AfCFTA: $130bn investment in goods, services to be recorded in 4 priority sectors
A total amount of $130bn in investment is anticipated to be recorded in four priority sectors under the African Continental Free Trade Area (AfCFTA) agreement.
In its January 2023 report, four sectors identified as having high potential for investment are the automobile, agriculture and agro-processing, pharmaceuticals and transport and logistic sectors.
The selection of the four sectors, the report further asserts, is on the basis of their potential to meet the Continent’s demand through local production as well as their potential value as exports to the rest of the world.
Per the report, automotive industry in Africa is expected to grow to more than $42 billion by 2027 due to increasing domestic demand, rising incomes and high projections for intra-African trade.
The agriculture sector also offers opportunities for economic growth, job creation, poverty reduction and food
security, with the potential for even more value added with agro-processing. Intra-African trade in agriculture is expected to increase by 574% by 2030 if tariffs are eliminated under the AfCFTA.
“The pharmaceuticals was selected as a vital value chain given its potential for more value added as a complex product, given the feasibility of overcoming traditional barriers under the AfCFTA. The AfCFTA will help increase intra-African trade in pharmaceuticals, which is currently extremely low (only 3% of demand is met by intra-African trade), leading to more resilient health supply chains.
“Transport and logistics will be a crucial area for investment as an enabler of trade in goods as intra-African trade increases. The AfCFTA is projected to increase intra-African trade demand by 28%, with demand for almost 2 million trucks, 100,000 rail wagons, 250 aircraft and more than 100 vessels by 2030,” it added.
The report further notes that, five key pillars under the trade agreement are being championed by the World Economic Forum to ease ease physical, capital and digital flows in Africa and grow inclusive and sustainable development.
Pillar 1, the report notes, is the effort to facilitate trade in goods. The World Economic Forum is supporting public-private collaboration centred on implementing trade-facilitating provisions through projects already under way.
Pillar 2 is the effort to facilitate services and investment. The Forum is working to address fragmented investment regulatory frameworks through on-the-ground projects.
Pillar 3 is the effort to facilitate digital trade. As negotiations over the Protocol on Digital Trade advance, efforts are being developed to accelerate e-commerce preparedness for small businesses in Africa.
Pillar 4 is the effort to facilitate inclusive trade. The Forum has launched the Inclusive Trade Initiative to improve the societal outcomes of trade through its Trade and Labour Programme as well as the Trade and Indigenous Peoples Programme, which uncovers good practices that can be shared with AfCFTA negotiators and businesses.
Pillar 5 is the effort to facilitate environmentally sustainable trade. The Forum is working to mainstream environmental sustainability in trade policy, which will be necessary to keep pace with the sustainability preferences of important trade partners, such as emissions reductions and material circularity.
According to the report, the adoption of the African Continental Free Trade Area (AfCFTA) will accelerate intra African trade and develop regional and local value chains, creating new business dynamics that offer investors access to a population of 1.7 billion people with combined business and consumer spending reaching $6.7 billion by 2030.
