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ASCM Insights

Africa Unlocks New Trade Potential

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At the start of this week, African leaders launched a continental free-trade zone that, if successful, could be an economic game-changer. The African Continental Free Trade Area (AfCFTA) is expected to unite the continent’s approximately 1.3 billion people, create a $3.4 trillion economic bloc and begin a new era of economic development, Reuters reports.

Africa has historically lagged behind other continents in terms of domestic economic activity. In 2017, its intra-regional trade accounted for just 17% of exports, compared with 59% in Asia and 69% in Europe. In addition, Africa has missed the economic advantages other trade blocs have experienced in recent decades.

AfCFTA, the largest free-trade agreement since the establishment of the World Trade Organization in 1994, is set to change all of that for the better. Members of the trade bloc have committed to eliminate tariffs on most items, which should increase regional trade by 15-25% in the medium term. IMF estimates that AfCFTA could boost trade by as much as 50% if challenges such as poor infrastructure, large areas of unrest, corruption and border bureaucracy are solved.

The continent also has to grapple with conflicting interests. Countries such as Nigeria, which relies heavily on its oil exports, likely will not receive the economic advantages other nations will. Nigerian officials have expressed concern that the country will be flooded with low-priced goods, which would stifle efforts to expand its manufacturing and farming industries. By comparison, South Africa, which boasts the most developed manufacturers in Africa, would benefit from easily reaching new customers in other parts of the continent.

Lastly, there’s the issue of economic disparity. Nigeria, South Africa and Egypt together make up more than half of Africa’s gross domestic product, while Africa’s six sovereign island nations represent about 1 percent combined. “It will be important to address those disparities to ensure that special and differential treatments for the least developed countries are adopted and successfully implemented,” Landry Signe, a fellow at the Brookings Institution’s Africa Growth Initiative, told Reuters.

A need for leaders

The creation of a continental free-trade agreement certainly is a step in the right direction for Africa.  Still, the developing economy will have issues to sort out and lessons to learn before it can reach the level of prosperity experienced in other continents. This is where supply chain management knowledge will make the difference. The continent and its nations will need professionals who can understand the new trade situation, forecast demand, ensure supply, manage production, optimize transportation and more.

ASCM is nurturing supply chain leadership in Africa. Earlier this year, we hosted the first of our ASCM Leadership Forums. These one-day seminars develop supply chain leaders on the continent, help them solve supply chain challenges, build community, and disseminate ideas and best practices. A second round of forums will take place in October. I urge you to learn more about how these events are establishing and nurturing a sustainable supply chain association in critical African markets.

About the Author

Abe Eshkenazi, CSCP, CPA, CAE CEO, ASCM

Abe Eshkenazi is chief executive officer of the Association for Supply Chain Management (ASCM), the largest organization for supply chain and the global pacesetter of organizational transformation, talent development and supply chain innovation. During his tenure, ASCM has significantly expanded its services to corporations, individuals and communities. Its revenue has more than doubled, and the association successfully completed three mergers in response to both heightened industry awareness and the vast and ongoing global impact driven by supply chains. Previously, Eshkenazi was the managing director of the Operations Consulting Group of American Express Tax and Business Services. He may be contacted at abe@ascm.org.

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