World Economic Forum 2023 Examines Opportunities Brought by AfCFTA
A NEW ERA FOR AFRICA
During the World Economic Forum (#WEF2023), a new report on the African Continental Free Trade Area (#AfCFTA) entitled “AfCFTA: A New Era for Global Business and Investment in Africa” was officially released. The report is a joint effort of the WEF, AfCFTA Secretariat, Brookings Institution and other Forum partners.
The AfCFTA report highlighted four key sectors which will most likely benefit from the African single market. It is estimated that these four sectors can contribute USD 130 billion to Africa and are as follows:
- Agribusiness
- Automotive
- Pharmaceuticals
- Transport and Logistics
The AfCFTA is a single market of 55 countries with a combined population of one billion. By 2050, this population will grow to 2.5 billion, representing one in four humans on Earth.
AGRIBUSINESS
Africa has 40% of the world’s total arable land which makes up of 60% of the total uncultivated arable land around the world. Today, Africa imports nearly USD 50 billions of agricultural produce every year when it has sufficient resources to grow it on its own soil.
Further opportunities will arise with Local Value Addition (#LVA) of agricultural produce. Ghana has taken the lead by processing its cocoa locally rather than exporting raw cocoa beans. Ghana hopes to produce chocolate ‘Made in Ghana’ which is on par or better than the famous European-branded chocolates with ingredients sourced from Africa.
AUTOMOTIVE
According to the report, the African automotive market is experiencing vigorous growth will be valued at USD 43 billion by 2027. The annual demand is estimated at 2.4 million cars and 300,000 commercial vehicles.
Most of the vehicles in Africa are imported from Asia but Algeria, Egypt, Morocco and South Africa have developed local production facilities. Some 56% of the production is actually exported outside Africa. South Africa leads in that area with 80% of total automotive export value.
The renowned German car maker Volkswagen has set up plants in South Africa, Morocco, Tunisia, Ghana, Kenya and Egypt. Several large automakers have also established assembly plants in Africa with others to follow.
PHARMA
Currently, Africa imports 64% of its needs in pharmaceuticals and produces only 36% locally. The local African production amounts to about USD 20 billion each year.
The main diseases affecting Africa are Malaria, TB and HIV which accounts for 40% of all illnesses. During the COVID pandemic, it became increasingly evident that Africa urgent needs to develop its own pharmaceutical ecosystem in order to better face the next pandemic. Thus, opportunities exist with many African countries offering generous incentives for big pharma to set up shop on the continent.
TRANSPORT AND LOGISTICS
Based on the study, the majority of intra-African trade is conducted via land transport. By 2030, the AfCFTA will contribute to boost intra-African trade by 28%, creating demand for 2 million trucks and 100,000 rail wagons
The development of land transport must occur in coordination with other modes of transport such as air and sea. In that regard, the Chinese BRI which has done a great job to improve the transport infrastructure across Africa. However, there is still a lot much room for improvement and other partners are welcome to seize the opportunities as trade and transport are set to grow dramatically following the operationalization of the AfCFTA.