Will African brands shine more under AfCFTA?

The biggest news in May will not be the resignation of UK Prime Minister Theresa May but the coming into force, of the much anticipated Africa Continental Free Trade Area (AfCFTA) exactly four years today, since negotiations for the treaty begun in June 2015; it is a milestone worth celebrating.

While it is without doubt a collective achievement of African leadership, Rwanda rightly deserves a special mention for the crucial role played by President Paul Kagame, under his mandate as the African Union Chairperson for the year 2018 in which he helped accelerate the actualization of the AfCFTA dream.

His charisma and passionate drive quickly set things in accelerated action towards March 21, 2018 when the AfCFTA agreement was signed in Kigali. He continued engaging with counterparts on the continent towards May 30, 2019 when the AfCFTA officially came into force after the 22nd nation threshold to ratify was achieved in April.

The AfCFTA excitement is based on what experts have ably articulated as the projected potential benefit to Africans such as turning colonial borders into bridges of cooperation and allow for a single continental market of goods and services and with free movement of persons.

It will also facilitate cross-border investment and pave the way for accelerating the establishment of the Continental Customs Union; intra-Africa trade will grow to the tune of between US$50 and 70billion by 2040 with a combined GDP of nearly US$3trillion, according to UNECA.

Statistics indicate that trade among African countries is at 15 percent compared with 20 percent in Latin America and 58 percent in Asia; however, this could increase by 52 percent within five years and potentially double within the first decade, according to the African Export-Import Bank.

But standing between Africans and those attractive anticipated benefits is some major work still to be done by the same leadership that got us here. We can figuratively say, May 30, 2019 is when the marriage was consummated among the AfCFTA member-states. That means there is no turning back.

The participants in this union must now set some rules on how they want the marriage to work and lead to making babies in form of all the anticipated benefits. These negotiations have been ongoing among the members since February 2019.

So, the result will be regarded as the software on which the AfCFTA hardware will run. The conversation includes aspects such as countries’ schedules of tariff concessions and services commitments, rules of origin, investment, intellectual property and a competition framework.

“The extent to which the AfCFTA will reduce barriers to intra-African trade largely depends on the ongoing negotiations,” says the Brookings Institute.

How will indigenous African brands fare in AfCFTA?

There are other concerns to pay attention to; these include the role of the private sector in this whole discourse. If the AfCFTA is a brand new playground that African governments have built, the players on that pitch will have to come from the continent’s private sector.

But the chance to play will not come on the silver plate; African actors in the private sector must fight and earn their chance to play. The question is; are they doing the necessary preparations to compete?

If they are not, then foreign players are likely to dominate opportunities to play on the AfCFTA pitch.

One can only hope that the AfCFTA will give an opportunity to more indigenous African brands to shine because the current status-quo indicates that foreign brands with subsidiaries on the continent are dominating the shine, with native brands lurking in shadows.

That reality was clear in last weekend’s release of the seventh edition survey by the South Africa based Brand Africa in collaboration with the Johannesburg Stock Exchange (JSE) in which 15,000 brands were assessed for the ‘top 100 brands in Africa.’

In what many will find surprising, the survey reported that 86 percent of top 100 brands in Africa are actually non-African brands with Sports-kit maker, Nike retaining the number one spot as ‘the most admired brand in Africa.’

Overall, African brands fell by 18 percent to an all-time low of 14 percent share of the Top 100 most admired brands in Africa, relative to non-African brands.

Europe leads the table with 40 brands out of 100; North America with all-USA brands has 28 while Asia has 18; meaning that out of 100 Africa’s top brands, 86 are not African although active on the continent. Why are African indigenous brands being dominated on their home-turf?

The respondents in this survey were Africans and the fact that they admire international brands more than African brands says a lot about the attitude of Africans to anything African. How do we make African brands appeal to more Africans? This could be at the heart of the meager intra-Africa trade volumes.

It could explain Africa’s high import bill, because similar locally produced goods don’t appeal to Africans. How will this attitude affect the performance of African brands within the AfCFTA?

Landry Signe with Brookings Institute’s Global Economy and Development Program has estimated that under a successfully implemented AfCFTA, Africa will have a combined consumer and business spending base of US$6.7trillion by 2030. But how much of that will directly benefit indigenous African enterprises?

The views expressed in this article are of the author.