Small and medium sized enterprises (SMEs) are the backbone of African economies, making up majority of businesses and generating significant share of jobs for the continent.
Yet, a host of complex and rigorous customs procedures and corruption remain a key hindrance to these enterprises as they look to leverage the African Continental Free Trade Area (AfCFTA).
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SMEs account for 80 per cent of jobs in Africa and there are about 44 million of them in Sub-Saharan Africa, which points to a special place they hold in Africa, AUDA-NEPAD shows.
The desire by the African Union members to create a single common market under the AfCFTA presents an enormous opportunity for these enterprises.
With a market of 1.3 billion people, AfCFTA is set to drive the expansion of small businesses, especially those owned by women and young people, to regional and continental-wide export markets.
Trading under AfCFTA kicked off in 2021. However, no trade took place until 2022 due to challenges in implementation such as completion of negotiations on rules of origin.
To accelerate trading under the AfCFTA regime, the AfCFTA Secretariat introduced theGuided Trade Initiative in October 2022 as a pilot initiative that would see eight countries participate in the initial trading phase.
These countries included Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda, Tanzania and Tunisia, representing five regions of Africa.
Trading under AfCFTA
The first AfCFTA certificate of origin from Rwanda was issued to Briggette Harrington, Founder and CEO of Igire Coffee Ltd, who exported coffee to Ghana in September 2022 under the Guided Trade Initiative.
She exported 400 bags of coffee to the Ghanaian market, but she said she faced difficulties penetrating the market, despite having been a player in the market for some years.
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Having gone through a long process of paperwork as she prepared to export under AfCFTA preferences until the time the products reached the customs offices in Ghana, Harrington was called several times being told that her clearance wasn’t going to be processed because of either an alleged missing document or extra duty to pay.
Fortunately, the shipment was successfully imported and products distributed on the market, after strained efforts and complex procedures.
For Temitope Mayegun, Founder of Avila Naturalle Ltd – a manufacturing company of natural beauty care products based in Nigeria – it was a seamless procedure as she exported her products to the Kenyan market.
However, this was due to the fact that Nigerian authorities had notified their Kenyan counterparts to facilitate the shipment at customs offices.
These businesswomen and others who championed the AfCFTA Guided Trade Initiative were present at the Biashara Afrika 2024 opening ceremony, on October 9, when President Paul Kagame emphasised that African governments should focus on supporting SMEs as the backbone of the continent’s economy.
"They shouldn’t remain small or medium, they need to grow,” he said.
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John Bosco Kalisa, CEO of East Africa Business Advisory and former Executive Director of East Africa Business Council, said that complex customs procedures embedded with corruption discourage 67 per cent of African SMEs from trading across borders, according to a survey conducted by the UN Economic Commission of Africa.
"There is always conflict between revenue collection and trade facilitation,” he noted, while pointing at the need to simplify trade procedures across customs for SMEs.
Alhaji Bashir Adewale Adeniyi, Comptroller of the Nigeria Customs Services, acknowledged that the biggest challenge to trade liberalisation is customs administration's lack of understanding of rules of origin as the essential part of any integration arrangement.
He noted that it is essential to have capacity building for customs service providers as the continent implements the trade agreement.
Emphasising the importance of technology, he added: "Now that customs administrations have been picked as competent authority under the Guided Trade Initiative, there will be a need to share data in a secure manner that makes it easier for the implementation of the AfCFTA.”
As of now, 48 countries have ratified the agreement, and negotiations of all protocols have been concluded and adopted.
Initially, eight countries were participating under the pilot implementation phase of the AfCFTA. This number is expected to increase to 39 by the end of this year, according to the AfCFTA Secretariat.