New African Continental Free Trade Area is potential $2.5 trillion target market

In March a Rwanda conference of 44 African heads of state produced a framework for trade unity among 54 African countries. The proposed African Continental Free Trade Area (AfCFTA) would be the world's largest free trade area since the WTO was formed. 
 
The aim is to eliminate tariffs on intra-African trade in a market of 1.2 billion people with a gross domestic product (GDP) of $2.5 trillion. If the tariff-removing objectives are met the organisers claim they could boost intra-African trade by 53.2 percent.  
 
The trade dividend will come from the removal of non-tariff barriers too, such as customs procedures and excessive paperwork, through the imposition of technical and sanitary standards, transit facilitation and customs cooperation. 
 
Can it work? Exporters should get themselves in position because this has enormous potential, says Tusha Shar, owner of Hull-based Integrated Power Solutions, which supplies diesel generators and solar panels to Africa.
 
According to Shar, British engineering is well respected in African nations and former colonies, but he warns that the competitive advantage is being eroded as China stakes a claim to the regions. Nevertheless, AfCFTA offers a significant opportunity for British exporters in the years ahead. It will take many years to reap the full benefits of an open market free of tariffs and restrictions practises, but companies should not stand on ceremony. 
 
In the meantime, exporters should target the more developed nations in Africa with efficient ports. Shar targets West African nations, such as Nigeria and Ghana, as well as Kenya in the East. Each has a port that can be a gateway to landlocked, less developed nations. But therein lies the problem that needs to be addressed by AfCTFA. There are restrictions on movement inland to nations such as Eritrea, which make trade unprofitable. If non-tariff barriers can be removed - and the richer nations will be a priority for action - these will become strategically important bridgeheads into landlocked central African countries whose fortunes will benefit from market liberalisation. 
 
"We sell to West Africa in particular but there are blockages now when you want to move goods across from Nigeria to Ghana. There is free movement but it could be better," says Shar. "There is massive bureaucracy involved in getting customs clearance for moving goods from a port on a coastal nation to a landlocked destination like Zimbabwe or Eritrea."
 
Many countries in central Africa are neither rich nor resourceful, says Shar, but he thinks neighbours could emerge as increasingly significant gateways which will bring economic benefits and knowhow.
 
Egypt, he predicts, will become an increasingly important bridgehead between Africa and the Middle East. 
 
As one set of barriers is lifted, another may be put in place, Shar fears. "Africa is definitely the next big growth market but China is in place before us. In some cases, the Chinese can veto what comes in. For example, we used to supply solar panels to one country but a Chinese contractor was the primary source. Once we'd provided the designs, suddenly all their future orders were put through China," says Shar.
 
Still the positives are that British engineering is widely respected across the region. "Our products are in demand but if you are dealing in single digit margins in can be very risky. A single bad order can set you back two years," says Shar.
 
Africa will be a huge market for fisheries too, says Shar. But it all depends on whether liberalisation can take place. "Even getting letters of credit is very difficult at the moment," says Shar. 
 
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