"10 basic tips for a smooth intra-African trade"

" \n 10 basic tips for a sm o oth intra-African trade \n \n\n \n As we celebrate Africa Union (AU) Day today, 25 May 2022, we commend the AU for its milestone achievement of establishing and implementing the Africa Continental Free Trade Area (AfCFTA) for the promotion of intra-African trade. \n \n\n \n It is a major objective of the AfCFTA to create a single continental market for goods and services, with free movement of business persons and investments, and to pave the way for accelerating the establishment of the Continental Customs Union and the African customs union. \n \n\n \n In this write-up, we outline the benefits and some challenges we perceive under the AfCFTA implementation and then propose ten (10) practical tips for avoiding or minimising these challenges for a smooth intra-African trade. \n \n\n \n Benefits Under the AfCFTA \n \n\n \n The benefits of the AfCFTA for the African economy and that of its Member States cannot be overemphasised. Under the AfCFTA, we can boast of benefits such as: \n \n\n \n A Single Market \u2013 a single market is created under the AfCFTA by the protocols eliminating trade barriers and promoting cooperation among the Member States on investment and competition policies, intellectual property rights, settlement of disputes, and other trade-liberating strategies. This allows a person in Ghana, for example, to easily do business in Nigeria or any part of Africa without trade restrictions; \n \n\n \n No Tariffs - The AfCFTA protocols require that the Member States remove up to 90% of tariffs imposed on goods and services traded among the Member States. This means that there shall be nearly no duties imposed on the import or export of goods within Africa; \n \n\n \n Expansion and Growth in Business - small and medium-size businesses have the potential for growth under the AfCFTA since they can easily import and export goods and services across Africa with no duty and fewer restrictions. With the AfCFTA implementation, we anticipate an increase in production and the number of businesses springing up in Africa; \n \n\n \n Collaborative Structures for Enforcement \u2013 Member States have pledged their commitment to implementing the AfCFTA protocols to ensure that enforcement is smooth and widespread within the Continent. We have over 54 African States that have signed the AfCFTA Agreement; and \n \n\n \n An Enhanced Business Environment - With the mechanisms in place for the settlement of disputes, industrialisation boost, and promotion of women's trade among others, the AfCFTA implementation set to promote an enhanced environment for trading and doing business within Africa. \n \n\n \n Despite the many benefits, there are some challenges that hinder the ease of doing business under the AfCFTA. \n \n\n \n Challenges for Doing Business Under the AfCFTA \n \n\n \n 1. Minimum Capital Requirement \n \n\n \n Although discussions on removing capital restrictions are underway in the many Member States, it still stands today that to do business as a foreigner in an AfCFTA Member State, you will need to satisfy the minimum capital requirement in each jurisdiction. In Ghana, for instance, foreigners are required to invest foreign capital of $200,000, or $500,000 to do business as a joint-venture or a wholly-owned foreign entity respectively. Trading requires a minimum capital of $1,000,000. This becomes a hindrance since one has to raise huge capital to do business in another Member State. \n \n\n \n 2. Regulatory Compliance \n \n\n \n Despite the absence of tariffs, several laws and regulations apply to doing business in any State. For example, a manufacturer or distributor of food products must comply with registration requirements with the Food and Drugs Authorities in each jurisdiction, in addition to several permits and licences that need to be obtained and different standards that need to be complied with. These become burdensome as compliance increases costs and causes undue delays. \n \n\n \n 3. Payment of Taxes \n \n\n \n Income taxes continue to apply to businesses trading in different jurisdictions in Africa with complex tax systems and no double tax agreements among the African States. \n \n\n \n 4. Finance Difficulties \n \n\n \n There are currently no active financing opportunities under the AfCFTA. Although an Adjustment Fund has been established by the AfCFTA Secretariat to provide support to the Member States and their private sector through financing, technical assistance, grants, and compensation funding, its aim is to help mitigate revenue losses and competitive pressures that may result from a reduction in tariffs and liberalisation of markets. It is unclear at this stage whether the AfCFTA will be financing business expansion by providing funds for, say, the acquisition of equipment. Businesses are, therefore, required to seek out funding sources within their respective jurisdictions. \n \n\n \n In addition to the above, price differentials, unfair competition, cost of doing business, trademark infringements, and many more, are but a few of the challenges we envisage under the AfCFTA. \n \n\n \n While we look forward to strong structures being implemented under the AfCFTA protocols, there are some basic ways the private businessman can avoid or reduce the impact of these challenges. Below, we outline ten (10) of our favourite guidelines: \n \n\n \n Ten (10) Simple Intra-Trade Guidelines \n \n\n \n 1. Foreign minimum capital need not always be in cash \n \n\n \n You can satisfy the minimum capital requirements with the value of assets and goods acquired and or owned by the business. For example, the cost of office premises, furniture, equipment, salaries, stock, receivables, etc. can all be used to satisfy the foreign minimum capital. You should make sure that all such items are incurred or acquired in the name of the business and negotiate with the Regulator for approval prior to registering the business. \n \n\n \n 2. Know the laws and play around with it \n \n\n \n The goal of every investor is to make the most returns\/revenue\/profits from any business in full compliance with the law. Once you know the laws that apply in each State, you will be able to structure your business within the confines of the law for maximum profits. \n \n\n \n 3. Taxes can be avoided \n \n\n \n Don't evade taxes rather know the taxes that apply to every business and transaction within the jurisdiction and structure your business or transaction to reduce your tax burden. It is a cardinal principle in law, that a person is allowed to arrange their affairs in order to reduce their tax burden. Also, there are opportunities to negotiate with Tax Authorities on flexible payments and tax waivers. Yes, it works so make use of those. \n \n\n \n 4. You don't need huge bank loans to finance your business \n \n\n \n Make use of other funding opportunities with fewer burdens such as partnerships and collaborations, crowdfunding, leasing, factoring, franchising, angel investors, and venture capitalists to finance business projects under the AfCFTA. You can also take advantage of any Government financing support that is available in each jurisdiction. \n \n\n \n 5. Reduce employment burdens \n \n\n \n Your business can avoid the cost, responsibilities, and liabilities of complying with the obligations of an employer by the use of outsourced staff arrangements or employment at will. The employer, however, needs to be fair in all such arrangements. \n \n\n \n 6. Don't overlook the power of Corporate Social Responsibilities (CSR) \n \n\n \n Undertake CSR projects that do not only promote your brand but give your business leverage in lobbying or negotiating with the Government or Government Authorities in your favour. One of the best ways is to identify Government projects that will have great social impact and lend your support. \n \n\n \n 7. Do business right \n \n\n \n This requires that you don't \"cut corners\", don't pay bribes, don't use illegal proxies, don't disregard the law, don't sign shady deals, don't abuse locals, don't misinform or avoid disclosures, don't commit crimes, etc. No matter how ineffective the African governance and judicial systems may be, they do work sometimes and you may not want to be a culprit when it does. \n \n\n \n 8. Engage lawyers and auditors \n \n\n \n As they say, it is more expensive to fall into a risk than to avoid it. Lawyers and auditors are your business partners whose role is to secure and protect your business interests. Be intentional about the legal and audit services you require, budget for them, look for the resources, and invest in quality professionals for good results. \n \n\n \n 9. Stay out of court \n \n\n \n Your quest to increase earnings should not get you on the wrong side of the law. Unfair labour practices, poor occupational health practices, environmental degradation, supply of unwholesome products, regulatory non-compliance, delay or non-payment of bank loans or facilities, breach of contracts, and the likes which are examples of strategies adopted to reduce operational costs may lead you to court and in long litigation battles as they are against the laws of the land. \n \n\n \n 10. Strengthen your business structures \n \n\n \n Engaging in intra-African trade requires strong business structures. Reduce wasteful practices, institute good procurement structures, be ethical, automate your business processes, outsource part of operations, be strict on risks and compliance, engage in online business, etc. These will help promote your brand while keeping you efficient and resilient to unfavourable conditions. \n \n\n \n Conclusion \n \n\n \n The AfCFTA implementation is a good initiative for Africa with the huge potential of promoting economic growth and reducing poverty. We, therefore, call for the support of the Member States and all stakeholders to make the AfCFTA implementation not just a theory but a reality. \n \n\n \n We also encourage private businesses to take advantage of the AfCFTA opportunities as a sure strategy for business growth and expansion. No, matter the challenges we perceive, we are positive that a smooth intra-African trade is possible. \n "

"10 basic tips for a smooth intra-African trade"

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