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Insights and recommendations to overcome intra-African trade challenges
In its initial year, Renew Capital’s Regional Trade Facilitation program, a part of the Accelerating Regional Business Growth (ARBG) program partnership with Global Affairs Canada, has drawn important insights that could help shape the future of intra-African trade.
During the design and development of the Regional Trade Facilitation program, Renew Capital’s ARBG team spoke to hundreds of organizations, experts and companies on the continent, resulting in a report that highlights some of the opportunities and challenges for African businesses looking to trade within the region. From addressing financing gaps to improving data reliability, here are the highlights of what we have learned so far, alongside early policy recommendations based on the findings:
Sign up now for the Regional Trade Facilitation program that’s designed for entrepreneurs to learn more about recent liberalization trends, the benefits of regional trade and strategies for executing effective new market entry.
Capitalizing on the AfCFTA: Potential for Progress
- Capitalize on the African Continental Free Trade Area (AfCFTA): The AfCFTA is more than a free trade agreement; it's a blueprint for Africa's future. ARBG seeks to leverage this potential to its fullest, supporting businesses with the knowledge and tools to navigate the treaty's provisions.
- Equip businesses for success: ARBG is providing businesses with the tools they need to navigate the complex landscape of intra-African trade, including country-by-country trade assessments and training in the private investment process and business management.
- Tackle trade barriers: ARBG seeks to identify the obstacles faced by entrepreneurs seeking to trade across borders and support companies by identifying solutions, creating linkages and advocating for policy changes as applicable.
The Roadblocks to Progress
In the region, businesses face significant hurdles they will need to overcome in order to progress:
- Lack of capital: Many firms looking to break into the export market struggle to access trade financing, hindering their ability to expand their operations.
- Complexities of transportation, logistics and borders: SMEs looking to expand their horizons face concerns over time-consuming logistics and paperwork with the potential for goods to get lost in transit.
- Scarcity of quality research and granular data: Lack of reliable data is an impediment to informed decision-making across the continent.
Shifting the Trade Focus
ARBG's Regional Trade Facilitation program aims to shift the focus from external to intra-African trade. This involves:
- Equipping businesses with the skills and data: To help businesses thrive in a new era of regional trade, ARBG offers targeted training for SMEs interested in trade in East Africa. The project also develops country-by-country trade assessments that outline the barriers to trade faced by entrepreneurs and conducts research on finance opportunities and market intelligence.
- Influencing policy: ARBG aims to shape the future of trade policy by offering recommendations based on findings.
- Investing directly in businesses: Keen on regional trade, ARBG is walking the talk by investing in SMEs, supporting them in their business growth through finance, market research and support building the foundations of their businesses.
Early Policy Recommendations
ARBG's initial findings suggest several key areas of focus:
- Financing: Though repeatedly acknowledged as a challenge, the trade financing gap remains a key challenge for companies, partly due to the conservative nature of the banking sector. The solution likely lies within the private sector, where tech-based startups are now looking to fill the gap. Looking at how this burgeoning industry can be fostered (through private investment, regulatory reform, etc.) is recommended.
- Reliable Data: There's a pressing need for quality research and granular data to guide decision-making. Solutions could build on existing data repositories (e.g., East Africa Community (EAC) Open Data For Africa, Observatory of Economic Complexity (OEC) data portal), but should also include specific product details and sub-country-level data.
- Import Substitution: Almost all companies we spoke to spent a significant amount of capital and time importing key ingredients. Swapping expensive foreign imports with regionally produced options offers significant opportunities for companies. Significant outreach and marketing is still needed to ensure the AfCFTA’s recently launched platforms like the Pan-African Payment and Settlement System (PAPSS) and the Africa Trade Exchange become trusted tools for traders to find and connect with new high-quality, cost-effective and accessible suppliers from the region.
- SME Coordination: Among the Regional Economic Communities (RECs), a desire remains for the private sector to take greater ownership of coordinating amongst themselves to yield commercial linkages and pressure states to prioritize trade policy upgrades. While ultimately these processes need to be owned by SMEs, the RECs and their corresponding business councils can play an important role in jumpstarting these initiatives.
"Increasing regional trade can significantly benefit the companies we partner with," says Renew Capital Director of Regional Private Sector Projects Lucas Robinson. "Companies will be able to employ more people, source more materials locally, grow their revenue and even manage currency fluctuation risks. These changes can have a significant positive impact on the businesses."
Sign up now for the Regional Trade Facilitation program in East Africa. The program is designed to help entrepreneurs in East Africa gain a better understanding of:
- Recent developments related to trade liberalization in Africa
- Benefits of regional trade
- Deployable strategies to increase trade
- How to develop regional market entry strategies and execute trade plans
- Tools to facilitate (new) regional market entry.
*Ecosystem activation, pipeline development and capacity-building support provided to Renew Capital portfolio companies is generously supported by Global Affairs Canada.
Renew Capital is an Africa-focused impact investment firm that backs innovative companies with high-growth potential. Renew Capital manages investments made on behalf of the Renew Capital Angels, a global network of angel investors, foundations and family offices who seek financial returns and sustainable social impact. For the latest on investing in Africa, subscribe and follow us at our social links below.
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