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A policy paper to the Secretary General of AfCFTA

Tue, 24 Nov 2020 Source: Salifu Ali

A deliberate policy intervention that must be put in place to support young entrepreneurs/start-ups and SMEs particularly operating in food processing or agribusiness to participate in intra-Africa trade through the AfCFTA platform.

As a youth, I have been watching and following the African Continental Free Trade Area (AfCFTA) from its zygotic or embryonic stage to a now fully fledged trade cell ready to hit the ground running in the year of Our Lord, 2021. For this, I now find it a duty to contribute my quota as a bona fide African youth to the successful implementation of the continental body, whose headquarters is hosted in my home country – Ghana. Your Excellency, below is how I choose to make my contribution felt.

THE CASE FOR DELIBERATE POLICY INTERVENTION

It has been noted that the ‘next big bang’ waiting to happen in the history of cross-border trade promotions and socioeconomic transformation is Africa; and the catalyst is no doubt the African Continent Free Trade Area (AfCFTA) agreement. Thankfully, the AfCFTA is set to commence in January 2021 with an estimated potential of boosting both intra-Africa trade by 52.3 per cent by eliminating import duties, and to further double tradegains if non-tariff barriers are reduced eventually in the subsequent phases of the AfCFTA implementation plan.

Africa’s demographic distribution, abundance of natural resources, stable political and peaceful democratic transitions,and the potentials of AfCFTA serve as spokes and hub for the progress of the continent as has not been witnessed before.

In this context, it is important to highlight the centrality of theyouth and how deliberate policy interventions must carry them along in order to consciously cultivate the next generation of industrialists, entrepreneurs, movers and shakers of the continent’s trade agenda so that sustainability would be guaranteed.

It is estimated that, close to 60 per cent of Africa’s population is under the age of 25, and 19 of the world’s 20 youngest countries are in Africa. Despite the fact that the youth make up a significant percentage of the continent’s population, young people’s participation in cross-border trade and trade governance matters is still very limited in Africa. Africa’s youth is disproportionately affected by high unemployment, poor quality jobs, labor market inequalities and barriers to entry to cross border trade.

Notwithstanding the above mentioned limiting factors to young entrepreneurs, according to the International Trade Centre, ‘youth are 1.6 times more likely to start a business than those above 35 years old’. Ironically, young entrepreneurs in Africa, especially start-ups and SMEs continue to face a wide range of bottlenecks that constrain their capacity to participate and benefit from intra-Africa trade opportunities.

For instance, youth-specific barriers in intra-Africa trade include power dynamics and business networks based on age; lack of access to assets and finance; limited access to trade-related or critical market information, limited trade-related education or skill sets; inadequate exposure and administrative and regulatory frameworks that do not favor young entrepreneurs, most especially agripreneurs.

Currently, intra-Africa trade is taxing and unattractive for young entrepreneurs due to the prevalence of non-tariff barriers. To address the myriad of challenges the youth are facing, the AfCFTA together with member state governments must make and pass targeted youth policies to enable the youth participate in regional and global value chains and cross-border/international trade so that the youth can acquire theneeded skill sets and competencies to drive the pulse of the continental trade agenda.

Integration and exposure of the youth to value chains and international markets can have a consequential impact in ensuring the long-term success of SMEs which can lead to positive spill overs such as new jobs, ideally for other young people, given the fact that in developing countries such as comprise the entire continent of Africa, the greatest potential for job creation lies in the local small and medium-sized enterprises (SMEs) who incidentally operate more in the food processing and agribusiness sector.

It has been argued forcefully that, for agriculture in general and food processing and agribusiness in particular to sustain the economic growth of the continent of Africa, especially in this pandemic period, there will be the need for practical incentives to be formulated across the value chain; and this must be done by deliberate policy intervention.

The obvious reason is that, agriculture as practiced in its current form, has a level of risk which is slightly higher than that of commerce. Therefore, it cannot pay the same rates on loans just as other sectors do.

So it needs cheaper source of credit and this calls for deliberate government policy intervention or the intervention of supra-national organs such as AfCFTA, or both.

But government doesn’t necessarily have to directly lend to players in the sector. It can provide incentive schemes for banks or development financial institutions to lend to agriculture – such as the Ghana Exim Bank does.

It is no gain saying agriculture is very risky, because it is dependent on rainfall. To turn the tides therefore, primary producers, especially youth entrepreneurs in food processing and agribusiness must be engaged in irrigation to reduce the risk of rainfall-dependent agriculture.

As a link from that point, access to market must be created. But as of now, access to niche or targeted markets is yet another disincentive to the youth getting into and staying in agribusiness despite its enormous potential benefits.

Expert opinions in the field of agriculture maintain that, until value is added to the raw produce, market access will be limited. Supporting infrastructure such as roads, water, electricity, pack houses, cold refrigeration systems are critically needed to prevent post-harvest losses.

These are very necessary basic minimums that deliberate policy interventions must bring about to make agriculture a viable entity to attract the youth to engage in agribusiness on permanent basis. As has been noted, agriculture is a holistic venture and must be tackled holistically and on consistent basis, and not on piece-meal approach.

Any approach to commercializing agriculture that does not link the value chains is an exercise in futility. Agriculture is a holistic enterprise; policy interventions in that respect must be comprehensive.

Again, the policy dialogue on agriculture and agribusiness mustshape the discussions as well around macro-economic policies which will make the environment conducive for players in the sector, and further attract the youth into agriculture so as to set in motion the wheels for creating vibrant rural economies capable of attracting people to venture into the green fields to set up factories for processing and value addition which intern will guarantee higher returns.

Currently, it has been suggested that, Africa lags behind other regions of the world in terms of cross-border trade. According to the African Development Bank, intra-Africa exports amount to only 16.6% of total trade. It is believed that, if AfCFTA is implemented successfully, it could create a single African market of over a billion consumers, making the continent the biggest free trade area in the world. It is therefore more imperative that the youth of Africa are present and active within this space.

But the seat of participation for the youth of Africa in the chamber of cross-border trade, would remain unoccupied if policy is not meticulously crafted to target and create one forthem to flourish.

In this vein, there are many policy interventions to consider because as has been demonstrated in this paper so far, the AfCFTA platform has the potential to raise productivity levels, promote higher investments, improve income levels, and reduce poverty on the continent.

These positives must benefit the youth of Africa now and through to their progeny; after all they are the future of the continent. The AfCFTA we want must be created; and the youth of Africa must be at the center of it all.

There is no mistake about the fact that, for AfCFTA to remain vibrant and progressive, there is the need to train and equip the youth with the requisite skills needed for the expected increase in economic activities to foster sustained resilience and self-sufficiency.

Building this kind of resilience and local/regionalcapacity of young African entrepreneurs to retain the full benefits of AfCFTA means giving them capacity and exposure to compete in the African market and beyond.

Thus, the way to do this is that, deliberate policy must be put in place to assist businesses to innovate, understand the regional value chain framework, adapt to technological advances and pursue aggressive marketing techniques and with time the right business sub-culture is formed.

More so now than ever, there is the need for a strong payment and settlement infrastructure system supported by a strong legal and regulatory framework which can be leveraged to support cross-border trade financing activities to enhance trade deals and contracts for especially young entrepreneurs.

Intra-Africa trade supported with the above anchors will no doubt promotespecialization and specialization can generate further benefits in terms of efficiency and productivity. This would be of immense benefit for young entrepreneurs across the agriculture value chain.

Crucially, there is no doubt that, access to adequate credit increases the ability of young entrepreneurs to trade both in export and import. Yet the staggering fact of the matter is that, access to credit still remains a complex process most oftenrequiring immovable property-based collateral and guarantees and cumbersome financial documentation of which young entrepreneurs hardly are able to meet.

A deliberate policy intervention therefore must be geared toward a new system of financing called value chain financing, in order to de-risk agriculture but at the same time ensure that funds invested into agriculture projects produce desired returns worth the investment.

This is doable by giving the youth adequate access to low-interest finance which does not require property-based collateral and guarantees.

To guarantee the success of this model of financing, the beneficiary young entrepreneurs would be put under the supervision of already established industry captains for grooming to be weaned-off when the necessary capacities, competencies and networks for doing successful business is fully established and functional. This will serve as a check not to dissipate funds by the beneficiary, for that would dent the image of the supervising industry captain, and no industry worth its salt wants that.

Again, there is the need to create a fertile and enabling legal, regulatory and administrative environment for young entrepreneurs to actively participate in the AfCFTA trade and governance processes. An effective way to doing this is for trade supporting institutions both national and regional to provide enhanced services to young entrepreneurs such as trade-related information on current technologies, packaging, standards and regulations, market access issues and trade opportunities. This would accelerate and guarantee sustainable and stable economic growth, poverty reduction, social inclusion and foreign currency earnings which are needed for the forward march of the continent.

Technological advancements that are driving e-commerce and digital economy developments demand specialized skill sets and knowledge. While education alone is not enough, it remains an essential ingredient for empowering the youth.

At the national level, this implies countries adapting public education to provideyoung people with more relevant learning opportunities they need to create jobs for the future and for them to be employable especially in the food processing and agribusiness sub-sectorwhere there are enormous opportunities. Functional digital economies as required today need capable, healthy and skilled workers. This presents exclusive opportunities for young peoplein Africa because of the continent’s fairly young and progressive demography.

Equally important, the reduction of non-tariff barriers to trade can increase the meaningful participation of the youth in intra-Africa trade, by lowering trade costs. The African Continental Free Trade Area (AfCFTA) has the potential to address non-tariff barriers on a continent-wide scale if the legal instruments on trade facilitation matters are effectively implemented.

While the AfCFTA may hold many opportunities, trade liberalization in itself will not automatically translate into developmental outcomes. It is expected that AfCFTA will contribute to improving trade governance, through its trade facilitation provisions and enhancing customs and border managementframeworks. The implementation of AfCFTA must be supported by appropriate national/regional policies and support programs. This can play a pivotal role in making trade opportunities accessible to young people.

It bears emphasizing that, young people have an important role in holding governments and policy makers accountable. This is essential for good governance. The AfCFTA framework must consciously and deliberately create a platform for youth participation as well as monitoring of national trade policies to facilitate active and meaningful inclusion of the youth in trade governance.

It is important to remember that the trading environment in the next ten years will be very different from today. How the novel African Continental Free Trade Area cross-border trading environment evolves, will be contingent on the deliberate but thought-through decisions made today.

It is imperative therefore to give the youth, who are undeniably a very significant segment of the continent’s population the opportunities to participate in trade policy making and to remove barriers to trade that inhibit the integration of youth-led businesses into regional and global value chains. It is the responsibility of today’s trade policy makers such as AfCFTA and the existing Regional Economic Communities to listen to the youth, and understand their challenges and work with young persons to ensure that trade and trade governance and its implementation contribute to more inclusive, sustainable development outcomes.

CONCLUSION

In conclusion, it is gratifying to note that in all measure, AfCFTA promises to be the game changer for Africa to leap-frog itself into the envy of other continents. But this will not materialize automatically; certain conscious and pragmatic actions must be taken to include deliberate policy made to provide young entrepreneurs with Business Friendly Loans at concessionary or zero interest rates.

This must be coupled with skill training and apprenticeship, by linking young entrepreneurs to successful industry leaders for mentoring and grooming. Rules governing start-ups and micro small and medium enterprises, often owned and operated by young persons must be simplified so that the benefits of AfCFTA can become a reality.AfCFTA must not be talk as usual; that would be a very dear price to pay.

AfCFTA cannot fail and AfCFTA must not fail. AfCFTA is Africa’s last available bus to the destination of economic independence and we here must drive her to a safe arrival.

Columnist: Salifu Ali
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