There is tremendous economic growth potential for agricultural enterprises in East Africa, but expansion depends on their receiving appropriate support – including training on how to be climate-smart. Joseph Muhwanga and Teferi Demissie report. This is one of a series of blogs on ‘Accelerating adaptation action in Africa’ published by CDKN to frame the Africa segment of the Climate Adaptation Summit, January 2021. The role of MSMEs in East African economies For African countries to achieve meaningful and sustainable development, the role of the private sector and its need for enhanced, adaptive capacity in the face of climate change is undeniable. Many micro-, small- and medium-sized enterprises (MSMEs) are less likely to have adequate capacity to take the necessary measures needed to adapt to the potential risks and opportunities presented by climate change. Yet involving MSMEs is crucial as a source of employment, economic growth, social transformation and building resilience to climate change. The definition of MSMEs varies slightly per country but the main parameters used are the number of people employed and turnover per year.  In Kenya, the official definition of MSME is based on employment numbers whereby a) micro-enterprises have fewer than 10 employees, b) small enterprises have 10- 49 employees and c) medium sized enterprise have 50 to 99 employees.  In Uganda, micro-enterprises employ up to 4 people and have turnover or total assets not exceeding US$ 2690, Small enterprises employ 5-49 and have turnover or total assets of US$ 2,690 -26,906 and medium enterprises employ 50-100, with total...

After getting delayed by eight months because of the global Coronavirus pandemic, the African Continental Free Trade Area (AfCFTA) was launched belatedly on New Year’s Day this year. Ethiopian Airlines partnered with DHL and African Electronic Trade Group to transport the first batch of parcels traded under this much anticipated free trade area agreement. In a statement, the partners hailed the effort as one that will “welcome the start of trading of the African Continental Free Trade Area with its 1.3 billion people and an estimated GDP of [USD] 3.4 trillion.” The AfCFTA, the largest in the world, garnered the signatures from 30 of the 55 nations on the continent surpassing the threshold of 22 signatories to be ratified. The objectives of the agreement include creating a single continental market for goods and services - with free movement of goods, people and investments - and thus, paving the way for an accelerated establishment of the Continental Customs Union. The ultimate vision being to further expand intra-African trade through better harmonization and coordination of trade liberalization and facilitation regimes and instruments across Regional Economic Communities (RECs). Resolving the challenges of multiple and overlapping memberships and expediting the regional and continental integration processes and enhancing competitiveness at the industry and enterprise level is also to be the principle that will guide the historic agreement. This is to be achieved by exploiting opportunities for scale production, continental market access and better reallocation of resources. The AfCFTA is said to bring about much more...

Dangote Industries Limited has said its cement expansion plan and fertiliser investments are strategies to open new trade routes for Nigeria under the Africa Continental Free Trade Area (AfCFTA). President of Dangote Industries Limited, Alhaji Aliko Dangote, said this in a statement yesterday in Lagos. AfCFTA, which took off on January 1, aims at creating a single market for the movement of capital, goods, people and investments to further deepen the economic integration of the continent. According to him, the cement company with an installed capacity of 29.3Mta in Nigeria, is targeting an expanded entity in Cameroon. He also revealed that new plants would soon be ready for commissioning in Niger, Benin, Ghana, Cote D‘Ivoire and Togo. Dangote stressed the need for Africa to deliberately improve its per capital consumption of cement to aid infrastructure development by stimulating further demand and forcing down the cost of the commodity. He said the desire for Africa’s self-sufficiency in cement production informed the signing of a $4.34 billion contract with Sinoma International Engineering Company Limited, a Chinese construction giant. The contract, the business mogul said, was for the construction of 11 new cement plants in 10 African countries, and Nepal in Asia. Dangote said the report by the United Nations Conference on Trade and Development (UNCTAD) on the development of deficit infrastructure to ensure competitiveness in the AfCFTA had moved the company to leverage the deficit with its cement investment. “For Dangote Industries Limited, moving goods, like cement by road from Nigeria, where...

Tool released ahead of the start of trading under the new African Continental Free Trade Area. new trade intelligence tool that enables firms to easily explore and compare trade opportunities across Africa has been released ahead of the start of trading under the new African Continental Free Trade Area. The African Trade Observatory was rolled out by the African Union (AU), the European Union (EU) Commission and the International Trade Centre (ITC) at an AU summit on 5 December 2020. ‘Trade information is vital to the promotion of trade in Africa,’ AU Commissioner for Trade and Industry, H.E. Amb. Albert Muchanga said. The AfCFTA lowers trade barriers and promotes regional economic integration. Trading under the continent-wide area is set to begin on 1 January 2021. ‘Economic Integration is close to the heart of the European Union and will continue to support the African Union towards its endeavour of the African Common Market,’ European Union Commissioner for International Partnerships H.E. Jutta Uripilainen said. The African Trade Observatory is especially valuable for empowering the economic operators during this COVID-19 pandemic, ITC Executive Director Pamela Coke-Hamilton said. ‘Today, we are putting an entire continent of trade intelligence at the fingertips of African entrepreneurs, especially to support small local firms, women and young people in making the most of new opportunities’. The beta version of the web platform, currently available in French and English, was released during the 13th Extraordinary Session of the Assembly of Heads of State and Government on the AfCFTA. The...

On 1st January 2021 trading under the AfCFTA started Africa. This is a historic milestone for the continent as Africa will really start to trade with Africa. Currently, the percentage of trade that African countries do with each other is a mere 16 – 18%. The bulk of the continent’s trade is with the rest of the world, and most African exports are in raw materials including extractive commodities like oil, gas and minerals which are vulnerable to market volatility. Under AfCFTA trading, tariffs on various commodities where rules of origin have been agreed will be drastically reduced and traders of all sizes will have access to a much bigger market than they used to before. Non-tariff barriers (NTBs) to trade will also be addressed and a mechanism for speedy reporting and resolution of NTBs has been put in place (www.tradebarriers.africa). The bigger market will spur producers to upscale and so support increased industrialization and value addition on the continent. More employment opportunities will thus be generated for Africa’s burgeoning youth population. It has already been demonstrated that to mitigate the Covid-19 pandemic medicines and personal protective equipment need to be produced and moved to where they are needed expeditiously. The AfCFTA will be a tool for mitigation of Covid-19 by allowing free and unhindered trade in health products across the continent. The Agreement establishing the AfCFTA was signed in March 2018, in Kigali Rwanda, following conclusion of the main legal texts. 54 Member States of the African Union have...

Summary When well utilised, technology and online market places can drive inclusive growth across Africa, with e-commerce likely to create as many as three million jobs by 2025. Ditching outmoded business models for e-commerce will drive intra-regional trade to new business markets and fasttrack the implementation of the AfCFTA. Young people in Africa could unlock the benefits of the Africa Continental Free Trade Area (AfCFTA) through e-commerce, which accounts for global online sales worth $26 million. The trading bloc comes into force in January 2021. However, even as e-commerce is touted as the panacea for growth of trade in Africa, countries are being warned about the sector’s legal hurdles. When well utilised, technology and online market places can drive inclusive growth across Africa, with e-commerce likely to create as many as three million jobs by 2025. This is according to a recent virtual meeting on Trade Beyond Covid-19: Unpacking the AfCFTA for East Africa. The meeting, hosted by the International Trade Centre (ITC) — the joint agency of the World Trade Organisation and the United Nations — was attended by government officials and other private business partners from around Africa. ITC executive director Pamela Coke-Hamilton said there is a need for African countries to incorporate technology in their trading programmes and should learn from regional blocs such as the East African Community (EAC), the Southern African Development Community (SADC), the Economic Community of West African States (Ecowas). She said the opportunities and challenges of e-commerce in Africa interplay with other...

Summary Countries need to grow and spur economic growth including creating new wealth, without which there is limited public revenue, yet expenditure continues as governments have to provide public services. Co-operation is critical. Putting resources together as well as sharing information to make sure countries have a common objective in keeping the flow of trade going. Mama Keita, United Nations Economic Commission for Africa (UNECA) director for eastern Africa, shared insights into impacts of the pandemic and ongoing negotiations of the continental free trade bloc with Berna Namata. Rising debt levels in Africa remain a constant concern as countries borrow to deal with the pandemic. While some are benefiting from debt relief, many others face the risk of defaulting. How can this be addressed? Countries need to grow and spur economic growth including creating new wealth, without which there is limited public revenue, yet expenditure continues as governments have to provide public services. Public resources will reduce if the economy is not growing. For countries to achieve growth, first countries need internal rigorous discipline in containing the pandemic; resorting to strict lockdown again means economic contraction and no growth which will reduce public revenues. If you do not create growth, you face the same poverty issues, so we need to find means to keep the economies growing. Externally, we hope the newly-developed vaccine will be made available to contain the pandemic so that all economies can return to normal. The G20 has come up with a new initiative to support countries...

While the size of the global chocolate market is valued at more than $100bn, only ~5% of this market is captured by Africa; whereas 70% of the world’s cocoa production comes from the African continent, namely from Cote d’Ivoire, Ghana, Nigeria and Cameroon. This example emphasizes the crucial role of industrialization in boosting economic activity along value chains; shifting from over dependence on raw material to higher value-added goods. Furthermore, industrialization is closely linked to economic and social development: it enhances productivity, innovation and economic diversification, and contributes to a rise in the workforce education as well as formal employment. As of 2019, industry generated on average $700 of GDP per capita in Africa, less than 30% of Latin America’s output ($2,500) and c. 20% of East Asia’s one ($3,400). Nonetheless, African economies have the opportunity to foster industrialization by capitalizing on two decades of steady GDP growth, along with an increasing young workforce, rapid urbanization, and technological development. To do so, Special Economic Zones (SEZs) have the right ingredients to achieve rapid and scaled industrialization of the African continent. SEZs are demarcated geographical areas within a country’s national boundaries, which benefit from a distinct regulatory regime. They generally provide four types of advantages to investors: (i) an access to reliable infrastructures and utilities, (ii) attractive customs regimes, (iii) fiscal incentives such as corporate taxes exemptions, and (iv) enhanced regulatory and administrative frameworks. From ~500 in 1955, SEZs’ number has risen to ~5,400 in 2019 worldwide, with Asia counting for three quarters...

With less than a month to the African Continental Free Trade Area coming into effect, the East African Community submitted its tariff offer on December 3, beating the December 5 deadline. EAC’s tariff offer now brings the number of countries to 40 that are ready to join the continent-wide duty-free quota-free movement of goods on January 1, when trading under the AfCFTA agreement starts. By press time on Friday, 14 countries that had signed the agreement had not yet submitted their tariff offers. These are Algeria, Angola, Comoros, Djibouti, Eritrea, Ethiopia, Libya, Morocco, Mozambique, Saharawi Republic, Somalia, Sudan, Tunisia and Zimbabwe. “EAC has submitted both the tariff offers and schedule of commitments on trade in services,” Kenneth Bagamuhunda, the EAC director general of Trade and Customs, told The EastAfrican. The EAC had missed previous deadlines as the bloc was putting together its offer that addresses the trading regimes of different partners such as Ethiopia, DRC and Sudan. The EAC overcame delays and several deadlines that risked making it the only Customs Union and Single Customs Territory that would have been locked out of the intra-Africa trade. The Economic Community of West African States (Ecowas) submitted its tariff offer on December 2. Prudence Sebahizi, the head of AfCFTA Negotiations Support Unit at the African Union Commission confirmed that EAC’s offer was received on time. Dispatch The EAC Council of Ministers, which met on November 2 under the Sectoral Council on Trade, Industry, Finance and Investment, directed that partner states experts meet...

African Union Heads of State and Government have underscored the urgent need for member states to kick-start trading activities, under the African Continental Free Trade Area (AfCFTA). The decision was adopted during a virtual meeting of the 13th Extra Ordinary Session of the Assembly of the Union on the AfCFTA, this past Saturday, under the Chairmanship of Cyril Ramaphosa, President of South Africa and Chairperson of the African Union (AU). The summit is taking place just four weeks before the AfCFTA commences trading on January 1, 2021, to consider the adoption of the legal instruments that will facilitate its operation. “Today we stand on the cusp of a new era in the progress of our continent,” said Ramaphosa, adding, “The moment that we have all been working painstakingly towards has finally arrived…We are all filled with a great sense of pride at how far we have come to reach this moment”. All 55 member states of the African Union will be brought together by AfCFTA which allows for market covering of over 1.2 billion people not limiting the growing middle class, and a collective gross domestic product of over US$3.4 trillion. This also makes AfCFTA the world’s biggest free trade area after the establishment of World Trade organisation. AfCFTA has the ability to enhance intra-African trade by 52.3 percent by removing import duties, and also to double this trade if non-tariff barriers are also reduced. AfCFTA seeks to create and achieve unilateral continental market for goods and services, with free...