Favourable trade policies for SMEs
The importance of favourable trade policies for small and medium enterprises (SMEs) came under the spotlight at the recent Prosperity Africa conference, organised by the Pan African Chamber of Commerce and Industry (PACCI) in partnership with the Shared Value Africa Initiative (SVAI).
SVAI partner and guest speaker, John Bee, a former Nestle Regulatory and Scientific Affairs Regional Head in Sub-Saharan Africa and Shared Value Expert, was tasked with unpacking this critical issue, focusing on Africa Continental Free Trade Area (AfCFTA) opportunities and challenges.
During the presentation, he re-iterated that one of the main challenges to intra-Africa trade is the continent’s political complexity within the context of the 55 member states unified under the African Union (AU) and Regional Economic Communities (RECs). All eight RECs have been established under separate regional treaties and are acknowledged as the AU’s executive arm, implementing policy harmonisation at regional level.
According to John, there are also practical challenges associated with AfCFTA, which were previously identified by Nestle at the trade area’s inception – and most of these challenges are magnified in the case of SMEs.
For example, not all countries will implement and realise the benefits of AfCFTA at the same speed. To counter this there should be a list of sensitive products or commodities that will remain exempt from tariff elimination for a maximum of 10 years and representing not more than 7% of national trade.
Another case in point is the far bigger dilemma created by the various Technical Barriers to Trade (TBTs). Apart from transactional reporting tools, it is not clear how the TBTs will be addressed systematically, at policy level, John pointed out. He also highlighted the corresponding administrative burden and resulting delay to market created by TBTs, as well as the added costs (e.g. moving a container from Holland to Durban can cost a third of the price of moving the same container on to Harare).
Product registration is yet another specific example of TBT complexity and one of five principal TBT causes identified in an SME survey. In addition, as John pointed out, if this caused headaches to a company of Nestle’s size, one can only imagine what it would be like for an SME.
In essence, if you want to put a food or beverage product on sale in most African countries, you have to register it, with all the supporting documentation, food safety analytics and so on. Once you have that registration approved, you are good to sell. This registration can be a costly process, since in many jurisdictions, every new product, every recipe change requires a new registration.
John elaborated: “In the EAC countries, in theory it should be possible to register in one member state and have the registration honoured elsewhere. However, if you registered at the Kenya Bureau of Standards – one of the more efficient registration bodies in the region – your product will not be accepted in Tanzania. Recently that has changed, but I am informed that Rwanda now insists on separate registration. So what should be simple in theory, is far from it in practice.”
On the upside, some remedying strategies in response to these challenges have been forthcoming. There is, for example, a Non-Tariff Barriers (NTBs) reporting website jointly operated by COMESA, EAC and SADC, which encourages anyone encountering an NTB or TBT when trading across borders in those regions to report it online. The data gathered is intended to help the African Union Commission’s Department of Trade and Industry identify recurring patterns, which in turn will inform necessary policy advocacy with the relevant member states.
John noted: “What’s not so clear, nearly 18 months after go-live, is what the mechanisms are for using this data for real and effective policy change? Who is analysing the trends, who is listening, and what are the results?”
Overall, there is no shortage of information available for operators looking to embark on their AfCFTA journey or get advice concerning the problems they encounter along the way. These, however, are institution-driven platforms that do not respond directly to the needs of SMEs. The downside is that no centralised information hub exists, which specifically caters to the needs of SMEs interested in finding out how to engage in cross border trade. For example, centralized information on trade development, facilitation, finance, negotiations (SMEs, SMMES & SHFs) and services; production processes for different sectors; product requirements per country and so on.
The biggest challenge remains, namely, to address the needs of smaller operators and make trading across borders far more attractive to young and smaller businesses. If not, AfCFTA could even create further inequalities.
This conundrum was recognised by UNCTAD in its recent report and by AfCFTA Secretary General, Wamkele Mene: “Complementary measures to support women and young people in trade, small businesses and the least developed African countries are required to achieve a more inclusive African Continental Free Trade Area.”
John also referenced results from a survey conducted by the SVAI among SMEs and entrepreneurial networks in southern Africa in July 2021, to better understand the gap in knowledge around the AfCFTA.
While the majority considered themselves well prepared and optimistic to take advantage of AfCFTA, many said they don‘t know enough about it. In fact, more than two thirds of the respondents thought it was hard to access information relative to AfCFTA and 40% didn‘t feel well supported by their relevant business organisation. Finally, 87% would like to have information in a format that is easily accessible to them, for example as an application they can use on the phones they use to transact much of their business.
In answering the question ‘What else needs to be done?’, John expressed his own reservations about the current representation as being sufficiently coordinated and aligned to achieve the real and necessary change noted in both the UNCTAD report and borne out by the SVAI survey. “Perhaps it is time to constitute an officially mandated body comprising all the actors shown with the remit of practically resolving TBT policy challenges faced by SMEs,” John concluded.
In closing, he introduced the audience to JamiiTrade, a curated, collaborative community of SMEs trading in Africa and beyond. This innovative digital platform, the brainchild of the SVAI, aims to aggregate the various information sources we heard about before in a manner accessible and geared to the needs of SMEs – and most important of all, form a community of self-help. Because wherever you are in the world, any entrepreneur will tell you that if you wait for governments to solve your problems you‘ll miss the opportunity.
 UNCTAD Economic Development in Africa Report, December 2021