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The narrative around a successful African Continental Free Trade Area (AfCFTA), its potential to increase intra-African trade by 15 to 25 percent, or $50 billion to $70 billion, is promising, but if companies African nations do not make efficient use of this historic agreement, their ultimate success will be limited. Since the private sector is directly involved in cross-border trade, it is an important actor and beneficiary of the AfCFTA. Therefore, to better understand how African companies are approaching the AfCFTA, and more importantly, how the AfCFTA can best support those companies through trade, the United Nations Economic Commission for Africa (ECA) created the AfCFTA Country Business Index (ACBI).

The ACBI is a new easy-to-do business index focused on AfCFTA and is based on a sound theoretical framework and data collection process. It enables relevant policy makers to identify bottlenecks in intra-African trade at the country level, informing the barriers that prevent effective implementation of the AfCFTA from a private sector perspective. Its goal is to inform African politicians about trade barriers and guide national AfCFTA strategies. The ACBI aims to ensure that the African Continental Free Trade Area delivers on its projected sustainable development promises, especially for small and medium-sized enterprises (SMEs) and women-owned businesses.

The ACBI captures three dimensions relevant to understanding the AfCFTA and related negotiations:

For a solid discussion of the ACBI methodology, see the bottom of this blog.

Top ACBI findings: How do African businesses perceive trading within Africa? 

The first round of the ACBI (covering the seven countries of Angola, Côte d’Ivoire, Gabon, Kenya, Nigeria, Namibia and South Africa) reveals several important trends in the understanding and use of the AfCFTA by African companies. Read also : Ranking Member News | Newsroom | The United States. These are the key findings:

In general, the companies surveyed reported feeling neutral towards their country’s environment for trading and investing in goods across African borders, that is, on average, companies feel neither positive nor negative about the ease of doing business. business within Africa (Figure 1). As these seven member states have deposited their AfCFTA instruments of ratification, the bottleneck does not seem to be on the legal side, but rather in the lack of business support to identify strategic interests and market opportunities to ensure that the private sector can fully benefit. of the AfCFTA.

In particular, the survey also reveals that perceptions related to trade in goods (Figure 2) constitute important challenges for trade within the continent. Some of the most commonly identified bottlenecks include unauthorized charges (bribery at a country’s border posts or along transportation routes) and other charges in trade (additional customs, border and product surcharges, price controls , reference prices, additional variable charges on goods, statistical taxes, import license fees, etc.).

Businesses appear to have positive perceptions of SPS measures and technical barriers, implying that these measures are not an impediment to intra-African trade. This finding is notable given that some experts have argued that these measures and barriers often constitute a major constraint to Africa’s trade competitiveness and international trade.

Regarding “knowledge and use of FTAs”, the survey found that most companies were very aware of their country’s participation in different regional economic communities, but less informed about their country’s participation in the AfCFTA (Figure 3). In other words, African companies do not have a clear understanding of the AfCFTA operating mechanisms and market opportunities at the continental level.

Importantly, companies surveyed most often cited compliance with the requirements of an FTA’s rules of origin, which determine how exported goods shipped to a country can qualify for free or preferential import duties, as the most binding restriction. for trade. Businesses often struggle to comply with these rules, and their complexity can be particularly burdensome for informal traders. The rules of origin must be simple, practical and business friendly to allow African companies to maximize the trade gains expected from the AfCFTA. At the same time, the rules of origin must lead to a transformation process that creates value through intellectual property gains and/or new jobs.

Regarding the “business environment”, companies largely report that they are neutral in their perception of the investment, competition and intellectual property rights policies embedded in the AfCFTA. One possible explanation is that the AfCFTA protocols that govern these policies are still under negotiation. For this reason, African negotiators and governments should prioritize finalizing the design of implementation strategies for concrete measures to facilitate access to African markets, reduce service costs and harmonize regulations related to the business environment.

Finally, perceptions of trade differ widely between women- and men-owned businesses, as well as between SMEs and large companies (Figure 5). For example, women-owned businesses and SMEs most often cited cross-border trade as a major challenge to growing their businesses. This finding aligns with the literature: women-owned businesses are, on average, more negatively affected by tariff and non-tariff barriers.

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Conclusion and recommendations 

ECA intends ACBI to be a monitoring and evaluation tool for African countries to understand and address the challenges faced by companies in their countries when implementing AfCFTA. The active participation of the private sector is vital in informing national and regional AfCFTA strategies and thus realizing the expected benefits of the AfCFTA. The implementation of the ACBI in all African countries will support the implementation of the AfCFTA by identifying the main trade restrictions at the national and regional levels. It is equally important to build strong alliances with national and regional business associations to support the launch of ACBI and to share best practices across countries and sub-regions.

The ACBI findings make a significant contribution to Africa’s Agenda 2063 development plan and the 2030 Agenda for Sustainable Development by identifying bottlenecks in trade regimes that need to be addressed to ensure more inclusive trade under the AfCFTA. To see also : Worcester Black Music Festival 2022. Indeed, the ACBI results point to the importance of complementing the AfCFTA with specific trade facilitation policies to ensure more inclusive trade under the AfCFTA.

In Africa, the majority of medium, small and micro-enterprises are owned by women. Therefore, it is important to ensure a propitious regulatory framework, national but also continental, that allows them to participate efficiently, effectively and competitively. Therefore, African countries should design specific policy responses to support the inclusive implementation of the AfCFTA.

In addition, an important and immediate point of action is to raise awareness of the opportunities of the AfCFTA and its operating mechanisms at both the national and continental levels. This ultimate goal can be achieved through deeper engagement with the private sector and trade associations when developing regional and national AfCFTA implementation strategies and through wider dissemination of these implementation strategies once completed to create the ecosystem. required for companies.

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ACBI approach and methodology: An index driven by private sector perceptions 

The ACBI is different from other indexes of doing business and integration in that it is 1) based on private sector perceptions collected through primary surveys rather than secondary data and 2) focuses on African integration by targeting business based in trade (and investment) within Africa. It is the first index based on a robust methodological framework and data collection process that translated business sentiment on trade restrictions under the AfCFTA. Read also : The high roles of health care: as the pandemic wreaked havoc, CEO revenues increased. The dimensions on which the ACBI focuses (see Table 1) are closely linked to the AfCFTA negotiations and outcomes, all of which focus on deepening integration across the continent.

Table 1. ACBI dimensions and subdimensions 

Source: RCT based on ACBI survey

The ACBI survey is based on a minimum specific sample of 50 complete responses in each country and is conducted primarily through online channels, with telephone and face-to-face interviews supplemented as needed.

Company perceptions are collected through a perception rating scale (Likert), which ranges from 0 to 10. The index, dimension, and sub-dimension scores aggregate these perception scores to provide an aggregate score for each country. , which ranges from 0 to 10, where a higher score implies that companies from that country perceive that a country is “performing” better in addressing trade, investment and integration issues in Africa.

For the ACBI, each dimension has the same weight within the index, and each subdimension has the same weight within each dimension. As an index of perceptions, the results can be interpreted based on strong perceptions of various aspects related to trade and investment across African borders. A score of 5 reflects a neutral perception (ie, on average, companies feel neither positive nor negative about the specific area). A score below 5 indicates that, on average, companies have a negative perception towards the area of ​​interest. Conversely, a score above 5 suggests that companies positively view the impact of that area on their business, or their ability to trade and invest across borders.

This contribution represents the personal views of individual staff members of the United Nations Economic Commission for Africa (ECA) and is not intended to represent the position of the ECA or its members, nor the official position of any staff member.

The authors would like to thank several contributors to the ACBI work, namely Mama Keita, David Luke, Komi Tsowou, Jamie MacLeod, Yash Ramkolowan, Jean Moolman, Thomas Yapo, Matthew Stern, Linton Reddy, Baneng Naape, Kendall Rÿnders, Jenni Jones and Micaela Mooloo.

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