Sign contracts or lose out, businesses told as AfCFTA takes shape

SMEs keen to trade under the African Continental Free Trade Area must have binding contracts in place or else they stand to lose; trade experts now say.

This comes as trade under the pact starts to pick, with Small and Medium-sized Enterprises in Kenya and the East Africa Community forming the bulk of entities pushing for deals in the export market , mainly in south and western Africa.

Kenya is among six countries picked last year to pilot the AfCFTA alongside Ghana, Cameroon, Egypt, Rwanda and Tanzania.

While the continental deal holds huge potential for the SMEs in terms of trade and services, businesses are yet to find a proper footing with deals under the pact remaining low amid numerous challenges.

“Don’t sign business deals without proper procedures…friendly and mutual agreements don’t work. You must sign contracts which are binding,” said Olivier Konje, director of international trade at the Ministry of Trade, Investment and Industry (Kenya).

He spoke in Nairobi during a national sensitization workshop for SMEs and women in business on AfCFTA protocols and their relevance to business in the EAC.

Konje ,who is part of the negotiating team on AfCFTA trading instruments, called on businesses to collaborate with relevant embassies and trade attachés mainly in volatile markets. 

This is to help them evade blacklisted companies and ensure they do business with legit firms.

The forum by the East African Business Council (EABC) identified Non-Tariff Barriers, lack of harmonised tariffs and lack of access to financing as among major challenges facing business, hence slow uptake of opportunities under the AfCFTA.

For instance, it took up to 40 days to deliver a tea consignment from Kenya to Ghana last year, blamed on vessel routing.

Banks are are seen to lend more to government (bonds and treasury bills) which have higher returns, as opposed to "high risk" borrowers which includes individuals and SMEs.

This is despite some of them securing billions in grants for on-lending to SMEs. 

“If we are going to realise the potential, we must do things differently,” Kenya Private Sector Alliance deputy CEO Victor Ogalo said.

Meanwhile, EABC has called on improved productivity and standards to ensure goods from the region meet market criteria across the continent, while services fit the market needs.

“We must produce goods that are required and meet the standards of these huge markets,” EABC chief executive John Bosco Kalisa said, calling on the region to take advantage of the ECOWAS (Economic Community of West African States). 

The Nairobi workshop took Kenyan SMEs through principles and scope of the AfCFTA, protocol on trade in goods, schedule on tariff concession, and opportunities and challenges under the guided trade initiative.   

Kenya has listed 14 merchandise and service sectors for trade under AfCFTA.

Prioritised sectors in merchandise trade include agriculture, livestock and fisheries, manufacturing, handicrafts, mining, oil and gas.

Priority export sectors under services trade are business including professional services, tourism, education, health, financial services, ICT, cultural and sports services; and transport and logistics, which align with other EAC member states.

The region is the only with three countries among the six piloting AfCFTA, thanks to its already synchronised trading platforms under the EAC bloc.  

Kenya is confident that the implementation of the AfCFTA trade pact has the potential to unlock market access for its goods and services within the African continent, while creating numerous job opportunities across multiple sectors.

As it stands, statistics show that the AfCFTA creates a large single market with a population of over 1.2 billion people and a combined GDP of about US$ 2.5 trillion (Sh 361.8 trillion).

Despite the significance of trade, Africa’s share of the total global trade remains low at 2.8 per cent.

In addition, the share of intra-African trade has been limited at 18 per cent.