Are We Well-Prepared for the Period of African Continental Free Trade Area?

Is “Single Africa” possible? Having fought for development in difficult conditions for years, African countries are looking for ways out with the pressure of demographic power and the increasing middle class. Even though the Agreement Establishing African Continental Free Trade Area has entered into force on January 1, 2021, the implementation principles thereof and whether a full free trade implementation is possible are still a matter of debate.

The AfcFTA Secretariat maintains its activities for the purpose of implementing this powerful idea. It held a very significant meeting in Ghana on October 7, 2022. Ministers responsible for trade from Rwanda, Kenya, Egypt, Cameroon, Ghana, Tanzania, Tunisia, Mauritius attended the meeting and selected and approved products for preferential goods transitions for the first time, under the so-called “Guided Trade Initiative”.

Through this process, which was implemented as a pilot project, 8 countries approved tax-free trade for the products they agreed on. As a result of the implementation, Rwanda’s first coffee was sent to Ghana duty-free. A guide was published to define which products will be exempt from customs duty and how the transactions will proceed. The implementation is expected to be expanded in the upcoming period.

Africa has been becoming a single and common market, so is Türkiye ready for this transition? What kind of instruments does it have at hand? I believe that in this process, Türkiye’s SMEs will act as the biggest power to be brought to the field by Türkiye. We see that investment processes and global companies in Africa build their new strategies on African start-ups and African SMEs. Google has set aside $1 billion in funding for the digital transformation of African start-ups. The fact that the growing and developing African internet economy will reach $180 billion by 2025 has a great share in the process that led Google to allocate this large fund.

The African Private Equity and Venture Capital Association indicate that African Start-up investment value reached $3.5 billion in the first six months of this year. This figure has increased by more than 200% compared to the same period of the previous year. One of the most significant points is that 27% of these start-ups were established by female founders. It is estimated that this figure will reach $7 billion in the near future.

Africa’s progress towards a single common market is not limited to these, the AfcFTA Secretariat signed a memorandum of understanding with McDan Group at the trade ministers meeting held last week. McDan Group is going to offer logistics services that will contribute to free trade between African countries with its newly purchased cargo planes and maritime merchant ships.

In light of all these developments, Türkiye may make its strategic move in this chess-like process by bringing its SMEs to the field. We must take real steps to catch up with the demand developed by the increasing population and to build the future with African SMEs. We need to remember that Germany has increased its population by only 6% in 50 years and that Nigeria has almost quadrupled its population in this period, and we need to analyze where the demand will shift.

So what is the solution?

As growing and developing African SMEs look for suppliers, we must design systems that will allow them to find Turkish SMEs right next to them. We have to establish common warehouse systems and export development centres for SMEs by choosing strategic regions in Africa. SME export centres and common warehouse systems that can be established in strategic countries such as Ivory Coast, Ghana, Nigeria, and Ethiopia may be logistics supply bases for many different countries neighbouring these countries.

In fact, the solution is not that difficult: By establishing a logistics centre (which does not have to be huge in the first place) to support Turkish SMEs, 1 shelf is rented for each SME member of this centre, each SME puts samples and catalogues on this shelf, and if they wish, they can house any amount of stock in this centre. This centre, introduced by the Internet, the press, and field studies, will be open to the visit of every SME who wants to supply from Türkiye and want to develop business with Türkiye. African SMEs who come to the centre will be able to examine the samples and catalogues on the relevant shelves from this export centre on the relevant shelves and create a product basket through the software to be designed. It may organize an online meeting at the logistics centre with the Turkish partner it has chosen so that Turkish SMEs are constantly represented in the field and African SMEs find a constant interlocutor at the point of finding a partner from Türkiye. This system will also facilitate the activities of our Trade Consultants in the field and will support strong representation. As a result of such solutions, it is very likely that we will be the first choice of African SMEs who realize Turkish SMEs and their flexible and fast supply chain adaptation in the field. In order not to miss this great opportunity, we have to prepare an African SME-themed strategic action plan. A Single Africa is even closer than we thought…

Utku Bengisu

Industrial Engineer

Founder of Africa Trade Centres