Your company is going to expand to Africa soon.
Understandably, you were pulled in by the potential for market growth, the abundant natural resources, and human capital…but further research has you in doubt about the trade infrastructures in place. Will they be able to support your growth? Are there too many administrative and political barriers to success?
In the past few years, the AfCFTA (African Continental Free Trade Area) has emerged as a reply to questions surrounding Africa’s ability to grow and foster trade.
According to the UN, some experts say that the AfCFTA will improve cooperation, promote exports and investments, increase capital and workforce mobility, and promote industrial development, among other things.
But what is the AfCFTA really, and what can it do for your business?
The AfCFTA is one of the main initiatives of Agenda 2063: The Africa We Want. It is the largest free trade area worldwide.
The main goal of the AfCFTA is to unite the continent’s roughly 1.3 billion inhabitants and their about US$ 3.4 trillion combined GDP into one common market. It is an enormous step taken towards Africa’s route to self-sufficiency.
The AfCFTA also expects that its presence will create an income boost of 7% for Africa by the year 2035. Additionally, UNCTAD estimates that if all tariffs are removed, GDP could grow by 1 to 3% for every member country of the AfCFTA.
As a reminder, a free trade area is a defined geographical space where goods and services are free from tariffs and quotas. This means that the trade of goods is not restricted in numbers, and that no taxes are imposed on goods to increase government revenue, or for any other reason.
Naturally, this can facilitate imports and exports, boosting commerce and intra-trade activity within the African continent.
But not all free trade zones are equally free.
Participating countries must first establish regulations for the free trade area’s operations for it to grow. The member states must agree on answers for the following questions and more for the free trade area to work:
Typically, the answer and ensuing consensus to these issues depends on the political sway within the group and power dynamics between nations.
This determines the extent and level of true “freedom” in the transaction. The objective is not to have all countries fall into agreement, but rather to develop a trading strategy that all members of the free trade area can reasonably support.
Member nations of the AfCFTA would start to purchase from one another rather than importing overseas as is mostly the case now. This would be done by offering each other trade privileges.
This type of trade has already begun within the AfCFTA. In October of 2022, Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda, Tanzania and Tunisia all participated in the AfCFTA’s Guided Trade Initiative (GTI).
By accomplishing this, the AfCFTA’s trade would increase and provide stable grounds for the growth of local supply chains and the deepening of Africa’s manufacturing capabilities.
Commerce and industrialization go hand in hand since promoting regional integration will probably increase value addition both domestically and regionally.
Through promoting commerce among African nations, the AfCFTA would lessen Africa’s reliance on commodities imported from outside of Africa. Consequently, this would boost local supply chains, and create the jobs required to capitalize on the continent’s growing population.
The AfCFTA first started with 24 members. Since then, the free trade area has grown to include 54 countries, as of September 2023.
Ghana, Botswana, Kenya, Rwanda, Niger, Chad, Guinea, Côte d’Ivoire, Mali, Namibia, South Africa, Congo, Republic of Djibouti, Mauritania, Uganda, Mozambique, Senegal, Togo, Egypt, Ethiopia, Gambia, Sahrawi Arab Democratic Rep., Sierra Leone, Zimbabwe, Comoros, Burkina Faso, São Tomé & Príncipe, Equatorial Guinea, Gabon, Mauritius, Morocco, Central African Rep., Angola, Lesotho, Tunisia, Cameroon, Nigeria, Malawi, Zambia, Algeria, Burundi, Seychelles, Tanzania, Cabo Verde, Democratic Republic of the Congo, Guinea-Bissau, and Eswatini.
The AfCFTA, like other free trade areas, can allow for major specialization to happen within a country, and later enable an advantageous flow of commerce for these particular goods. This is because of the lack of quotas and tariffs, which encourages production and specialization in manufacturing.
However, to qualify for preferential, quota and tariff-free rates, your business must meet rules of origins requirements.
What does this mean?
Rules of Origins specify the requirements that businesses must meet to verify that their products are produced within the Free Trade Area and are therefore qualified for preferential treatment there.
This also means that your company will need to be and to remain 100% compliant with all the legislations in place. An EOR or PEO partner would serve your business well in these instances, helping you to stay away from legal troubles such as fines and long trials.
Critics of free trade areas often give out warnings about these blocs’ abilities to allow for super-specialization. This can often mean that some countries grow in a disproportionate manner especially in a certain sector, which can then negatively affect production in other countries. Critics also warn about the dangers of over-specialization, arguing that countries could become overly dependent on a few key sectors.
…but unsure of where to start? Which regulations you need to be aware of? And which pitfalls to avoid?
Africa HR Solutions will help you stay compliant and take care of all your HR needs through our PEO and EOR offers. Find out more about how we can help your business here.
Grant Geraghty is the longest-serving member of the Africa HR team. This resident subject matter expert and client champion is responsible for gaining a deep understanding of our clients’ unique HR needs in Africa and providing tailored solutions that align with their business objectives. Grant collaborates closely with our clients to ensure that their requirements are properly implemented, providing ongoing support and guidance throughout the process.
Grant brings a wealth of experience to his role, having served as Africa HR’s longest-serving employee. He holds a Bachelor of Commerce degree, with a major in Economics and Business Finance, from the University of Natal in South Africa. Additionally, he has completed a certification program in Payroll and Tax Administration from the University of Cape Town, further enhancing his expertise in HR operations and compliance.
His commitment to delivering exceptional service and his extensive knowledge of HR in Africa make him an invaluable member of the Africa HR team.
Kevina Takoordyal has a BA Hons Business Management from the University of Glamorgan, UK, with MBA in leadership and Innovation, MBA General, PMP Certified, and Agile Scrum Master. She currently works as the Head of Operations at Africa HR Solutions Ltd with more than 20 years of proven leadership capabilities in Operations, Business Development, People Management, Process Optimization, and Project Management in the Financial Services, BPO, Banking Industry, and Heath Care Industry. In Senior leadership roles with an international footprint across Europe working and extensive Pan- African experience from a compliance, finance, and operations angle, Kevina comes across with a panoply of cross-functional skills. Kevina also serves on a few Boards, Non-Independent Executive at MioD and for NGOs on a voluntary basis, a coach and mentor to aspiring female leaders across Africa and Mauritius.
Kevina is a firm believer in Servant Leadership with a strong focus and commitment to uplifting others, with the ability to deliver through a highly engaged – diverse team, and works towards consistently synergistic value creation. While being a focused and adaptive thinker and Kevina is actively participating in panel discussions on Innovation, CX, Digital transformation.
Kevina serves as Project Assessor for the National Youth upskilling program. She has been recognized as Global Talent in a few companies, Ceridian, and International SOS Ltd whereby she has been awarded a few scholarships and had the opportunity to be mentored by Senior Vice President in the US. Award Winner in various fields and at a national level and recognized including Super Achiever Leader Award in Africa in 2016, Awarded Africa Women Leader 2018.
Viloshna is an experienced finance professional with 18 years of expertise in strategic financial planning, financial analysis, cash flow management, systems and controls implementation, financial reporting, and continuous process improvements. She currently serves as Head of Finance & Business Support, where she has successfully automated and leveraged the financial reporting system capabilities to ensure efficient company operations.
Viloshna’s background includes senior roles in a multinational pharmaceutical company and a large listed Mauritian conglomerate. Her meticulous attention to detail and strategic thinking have streamlined financial processes, making her a valuable addition to any finance team. Viloshna is a qualified finance professional with an FCCA qualification and an MBA, bringing valuable expertise to any organization.
In her current role, Viloshna leads the company’s Treasury and Payments function, including the fulfillment of the company’s cross-border payments into Africa. With her strong educational background and extensive experience, Viloshna consistently demonstrates her ability to optimize financial operations, minimize risks, and improve profitability. Her expertise in financial reporting and process improvements make her a valuable asset to any organization.
A qualified lawyer who joined Africa HR Solutions in July 2020, Mark Du Preez has experience working in private practice for a reputable law firm in South Africa. He also played commercially focused roles at a leading private bank, wealth management company, and outsourcing firm in South Africa and Mauritius.
Mark has played a pivotal role in Africa HR Solution’s risk mitigation strategy, which positively impacted P&L performance over the years.
He currently leads the Partnerships function of the company including relationships and oversight with in-country partners (ICPs) across Africa.
Alex has more than 15 years of experience in the global, strategic development of both enterprise and consumer brands in categories including technology, transport, enterprise software, entertainment, and travel.
With experience in roles on both agency and corporate side, he has worked across international brands and has led the development and execution of multi-discipline campaigns across EMEA, NORAM and Asia Pacific.
His focus is on driving meaningful business impact through brand differentiation and building high-functioning, digitally oriented, and analytically driven capabilities. He is motivated by working with, and developing dynamic people, teams, and organizations.
He leads, manages, develops and mentors the Key Account Management department, including line management responsibility for the team of Key Account Managers and Key Account Administrator who represent the Company as the primary communication link between all relevant stakeholders, including clients, third party in-country partners and internal functions.
Originally from Mauritius, he holds bachelor’s degrees in International Business, Finance and Management from the University of Nevada, Reno.