By JAMES ANYANZWA

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African traders and companies are facing challenges operating across the borders despite the opening up of a $1.2 billion market in January 2021.

The latest study by the United Nations Economic Commission for Africa (UNECA) on selected African countries shows that things are not working on the ground after the African Continental Free Trade Area (AfCFTA) agreement came into effect on January 1 last year.

The survey conducted in seven countries — Angola, Côte d’Ivoire, Gabon, Kenya, Namibia, Nigeria and South Africa — shows companies have a neutral to slightly negative perception of the investing and trading environment across Africa.

The AfCFTA Country Business Index survey, which was launched in 2018, shows that the private sector has a negative perception of trade in goods, suggesting that more work needs to be done to remove tariff and non-tariff barriers.

According to the survey, firms in the sampled countries appear to have negative perceptions of unauthorised charges, customs procedures and additional fees.

“This result suggests that trade policy measures need to be implemented at the national and continental levels to remove tariff and non-tariff barriers. Such measures could be applied through the effective implementation of the Area in line with private-sector expectations,” the survey says.

The AfCFTA index is designed to show how businesses perceive trade under the free trade agreements already in force.

Strategic interests

The report dated April 2022 argues that for the private sector to fully benefit from the AfCFTA, businesses need to be supported in identifying strategic interests and market opportunities.

According to the survey, small and medium-sized firms (SMEs) have more positive perceptions of the continental free trade area than large businesses, but are more concerned about Custom duties, which they say are the main barrier to trade.

Respondents say attention should be given to addressing unauthorised charges and other charges on trade, which are perceived as most restricting trade.

“Firms seem to have the most positive perception of sanitary and phytosanitary measures and technical barriers to trade,” says survey

Local firms want their perceptions of the main challenges impacting trading and investing to inform AfCFTA implementation nationally.

Differing perceptions

In Namibia, Nigeria and South Africa, firms reported relatively positive perceptions of awareness and use of free trade agreements compared with other dimensions, but firms in Angola, Côte d’Ivoire and Gabon reported more positive perceptions of the commercial environment.

According to the survey complying with the rules-of-origin (ROO) requirements is the most restrictive aspect of a free trade agreement, which can partly be explained by the difficulty to conforming to the rules, especially by informal traders and women-owned businesses.

The survey notes that firms have a relatively neutral perception of the overall policy regimes for services, investment, intellectual property rights and competition.

While the survey noted that most SMEs in Africa are women-owned, these businesses are disproportionately affected when investing and trading across African borders.

In particular, women-owned businesses are more negatively affected by tariff and non-tariff barriers.

The AfCFTA, which brings together 55 countries with a combined gross domestic product of $3 trillion, was signed in Kigali on March 21, 2018.

Under the agreement, 90 percent of goods originating from an exporting country within the free trade area would be subject to preferential treatment (zero import tariffs), with projections that the pact could boost intra-African trade by 33 percent.

UNECA estimates the AfCFTA could help push African consumer and business combined spending to $6.7 trillion by 2030, up from $ 2.7 trillion in 2015.

It is also argued that the AfCFTA has the potential to accelerate industrial development, expand economic diversification and facilitate quality job creation across Africa.

Under the agreement, liberalisation of trade is carried out through regional trading blocs – the East African Community, the Common Market for Eastern and Southern Africa, Southern African Development Community and the Economic Community of West African States – which run separate customs unions.