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AfCFTA is the single largest untapped continental market available for trade and immediate investment. With 1.3 billion people across Africa and a combined $3.4 trillion GDP, 55 countries in Africa have ratified the African Continental Free Trade Agreement, thus making this treaty the most significant single treaty ever to be solidified by a collective group of countries in the world. This treaty makes Africa, for the very first time, united on one front.
During my time as the CEO of an organization that attracts investments into multiple tech industries throughout the African continent, I've seen that there are many talents in the area. Nigeria specifically has gained a sharp increase in more capital investments into the tech startup community. So, the question remains: What should the focus be for foreign investors interested in trading within this new African Union Member States?
What is the purpose of the AfCFTA Treaty?
Post-launch of the AfCFTA Treaty, investors can now more confidently engage in trade and investment inside of any African country and feel that their investments are protected, as the treaty hopes to harmonize goods and services classification in the form of reinforcing national customs requirements. The reclassification of goods and services will mirror the World Customs, an immediate goal for the AfCFTA Treaty. In addition, the AfCFTA Treaty seeks to improve systems to protect Intellectual Property Rights. The increase of oversight and protection of property rights will allow for the support of the implementation of geographical indicators. Lastly, the AfCFTA Treaty seeks the support of pilot countries to engage in preparation for national implementation strategies.
The immediate economic growth from this treaty is glaring within two specific industrial revolutionary spaces: Infrastructure capital investment development projects and agricultural projects are first on the priority list of the ambassadors of the AfCFTA Treaty. The implementation and adoption of the treaty look to accelerate the establishment of the Continental Customs Union, achieve sustainable and inclusive socio-economic development and transformation of the member countries, improve the competitiveness of member countries and drive industrialization, regional value chain development, agricultural development and food security.
After all, the effects of poor infrastructure when it comes to issues such as high road tariffs, electricity rates, handling costs and unpaved roads can lead to higher direct transport costs, longer delivery times, low technology adoption and hampered economic growth. And right now, Africa is not a global player in world trade as a result of the transportation and logistic industry, in my opinion. AfCFTA aims to reduce tariffs on 90% of goods while creating the free movement of goods, services, capital and people. The opposing argument suggests that Africa should not buy infrastructure it cannot afford; this strategy puts the African nation into further debt and trades away the country's land.
Why is it important to include a Code of Conduct?
I believe the AfCFTA Treaty must establish a Trade Code of Conduct Policy to help Fast-Track Borders and Custom limitations impeding regional trade, especially for agricultural goods with a short shelf-life. A Fast-Track Permit can increase delivery time and increase demand for products, which would, in turn, increase revenue. A Code of Conduct Fast-Track Permit could include: mandates on gender equality adoption and a maintenance clause for both suppliers and traders to not employ under-aged workers and pay at least the legal minimum wage for their home country. In addition, suppliers and traders should not make employees work excessive overtime and adhere to basic safety standards for staff.
Those who take on fast-track trade permits under AfCTFTA would be subject to periodic on-site ethical standards audits by members of the AU and a neutral third-party agency. The audit outcomes should result in substantiated corrective action plans, whereby traders have 120 days to respond and correct findings from the auditor and be subject to losing fast-track permits and a permanent trade ban under permitted regulatory standards. We must acknowledge that the root cause of ethical issues in international business and trade is the variation among nations' political systems, laws, economic development and culture. What is a legal practice in one country may be considered illegal in another.
As the AfCFTA Treaty rolls out, it is safe to say it is not okay for multination to endorse poor working conditions and traders/suppliers. A great demonstration of tools that can support change is known as the Sullivan Principle, named after Leon Sullivan. For example, a code of conduct specifically focused on environmental pollution for those with fast-track trade permits would require sellers to address the dumping of toxic chemicals, toxic materials in the world and air emission management. Or, as another example, the code of conduct against bribes outlaws bribes to foreign officials to gain business.
Understand your opportunities as an investor.
The AfCFTA Treaty means investors can increase capital spending on fintech products that extend capital resources to agriculturalists. Agriculture creates explicitly a massive potential for growers impacted by climate change conditions to see countries like Nigeria, with only 20% of its arable land used, leaving 80% of available land space not in use for food production and agricultural sustainability. Investment in the AfCFTA Treaty could mean improving the food insecurity issues experienced globally and procuring techniques to improve farming safety and preservation. Infrastructure tech is also an opportunity for investors to improve electricity, railways, road and water access, which have caused significant constraints for the private sectors. Eliminating this barrier could help move commerce forward.
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