Manufacturers check their Readiness to compete under the Africa Continental Free Trade Area.

In Summary
  • African countries are still struggling to meet the required standards to join the  world’s largest trading bloc by number of participants.
  • the Block has  54 member states, aiming to gradually reduce 90% of the tariffs over a 5-year period.
  • 41 of the 54 signatories (76%) had deposited their instruments of AfCFTA ratification.
Deo Kayemba, the chairman of the Uganda Manufacturers Association addreses C.E.Os at kampala Serena Hotel.
Deo Kayemba, the chairman of the Uganda Manufacturers Association addreses C.E.Os at kampala Serena Hotel.
Image: UMA

 The East African Business council is calling upon the business community especially manufacturers to emphasize quality and value addition if they are to achieve their dream of competing under the Africa Continental Free Trade Area.

this follows a recent engagement of  CEOS from various companies across the country.the meeting organised by the Uganda Manufacturers association aimed at deliberating on the  readiness as East African companies to compete with other African countries under the Africa Continental Free Trade Area.

The African Continental Free Trade Area (AfCFTA) started to trade under the preferential terms on January 1st, 2021.

This is so far the  world’s largest trading bloc by number of participants, with 54 member states, aiming to gradually reduce 90% of the tariffs over a 5-year period. As at January 2022, 41 of the 54 signatories (76%) had deposited their instruments of AfCFTA ratification, including the three largest African economies: Nigeria, South Africa, and Egypt.
 

However, Africa has only a 3 percent share of global trade as of 2019. Moreover, 44 African countries are considered dependent on commodity exports, mainly agricultural products, fuel, minerals, ores and metals.

Simon Kaheru the chairperson of the east African Business council is how ever concerned that most busineses in uganda compromise value and quality which he says has to be empasised if we have to get a maeket share in the continental market. especially agricultural products which are on high demand.

Image: Moses kidandi

The manufacturing sector, which is one of the key drivers of economic growth through the accumulation of capital and labor, accounts for about 10 percent of GDP in Africa. Also, more than 60 percent of the value of manufacturing production in Africa concentrates on four countries only: Egypt, Nigeria, South Africa, and Morocco.

The AfCFTA will boost the continent’s manufacturing sector by facilitating access to new markets for small and medium-sized enterprises (SMEs), increasing economies of scale, and facilitating exports diversification.Given Africa’s significant agricultural potential, agro-processing could be a start to achieving a vibrant manufacturing sector.

However, the continent’s exports have faced slow growth, in part, due to the developed countries tariff regimes in processed agricultural products- with higher tariffs on processed commodities than on raw materials.

This ‘tariff escalation’ has discouraged African countries from moving up the value chain.In 2014, manufactured products accounted for only 15% of Africa’s exports to outside the continent compared to 42% for intra-African exports. Evidence suggests that there is considerable room to grow intra-African manufactured exports if trade is further liberalised.

The AfCFTA aims to boost intra-African trade by reducing tariff and non-tariff barriers. Its full implementation will help mitigate the constraint of tariff escalation, encouraging countries to focus on more value-added products, and hence diversify exports away from commodities.

Else Attafuah UNDP country Representative to Uganda addressing C.E.Os in Kampala.
Else Attafuah UNDP country Representative to Uganda addressing C.E.Os in Kampala.
Image: UMA

According to Else Attafuah UNDP country Representative to uganda, AfCFTA will help businesses in the manufacturing sector increase their economies of scale by facilitating the reduction of costs of production because of the ease to acquire and supply production inputs.

as proof of positive results,Else Attafuah  says, under the Southern African Customs Union trading agreement, automobile manufacturers in South Africa have reduced their costs of production by importing leather for seats and fabrics from Botswana and Lesotho before they export assembled cars abroad.

The AfCFTA further aims to “enhance competitiveness at the industry and enterprise level - through exploiting opportunities for scale production” at the continental level. 

Uganda needs to intentionally consider important enablers for industrialisation namely, skilled labour, digital technology, and investing in strong Science, Technology, and Innovation ecosystems.