Unlocking AfCFTA's potential value

Opinion-Editorial by Shameel Joosub, CEO Vodacom Group
The African Continental Free Trade Agreement (AfCFTA) aims to create an integrated, continent-wide free trade zone. Encompassing 54 countries and 1.3 billion people and accounting for revenue of over US$3.4 trillion in terms of GDP, the AfCFTA’s potential value is enormous. The World Bank estimates that it will boost regional income by 9% or US$450 billion and lift 50 million people out of extreme poverty by 2035. In addition, the AfCFTA could generate combined consumer and business spending of $6.7 trillion by 2030, according to the Mo Ibrahim Foundation.

If implemented, the AfCFTA’s benefits include job creation and growth enabling businesses to join regional and global value chains as well as attracting foreign investment. It stands to be a game-changer for the continent, driving inclusive sustainable socio-economic development. This will largely be underpinned by the adoption of digital technology.

Building an inclusive digital economy
In accelerating cross-border trade, the AfCFTA will help to drive digitalisation in Africa, from online logistics to e-commerce, as well as the transfer of data. Digital technologies, such as broadband connectivity, automated processing, and the Internet of Things (IoT), are critical to the success of the AfCFTA by allowing cross-border trade more easily. Investment in digital infrastructure across the continent is therefore needed to support a digital trading bloc.

Digitalisation can also enable cross-border trade for many that have remained excluded from a global marketplace. This is particularly prevalent for small to medium enterprises (SMEs), which make up the majority of employment on the continent. The AfCFTA’s aim of stimulating regional cross-border trade, enabled by digital technology, can provide SMEs access to new markets and financial systems that boost economic growth and promote inclusion. This creates opportunities for African businesses to diversify their customer base, develop new products and services, and enhance their competitiveness on a global scale.

As digital trade is dependent on digital skills, the AfCFTA offers greater capacity for equipping local communities with relevant capabilities and digital literacy to perform tasks and transactions through technology. This can help to eliminate the digital divide while encouraging innovation on the continent.

Increasing digital trade will lead to a rise in cross-border data sharing, which requires greater harmonisation on how AfCFTA members govern the use of data and digital identity systems and support digital trade through policies and regulations. While some African markets have implemented legislation on data protection and privacy, others have yet to develop and enact data policies. The AfCFTA can provide a regulatory framework for seamless data interoperability for intra-continental cross-border trade for member states to follow.

One such solution is to develop a regional cross-border data transfer-centric trade approach, allowing an automatic display of adequacy for organisations that wish to transfer data amongst the various country signatories. These countries could also draw from best practices of other global bilateral agreements and principles, such as “open data” expressed by the European Commission’s regulatory endeavours. In this way, the AfCFTA can help to enhance trust and transparency in cross-border transactions, personal data protection and privacy.

Collaboration is the key to success
In the first phase of the AfCFTA, which took effect in January 2021, member countries have agreed to gradually eliminate tariffs on 90% of goods and address barriers to trade in services. However, negotiations on trade in services, additional protocols on investment, competition policy, intellectual property rights, and e-commerce are ongoing.

In addition, the AfCFTA seeks to liberalise five of the 12 service sectors categorised by the World Trade Organisation (WTO), namely business services, communication services (which includes telecommunication services, postal services, courier services, Audio-visual services and other services), financial services, tourism and travel, as well as transport services. However at this stage, there remains a lack of clarity on how these service sectors will be liberalised, and whether this will only happen in specific sub-sectors.

With the AfCFTA yet to be finalised, there lies an opportunity for the private sector to play a pivotal role in engaging with governments and authorities to ensure the full value of the agreement will materialise. For example, telecommunications operators and technology companies are substantive players in certain service sectors that AfCFTA seeks to liberalise, including communication, financial, and business services. As an industry, we can offer input into negotiations and use our expertise and capabilities for the requisite services integration and digitalisation to maximise the AfCFTA’s scope and possibilities.

With all of our eight markets signatories to the AfCFTA (with Mozambique still to ratify the agreement), Vodacom Group is committed to supporting the implementation of the AfCFTA. Working with governments, regulatory authorities and other stakeholders, we can help to advance digitalisation and create an enabling environment that enhances cross-border trade and unlocks Africa’s economic potential. With the right strategies and collective effort, the AfCFTA can pave the way for a prosperous and inclusive Africa.