place in African countries”.
And to add that “ACBI provides a unique and powerful monitoring and evaluation tool that allows the private sector in Member States to understand the perception of intra-African trade”.
So what is the methodology used in the implementation of the ACBI tool?
Indeed, the monitoring and evaluation took place in three stages: the first relates to the barriers and Costs of Trade in goods. In this context, the objective pursued is to assess the extent to which companies consider each of the areas related to Trade in Goods as significant challenges or obstacles to trade on the continent. “Non-tariff barriers are included as a sub-dimension and aligned to Annex 5 of the agreement establishing the AfCFTA; including customs tariffs, technical barriers to trade; sanitary and phytosanitary measures; specific limits; additional costs, fraud and corruption” explained Dr Wafa Aidi.
The second concerns the knowledge of Free Trade Agreements (FTA) by Africans, populations especially SMEs and its use in order to benefit from the resulting potential. “It’s about understanding the perception of companies on the ease of use of Free Trade Agreements in Africa; to assess private sector perceptions of the extent to which countries are proactively engaging with the private sector on the AfCFTA”.
And the third relates to the Business Environment: the objective is to understand private sector perceptions of the restrictive nature of the investment and service environment in the countries. “The aim was to assess the private sector’s perspectives on the “new generation” issues negotiated under the AfCFTA (investment, competition policy, trade in services, intellectual property rights)” .
“All dimensions have equal weights in the index, and each sub-dimension contributes equally in each dimension. Business perspectives are analyzed using a perception ranking scale from 0 to 10. A score above 5 suggests that businesses are positive about the impact of this dimension, sub-dimension on their ability to trade and invest across borders”.
As for the rating, a rating of 5 reflects a neutral perception (ie, on average, companies are neither positive nor negative for the area in question). And a rating below 5 indicates that on average companies have a negative perception of the area of interest” demonstrated Dr. AIDI through diagrams made on the survey.
Pending the publication of the report, Dr. Wafa AIDI will finally explain in what context the 13 pilot countries were selected and approximately the scores achieved by country before the publication of the said report. As a first step, Cameroon and Zambia are selected as the first two countries in which the pilot survey took place. Then, the ACBI methodology was revised and surveys were conducted in seven (07) countries including: Angola, Ivory Coast, Gabon, Kenya, Namibia, Nigeria and South Africa. In pursuit, the ACBI was also deployed in six (06) other countries which are: DR Congo, Egypt, Rwanda, Senegal, Tunisia and Morocco. This brings the number of pilot countries to 13.
“In most of the 13 pilot countries, companies are neutral in their perception of their country’s business environment for Africa-wide trade and investment. Companies in Rwanda, for example, are generally optimistic about the investment and business environment, and companies in the DRCongo are more pessimistic compared to companies in other countries”.
ACBI recommendations
According to ACBI, Agenda 2063 recognizes the need to accelerate the growth of intra-African trade as a driver of sustainable development. The ZLECAf for Business Index can contribute significantly to inclusive trade and development in Africa by identifying constraints in trade regimes, particularly at the level of women and Small and Medium Enterprises (SMEs) who face trade constraints. .
The findings of the report are optimistic and suggest that Africa can indeed benefit from the AfCFTA and its potential, if and only if there is active participation of the private sector; which could increase the share of intra-African trade to 25% in 2045.
“An important and immediate action point is to sensitize the private sector on the opportunities of the AfCFTA and its operating mechanisms at the national and continental level. It is essential to accompany women entrepreneurs through specific policy measures, with greater emphasis on understanding and improving perceptions of additional and unauthorized charges, customs tariffs and customs procedures. Compliance with the Rules of Origin (RO) of a free trade agreement is perceived as the most constraining aspect of trade. The ZLECAf ROs must be simple, practical and business-friendly to enable them, in particular SMEs, to perceive the economic and social gains expected from the ZLECAf” concluded Dr Wafa AIDI of ECA.
In other words, Governments should help companies understand the status of implementation of the AfCFTA; Equip especially those of the private sector to understand that the situation is changing and that the new paradigm in commercial matters is the ZLECAf.
