Since shortage of market linkage is still a major obstacle to the development of Small and Mediumsized Enterprises (SMEs), backing the embryonic African Continental Free Trade Area (AfCFTA) is the panacea to build new and improved export destinations across the continent, experts say.
Intended to shore up its rapidly growing manufacturing industries, Ethiopia is one of the 44 African countries that have signed the agreement to create the AfCFTA, which will become one of the world’s largest trading blocs of about 1.2 billion people and a collective Gross Domestic Product of over 2 trillion USD.
Approached by The Ethiopian Herald, Mussie Mendaye, Multilateral Trade Relations Negotiation Director with Ministry of Trade and Industry said that Ethiopia is finalizing the trade deal with respective African trade ministries, senior officials, and other technical working groups and will finally advise the parliament to ratify it in the near future.
According to Mussie, the trade pact has paramount importance to generating sustainable market opportunities for export products, increasing foreign direct investment inflows, creating additional job opportunities, reducing conflicts and promoting harmony to work together. At a larger scale, the AfCFTA would also have significant role for the country’s ongoing economic transformation eyeing to spur economic growth and industrialization, improve infrastructure development, and diversify trade relations across the continent and beyond.
In this regard, Asfaw Abebe, Director General to the Federal Small and Medium Manufacturing Industries Expansion Authority said the development of small & medium manufacturing industry sector has a paramount importance for industrial transformation and achieving industry led strong national economy. The Director also said the government has get-up-and-go to promote the import substitutes and exports there by improving the overall economic growth of the country.
The sector has also a potential to provide sustainably significant portion of employment opportunity for citizens, Asfaw added. According to him, small and medium manufacturing industries can be operated at farm lands, even from packing raw products and sending to the market. Currently, there are over 15,000 small and 3,000 medium enterprises operating in the country. If the number goes to 27,000 in the next few years, it is likely to achieve the economic transformation.
Definitely, the manufacturing industry sector has the capacity to mobilize the country’s resources, if the enterprises continue adding value to agricultural products through the chain starting from growing wheat, at the time baking bread, and finally distributing for sale, the Director explained. Although the country planned to achieve 8 per cent growth in manufacturing sector, it is optimistically attainable if its abundant labour and natural resources and demand-oriented market access come to effect, Asfaw highlighted.
In addition, protecting national stability as well as ensuring peace must be the priority task to reach at the intended growth outcome. To make this happen, government and other pertinent stakeholders will take the lion’s share to promote peace and stability, Asfaw noted. In this case, Mussie also suggests that if the country adds values on its agricultural products, the continental market will bring immediate benefit for Ethiopian small and medium manufacturing industries, thereby increasing their global competitiveness.
In fact, the AfCFTA is among the top priorities in the AU Agenda 2063, which aims at tackling nontariff barriers such as long delays at the border that hinder the exchange of trade between and among African countries. Although many African countries agreed with the pact that compels countries to removing tariffs on 90 percent of goods, Ethiopia and other six countries Djibouti, Zambia, Madagascar, Sudan, Zimbabwe and Malawi are repelling to drive 85 per cent of tariff liberalization in ten year implementation matrix, Mussie explains.
As to Mussie, tourism & travel, transport, communication, financial, professional, and related services will take the priority in the upcoming trade negotiations, he said adding that identifying progressively liberalized and non-liberalized goods and services is the major task still going ahead. On the contrary, though regional trade integration requires reduction of tariffs, policy harmonization, and compatibility of rules, the AfCFTA will put negative impact like loss of government revenue, narrowing the policy space, and reinforcing competitiveness over industries.
According to Mussie, Ethiopia’s export to African countries from 2012 to 2017 fiscal years reached on average 554 million USD; in the interim Ethiopia’s import from African countries has reached over 604 million USD. This shows almost a 50 million USD deficit over the balance of import–export trade between Ethiopia and African countries. Ethiopia has also registered remarkable trade performance with various regional trade blocks. For example, Ethiopia’s export to IGAD regions between 2012 to 2017 fiscal years has reached over 488 million USD, while Ethiopia’s import from IGAD secured about 105 million USD.
Correspondingly, Ethiopia’s export to COMESA reached more than 245 million USD, while its import from COMESA is exceeding 258 million USD. Thus, both Asfaw and Mussie stressed that it is the time to increase exporting Ethiopian products and reduce imported goods by multiplying the efforts exerted so far. Besides, women and the youth should be empowered in the new African continental free trade era, and making the agreement a reality for micro, small and medium enterprises in the context of the evolving trading environment.
The Agreement can also be considered as resurgence to smallscale operators that would help them to make partnerships with their international counterparts and to pool together resources, and reach and penetrate the market, experts indicated. The AfCFTA was launched during an Extra-Ordinary Summit of African Union Heads of State and Government on 21 March 2018 in Kigali, Rwanda.
Thus far, 49 countries have signed the Agreement while Kenya, Ghana, Rwanda, Eswatini, Chad, Niger, Sierra Leone, Uganda and Guinea Conakry have deposited their instruments of Ratification. The Agreement will enter into force once twenty-two Member States have deposited their instruments of Ratification, it was learnt.
The Ethiopian Herald, January 5/2019
BY ZELALEM GIRMA
