Analysis - Premium - February 8, 2022

PREMIUM | Mainstreaming African youth in AfCFTA’s agenda

Africa is the world’s youngest continent whose youth population is projected to reach 1.3 billion by 2100 –  representing almost half the world’s  youth population at the time.

 

 

By Adam Alqali

 

Yet one of the biggest contradictions of Africa’s recent economic growth is the continent’s staggering youth unemployment rates. If effectively harnessed, Africa’s youthful population offers a colossal opportunity for creating prosperity; if not, it is a recipe for chaos!

No doubt, Africa’s future lies in the sheer creativity and ingenuity of its teeming youth. Against this backdrop, the AU’s Agenda 2063: The Africa We Want seeks to leverage the immense potential of Africa’s youth to drive the continent’s socioeconomic transformation.

 

Understanding AfCFTA’s opportunities

The African Continental Free Trade Area (AfCFTA) Agreement aims to create a single, open continental market for goods and services for 1.27 billion consumers, with estimated Gross Domestic Product (GDP) of up to $3.4 trillion – making it the world’s largest free trade area since the creation of the World Trade Organization (WTO) in 1995.

This is in accordance with the vision of an “integrated, prosperous and peaceful Africa” as enshrined in Agenda 2063. Under the AfCFTA, a flagship project of Agenda 2063, African exports are projected to record gains of between US$40 billion to US$56 billion while intra-African trade increases by between US$50 billion to US$70 billion, by 2040.

Moreover, forecasts show African online retail business reaching US$75 billion by 2025 just as estimates show AfCFTA would lift 30 million Africans out of extreme poverty, boost incomes of nearly 68 million Africans living on less than US$5.50 a day while enhancing wages for women by 10.5%.

This envisioned economic prosperity will materialize thanks to the implementation of simplified customs procedures, tariff liberalization, reduction in non-tariff barriers and trade facilitation measures. Whereas the working-age populations of Europe and China are projected to fall significantly by 2050, Africa’s working-age population is expected to double to 2.5bn with the region becoming home to a quarter of the world’s working-age (youth) population.

If well harnessed, this population explosion in the AfCFTA era will see the continent reaping benefits of its unique demography. For youth, benefitting from AfCFTA’s opportunities – across trade in goods and services, agriculture, manufacturing, and e-commerce – depend on varied factors such as access to financing, regional supply chains and investment in soft and hard infrastructure.

 

Trade in services

Services contribute more than 50% of the continent’s economic activity and play a significant role in job creation while also supporting manufacturing competitiveness. AfCFTA’s Protocol on Trade in Services seeks to open up intra-African trade in services across 12 vital sectors. Article 27(d) of the services protocol seeks to improve the export capacity of formal and informal service suppliers, particularly SMEs, women and youth service suppliers.

Five out of the 12 sectors are being prioritized, namely: business/professional services, communication technologies, finance, transport and tourism. The advent of Covid-19 meant AU is considering including health services to this priority list.  Since services such as communication, transport and finance are integral to all economic activities, the priority sectors present enormous opportunities for youth employment and cross-border trade.

As the AfCFTA gradually open up trade in services and eliminate barriers, estimates show 90% of African countries would see their overall volume of service activities reflect the increasing demand for services across borders. And since most of the communication and finance services would require digital skills, African youth are poised to take advantage of the AfCFTA’s new digital economy.

 

Agriculture

Despite Africa’s huge agricultural potential, the continent continues to import food. In 2017, Africa spent US$64.5 billion on imported foods; unless drastic measures are taken, these figures will rise to as high as US$110 billion by 2025. This situation is blamed on high import tariffs and poor agricultural infrastructure. Experts believe the AfCFTA could enable African farmers and agribusinesses gradually meet the region’s ever-growing food demand.

Implementing the AfCFTA could see agricultural trade representing 49% of intra-African trade and 10% of extra-African trade by 2035. Indeed, the AfCFTA offers the biggest opportunity for significantly reducing the numerous tariff and non-tariff barriers currently hampering intra-Africa agric export across the entire value chain as well as improving market access.

To facilitate African youth’s entry into agriculture, essential structural barriers to agric trade must be addressed; this include boosting productive capacity, investment in research and development (R&D) and extension services as well as guaranteeing access to financing. Also crucial is entrenching the private sector’s role as drivers of inclusive agribusiness development as well as promoting regional value chains.

 

E-commerce

The continent’s digital economy potentials are likened to what coal and steel had been to the European Union. Subsequently, African e-commerce is set to grow to over US$300 billion by 2025. And despite Africa’s growing digital divide, it is the world’s leader in mobile money while Sub-Saharan Africa is the world’s fastest growing mobile phone market.

Kenya’s M-Pesa, which accounts for almost a quarter of mobile money users in Africa, is leading the continent’s mobile money revolution with almost a half of Kenya’s GDP being transacted through it. Additionally, e-commerce start-ups such as Jumia and Konga are transforming intra-African trade.  The drivers of Africa’s mobile money and e-commerce are but its enterprising young people.

As mobile money fosters financial inclusion and economic growth across urban and rural Africa, e-commerce is allowing SMEs scale up their businesses across borders, boosting intra-African trade. Thanks to the creative ingenuity of Africa’s young people, Fintech startups like Paystack, Flutterwave and My Paga are facilitating intra-African trade.

In this direction, a protocol on e-commerce is being added to the AfCFTA Agreement just as the AU had launched the Pan African e-commerce platform for ‘Made in Africa’ products, Sokokuu. Also launched was the Pan-African Payments and Settlement System (PAPSS), an accessible, low-cost and risk-controlled payment system that seeks to partly formalise unrecorded informal cross-border trade in Africa.

Digitisation of trade processes through digitised single windows, automated cargo tracking, QR code scanning and digital reporting of non-tariff barriers help fast-track seamless border crossings, creating opportunities for Africa’s youth. To this end, tradebarriers.africa, a user-friendly online NTBs reporting, monitoring and eliminating mechanism, is already transforming intra-African trade.

 

Mainstreaming gender

The AfCFTA is the first African trade agreement to identify the promotion of gender equality as one of its cardinal principles.  The Agreement’s Article 3 (e) seeks to advance “full and equal” participation of women in an integrated continental market while Article 27 of its Protocol on Trade in Services supports improvement of women’s export capacity.

Gender inequality costs Sub Saharan Africa US$95 billion every year, yet the AfCFTA could boost women’s wages upwards of 10.5% by 2035. However, without gender-responsive strategies, AfCFTA’s trade liberalization could even worsen existing deeply-seated gender gaps. To further mainstream women and youth in the AfCFTA, a Protocol on Women and Youth is underway.

For men and women to benefit equally from AfCFTA’s trade liberalization, there must be gender mainstreaming in the implementation of the Agreement, particularly at the country level. Trade facilitation measures such as modernizing customs and border procedures as well as the enactment of a continent-wide Simplified Trade Regime (STR) are key to tackling deeply-rooted barriers against women benefiting from the AfCFTA.

 

SMEs and informal sector

The dearth of white-collar employment continues to push Africa’s young people into launching Small and Medium Enterprises (SMEs) and where they lack the requisite education, skills and resources to start formal enterprises, they resort to informal businesses.

As such SMEs and informal businesses offer the surest path to ending Africa’s pervasive youth joblessness thus integrating youth from the informal sector into the formal economy would offer great economic transformation opportunities. With the AfCFTA in place, Africa could leverage the boundless entrepreneurial energies of these hordes of youth to drive the continent’s economic transformation.

Africa’s vast cross-border informal sector is currently made up of street vendors, women traders, market vendors and transporters; it is unregulated, unstructured and untaxed. As the AfCFTA liberalize intra-African trade, SMEs and informal businesses are poised to play a dominant role in cross-border trade in goods and services, thereby transforming Africa’s economic landscape.

 

Making AfCFTA work for African youth

Despite its enormous potential, the AfCFTA Agreement will be a huge failure if it fails to ensure effective inclusion of young people – men and women. In other words, youth inclusion will make or mar the AfCFTA. Thus, the Agreement has to foster a favourable environment for young Africans to competitively engage in cross-border trade in goods and services, in the true spirit of a free market economy.

To achieve this, stakeholders at the continental level must work with the 55 AU member states to ensure, beyond signing, ratifying and implementing the AfCFTA, state parties mainstream youth and gender in their respective national implementation strategies. Afterwards, state parties must evolve innovative youth-friendly communication campaigns to raise awareness about the AfCFTA among their young citizens.

Very importantly, since the impact of the AfCFTA would mostly be felt at the country level, the Agreement must be complemented by appropriate national-level policies to allow access to regional supply chains, trade facilitation, financing as well as business and skills development for young entrepreneurs and youth-led SMEs.

Article 4 of the AfCFTA Agreement says state parties shall cooperate on investment, intellectual property and competition policy. Since the Agreement is meant to foster creativity and innovation among African youth, member states must ensure the protection of youth’s intellectual property rights to nurture innovation in the AfCFTA era.

Moreover, African SMEs are faced with a large financing gap worth more than US$136 billion (annually) which constraints their ability to grow and scale. Hence, stakeholders at continental, regional and country levels must come up with innovative and flexible financing schemes for youth, women and SMEs.

Aside opportunities for growth in an integrated AfCFTA market, micro-entrepreneurs could be exposed to increased competition by cheaper imports from other countries which would affect their sales, erode their income and shrink their markets. Hence, governments have to come up with strategies for mitigating this unintended fallouts of trade liberalization across Africa.

The AfCFTA’s implementation begins when Africa and the rest of the world are battling the economic fallout of COVID-19. This requires a rethink of the future trajectory of Africa’s economic growth and development – factoring in the potential of youth dividend in driving resilience to the pandemic and recovery from its devastating impact. The limitless opportunities of the AfCFTA for youth’s and women’s economic empowerment is an opportunity we must not miss!

 

 

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