PAMA streamlines the needs for SMIs to thrive in the AfCFTA environment

The African Continental Free Trade Area (AfCFTA) agreement on 21st March 2018, was adopted by the 10th Extraordinary Session of the Assembly in Kigali, Rwanda with the primary objective to create a single African market for goods and services, facilitating trade and investment between member countries. This aims to boost intra-African trade, increase regional value chains, and enhance Africa’s global competitiveness.

As part of its mandate, the AfCFTA is to eliminate trade barriers and boost intra-Africa trade. In particular, it is to advance trade in value-added production across all service sectors of the African Economy.

However, a Summary Report by Pan-African Manufacturers Association (PAMA) noted that without a strong understanding of AfCFTA’s protocols, rules, and their implications, many SMIs may be unable to fully benefit from the agreement, and the overall impact of the scheme could fall short of expectations.

Against this backdrop, a new report by the Pan-African Manufacturers Association presents findings from a recent research survey assessing the impact and opportunities of AfCFTA for SMIs.

Small and medium-scale industries are the backbone of many economies, including high- and low-income nations. They often account for a substantial share of employment, public revenue, and industrial output growth, and are critical to accelerating inclusive growth, poverty reduction and economic stabilisation. This is particularly evident in Africa, where SMIs account for around 80–90% of employment (including jobs created in the shadow sector).

These promises and outcomes of SMIs align with the shared aspirations that drive the AfCFTA framework, which aim to establish a single continental market to promote Africa’s economic stability and prosperity. However, the full realisation of AfCFTA’s potential largely depends on strategic interventions that support the growth and active participation of SMIs in the scheme.

According to the study, many SMIs see AfCFTA as a pathway to overcoming the limitations of fragmented domestic markets and tapping into regional demand.

However, the study also highlights significant barriers that could hinder the full participation of SMIs in the AfCFTA framework.

Key challenges, it referenced include inadequate infrastructure, cumbersome customs procedures, financial constraints, product standardisation, low production volume, and limited awareness of AfCFTA’s provisions and protocols, while infrastructure deficits and poor logistics were identified as the most critical obstacles, affecting 34% of respondents.

Additionally, financial challenges such as forex instability and limited access to export financing were reported by 22% of participants. A notable 26% of respondents admitted having absolutely no familiarity with AfCFTA’s operations, reflecting a need for enhanced capacity-building efforts.

The report identifies critical areas for policy intervention to address these challenges and made recommendations which include “investing in infrastructure and logistics, simplifying customs and regulatory processes, providing financial support mechanisms, adopting export clustering or aggregation model for SMIs with similar products and challenges of low production who want to export, and deepening capacity-building programs. These measures aim to empower SMIs to compete effectively in the expanded market while ensuring inclusive growth.”

Furthermore, the report underscores the need for a level playing field to mitigate the risks of unfair competition, particularly from larger firms or industries, adding that strong regulatory frameworks and enforcement mechanisms are essential to protect the interests of SMIs and promote fair trade practices.

While the report presents detailed recommendations and tailored policy implementation strategies or a roadmap, it serves as a call to action to prioritise the needs of SMIs, enabling them to thrive in the AfCFTA environment and contribute significantly to Africa’s economic integration and prosperity.

In conclusion, the AfCFTA holds immense potential to drive economic transformation and industrial growth in Africa vis-à-vis the consideration of the full participation and integration of the SMIs. Despite challenges, targeted interventions and collaborative efforts among policymakers, regional and development institutions, inter-governmental bodies, and industry stakeholders can help unlock the full benefits of a single market in Africa for the continent’s industrial transformation.