Investors should seize the economic and business opportunities to establish a commercial presence in South Africa, said Secretary General of the African Continental Free Trade Area (AfCFTA) Secretariat, Wamkele Mene.
Mene was addressing delegates from varying industries in South Africa and across the world at the fifth South Africa Investment Conference (SAIC) on Thursday.
Mene, outlined the value proposition for the AfCFTA agreement saying that it will allow investors to gain access to a single market, which is projected to grow to 1.7 billion people and $6.7 trillion in consumer and business spending by 2030.
“By 2050, the continent will be home to 2.5 billion people. The largest working force in the world by 2050 will be in Africa. At that point, estimates are that consumer spending and business spending in Africa will be in excess of $16 trillion.
“This is an opportunity that our continent and our investors should not miss. It is of course expected that there will be challenges but I encourage everyone to look at Africa with a long-term view of investing and to see your returns in your investments,” Mene said at the gathering held at the Sandton Convention Centre in Johannesburg.
According the World Bank projections, by implementing the trade agreement, Africans will have an opportunity to lift 100 million people out of poverty, 60 million Africans out of abject poverty and the rest out of moderate poverty.
Increasing Africa’s GDP
The implementation of the agreement is also expected to contribute $450 million combined gross domestic product (GDP) to Africa’s GDP and increase wages by close to 9%.
“We project that the most immediate beneficiaries will be small, micro and medium enterprises (SMMEs) that are led by women, this is why this agreement is so important for the future of our continent,” he said.
The AfCFTA agreement seeks to eliminate trade barriers and boost intra-Africa trade. In particular, it is to advance trade in value-added production across all service sectors of the African economy.
The AfCFTA will contribute to establishing regional value chains in Africa, enabling investment and job creation. The practical implementation of the AfCFTA has the potential to foster industrialisation, job creation, and investment, thus enhancing the competitiveness of Africa in the medium to long term.
“The long station ambition of the African Union (AU) is that one day our continent must be a common one. That is why we recently concluded protocols on investment protection with some ratifications to be done on international property rights and competition, which are so critical for the economic integration in Africa,” Mene said.
In July this year heads of State and the Ministers of Trade should conclude two additional legal instruments that include a protocol on digital trade and a protocol on women and youth in trade.
“The protocol on digital trade represents a very unique opportunity for Africa to create digital economy jobs and to enhance digital innovation. It will also address the imperative of inclusion, particularly the inclusion of SMMEs led by women and young entrepreneurs.
“With the direction of the heads of State, the protocol in women and youth and trade should enable us to move beyond aspirations for inclusion and present concrete commercially meaningful opportunities for women and young people through this protocol,” he said.
In 2019, Africa imported $16 billion worth of pharmaceuticals and it presents an opportunity to enhance the local production in pharmaceuticals. Mene noted that the continent has a challenge of over reliance on imports for pharmaceuticals.
“In 2020 the challenge with the onset of the pandemic has proven to be an opportunity for job creation in Africa and an opportunity to address the Africa’s reliance on the protocol for international property rights,” he said.
In July 2022, BioNTech established the first mRNA Vaccine Manufacturing Facility in Rwanda with plans for vaccine manufacturing that spans the continent and includes South Africa, Ghana and Senegal.
“South Africa has a very strong manufacturing sector. By year 2035 Africa shall require five billion units of vehicles… this is an opportunity for us to include other countries in Africa who want to be part of the auto value chain in manufacturing components and to part of trade under the AfCFTA.
“The agreement also presents an opportunity for countries that are producers of lithium. Three of them, Zambia, Zimbabwe and Democratic Republic of Congo are on the continent. They should be in the top five of producers in the world so that when the transition from combustion engines to electric vehicles takes place, Africa takes the lead in the production of vehicles that are powered by lithium engines,” Mene said.
Ministers of Trade have concluded 88.3% of the rules of origins for trading in Africa. However, the textile and auto sectors remain unresolved by the Ministers.
“We have operationalized a protocol that will assist in resolving disputes that might arise and will be adjudicated by competent and impartial panel of experts that will be nominated by the private sector,” he said.
Although there are safeguards in place to mitigate challenges, Mene acknowledged that challenges that might arise include institutional capacity at national level, the cost of trade finance, which has to be brought down and the lack of trade support of infrastructure.
“We will have to confront [this] as we implement the agreement. It is a very ambitious agreement, wide in scope and ambitious in the direction of economic integration of the continent. The fact that 47 countries have ratified their agreement symbolizes strong commitment on their part,” Mene said.