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Experts Speak as African Continental Free Trade Area Agreement Takes Effect

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The African Continental Free Trade Area agreement (AfCFTA) came into force on May 30, 2019. In April 2019, Gambia ratified the agreement, bringing the total number of African Union (AU) member state ratifications to 22, the minimum threshold for AfCFTA’s implementation. In the last month, the required number of endorsements was received by the AU and the agreement is now in force.

According to Virusha Subban, Partner specialising in Customs and Trade at Baker McKenzie in Johannesburg “AfCFTA aims to eliminate tariffs on intra-African trade, reduce unemployment, increase infrastructure development and create a more competitive, yet sustainable environment for cross-border trade.”

Subban explains that AfCFTA is a treaty between consenting countries whereby a free trade area is constituted which allows member countries to conduct trade with each other without tariffs or other hindrances. Currently, the agreement has 52 signoraties, out of 55 member states, which make up a market of more than 1.2 billion people, with a combined GDP of more than $ 3.4 trillion.

Itumeleng Mukhovha, Associate in Corporate/M&A Practice, notes, “Expanded international and regional trade flows have played a significant role in Africa’s rapid growth in recent years. The AfCFTA marks another milestone toward deeper regional integration and the quest for stronger and sustained growth. As a matter of fact, the AfCFTA is expected to provide businesses across Africa with many opportunities and in so doing, it complies with Agenda 2063: The Africa We Want. Agenda 2063 is an AU goal aimed at socio-economic transformation.

In addition, the Economic Commission for Africa (ECA) estimates that intra-African trade should increase by 52.3%, with the elimination of import tariffs and add $70 billion to the continent’s GDP by 2040.

Currently, trading outside Africa is subject to lower tariffs than the 6.1% tariff imposed on intra-Africa trade. The scope of the AfCFTA will have widespread changes – businesses, traders and consumers in Africa will no longer be constrained by tariffs; and mechanisms will be put in place to assist traders that are burdened by non-tariff barriers.”

In January 2012, the AU decided to adopt a free trade area covering the African continent, which they hoped to have in place by 2017. Fast track to March 2018, where a significant decision was taken towards the fulfilment of the AU’s mandate of a continental free trade area – 44 countries indicated their commitment through signing the agreement in Kigali, Rwanda. Two further agreements were also presented at the Kigali Summit, namely the Kigali Declaration and the Protocol to the Treaty Establishing the African Economic Community relating to the Free Movement of Persons, the Right to Residence and the Right to Establishment.

“Two of Africa’s leading economies, Nigeria and South Africa, however, did not sign the agreement in Kigali in 2018. Both countries had indicated support of the agreement before the Summit, however, the reasons for their reservations took two different routes,” Mukhovka says.

“Nigeria was largely considered as a supporter of the free trade area and was expected to play a major role during the negotiations at the Kigali Summit. However, uproar by local businesses, policymakers and lobbyists within Nigeria led President Buhari to cancel his trip to Kigali in order to respond to complaints that their interests were not being accommodated.

“In July 2018, South Africa, along with five other countries, became party to AfCFTA, joining the-then 44 existing signoraties to the agreement.  The African Union Summit which took place in July 2018, saw South Africa, Namibia, Sierra Leone, Lesotho and Burundi take the total signatories to 49 of the 55 member states. In February 2019, during the 32nd AU Heads of State and Government Summit in Addis Ababa, Ethiopia, Botswana, Zambia and Guinea Bissau raised the number of countries to have signed the agreement to 52.

“However, Africa’s largest and most populous economy, Nigeria, is the most notable non-signatory of the AfCFTA.

“Although the Nigerian government was initially concerned about opening up its borders and turning the country into a receptacle of finished goods, the Minister of Industry, Trade and Investment, Okechukwu Enelamah, recently confirmed that Nigeria will sign the AfCFTA as soon as President Muhammadu Bihari approves an impact-assessment report,” says Mukhovha.

When he signed the agreement last year, President Ramaphosa said that it would create many opportunities and benefits for South Africa and moreover, would grow and diversify the South African economy through the reduction of inequality and unemployment. Ramaphosa indicated that South Africa’s position as a major supplier of goods and services to the continent would also be strengthened by the agreement.

“Through the AfCFTA, South Africa is also expected to be benefit from an increase in foreign direct investment, gain access to a broader range of expertise and the possibility of lower governmental spending.

“This is because, through its implementation, the subsidisation on local industry segments might be removed due to advantageous outcomes of the agreement. However, two disadvantages arising from the agreement include the potential increase in the outsourcing of jobs as a result of the significantly reduced tariffs and the possible degradation of natural resources,” says Mukhovha.

Mukhovha explains further that extractive commodities including oil, minerals and metals, have traditionally been the continent’s leading source of exports, accounting for 76% of exports outside Africa.

“Due to the volatile nature of these extractive exports, financial assurance is not certain. It is hoped that AfCFTA will encourage a shift away from reliance on extractive exports towards more sustainable trade in Africa. Moreover, encouraging more labour-intensive trade such as manufacturing and agricultural goods, will increase employment on the continent,” she says.

Subban says, “AfCFTA will not only have an impact on the trade of goods and services in Africa, but through the implementation of Phase II, it will also see an extension of the disciplines covering investments, competition and intellectual property. According to the AU, finalisation on the supporting instruments to facilitate the launch of the operational phase on AfCFTA will begin in June 2019 at an extra-ordinary head of state and government summit.

“Once all 55 AU member states have joined AfCFTA, it will become the largest free trade zone and the largest customs union in the world, with many more African products and services becoming freely available in other countries in the African Union,” Subban adds.

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via dipo.olowookere@businesspost.ng

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Swedfund Pumps €26m into AfricInvest’s FIVE

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AfricInvest's FIVE

By Modupe Gbadeyanka

The Financial Inclusion Vehicle (FIVE) of AfricInvest has received the injection of €26 million from Swedfund to boost access to financial services in Africa.

About a fifth of the African population has access to formal banking services. Limited access to finance restricts entrepreneurship, job creation, and the ability to absorb economic shocks.

Swedfund’s investment addresses this gap by supporting financial institutions that are expanding outreach and developing inclusive financial products, especially through new technology and digital solutions, particularly with AfricInvest’s FIVE, a platform designed to support financial institutions across Africa.

The investment aims to increase access to financial services for underserved individuals and small businesses, with a focus on digital innovation, economic empowerment and inclusion.

Through FIVE, Swedfund will strengthen the capital base of select financial institutions across Africa, enabling them to grow and reach more clients.

The investment also supports FIVE’s commitment to gender equality and women’s empowerment, creating positive change within its portfolio companies and communities.

By investing in a mix of traditional and digital-first financial service providers, including banks, insurers, and fintechs, Swedfund aims to catalyse more inclusive financial ecosystems, driving job creation and economic growth across the continent.

A Senior Investment Manager at Swedfund, Mr Jakob Larsson, while commenting on the fresh injection, said, “Our investment in FIVE further strengthens our engagement to improve access to banking and other financial services in underserved communities.

“This in turn spurs job creation and growth. We are also able to strengthen financial institutions and the development of innovative financial services.”

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Moscow: World-Renowned Fashionable City

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South African entrepreneur Stephen Manzini

By Kestér Kenn Klomegâh

Moscow is increasingly becoming popular among foreigners due to multiple reasons among them is its fashionable architecture and friendly people. Moscow’s architecture is world-renowned. In addition, Moscow’s status as the spiritual center of Russian orthodoxy and metropolitan buildings attract tourists from around the world. For much of its architectural history, Moscow is dominated by Orthodox churches.

Situated on the banks of the popular Moskva river, cultural parks and recreational centers offer an additional attraction especially during spring, summer and autumn seasons. The city has a population estimated at over 13 million. And public transport system is excellent for easy and fast connection to any part of the city. Today, the Moscow Metro comprises twelve lines, mostly underground with a total of 203 stations.

Moscow mayor Sergei Sobyanin shares in an interview with local Russian media that Moscow is becoming the world’s best megacity. But for South African Fashion entrepreneur, Stephen Manzini, Moscow’s contrasting features make it more fashionable to explore for fun and entertainment. Read Stephen Manzini’s impressions here:

Would you describe Moscow as a ‘fashionable’ city, if fashion is not limited to clothes and bags?

Moscow can be described as a fashionable city if it wasn’t for the weather. We would see beautiful display of runway pieces on the streets, however we do see this in indoor spaces it’s just overshadowed outdoors by the winter coats and jackets. Walking about Moscow does give you a European fashion appeal.

But Moscow as a fashionable city, do you think it is inaccessible from consumers, from tourists?

Moscow the fashionable city can be accessible to consumers. However when it comes to tourists, it’s a bit inaccessible as it takes on-site education to understand the dynamics. It cannot be understood from a distance due to the neo-propaganda that overshadows it.

Do you mean to conclude that cities such Venice, Miami, New York and London are more fashionable and attract more customers, tourists than Moscow?

Moscow’s tourism industry is barely in existence. To no fault of it’s own. Unfortunately, global online search engines are very unkind in referring to it as an undesirable tourist destination.

How then would you suggest rebranding Moscow?

The rebranding of Moscow would have to be intentional and would not happen overnight. It will have to start at a political level and then cascade it’s way to media and tourism.

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Shockwaves Over Trump’s Tariffs Reverberate Across Africa

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Vsevolod Sviridov High School of Economics

By Kestér Kenn Klomegâh

After taking office early 2025, U.S. President Donald Trump has embarked on rewriting American foreign policy and plans to create a new geopolitical history under the “America First” doctrine.

The first three months have seen efforts to implement tariffs, which finally was splashed early April world-wide, including on a grand scale across Africa.

Seemingly, a blanket of tariffs is one of the standout actions of the new administration. Trump’s changing approach to the world, using geoeconomic tools, including tariffs has now sparked extensive debates and discussions.

Our media chief, Kestér Kenn Klomegâh, took a quick chance and asked Vsevolod Sviridov, deputy director at the High School of Economics (HSE) University Center for African Studies, a few questions pertaining to the aspects and implications of the U.S. tariffs for Africa. Here are the interview excerpts:

How would you interpret trade war between China and the United States?

There has been a global trend towards overspending over the last two decades. We have seen commodity boom, rise of  China with  its global  investments drive  and infrastructure development projects like BRI, excessive budget   spending by the OECD countries during COVID-19, etc. Now   countries are trying to optimize their spending. Considering that there is a certain trend towards deglobalization, external trade and deficits are the first to fall victims to this policy. While China almost halved its lending, US are trying to cut their ODA (see South Africa’s case) and adjust their trade deficit, which is fuelling their vast debt.

What could be the reasons for Donald Trump to extend that kind of economic policy, trade tariffs, to Africa?

His latest actions indicated that was possible. Trump has imposed increased tariffs on 14 African countries, including South   Africa (30%), Madagascar (47%), Tunisia (28%), Côte d’Ivoire (21%), and others. The primary selection criterion was the trade deficit with the U.S., though there are exceptions, such as Libya, which was left off the list despite a US$1 billion deficit. Additionally, seven more countries, including Egypt, Morocco, and Kenya, will face a base tariff of 10%, meaning that for Washington stable relations with them are more important.

The hardest-hit country will be Lesotho (50%), where the textile industry, heavily reliant on the U.S. market, will suffer. However, South Africa will bear the greatest overall impact, as it accounts for 70% of the U.S.-Africa trade deficit. In addition to the 30% base tariff, there will be an extra 25% duty on imported cars. This will affect factories operated by VW, Toyota, BMW, and other automakers, whose exports to the U.S. total US$2-3 billion annually. Angola, which had backed the Democratic Party, is also facing penalties (32%).

If these tariffs take effect as announced, they could lead to the collapse of African Growth and Opportunity Act (AGOA). However, the U.S. has not needed AGOA as much since the 2010s when it reduced dependence on African oil and gas. AGOA is set to expire in September 2025, and Trump’s actions make its renewal highly unlikely.

Trump has suggested that affected countries relocate production to the U.S., but this is difficult for African nations that mainly export raw materials. The new tariff preference system is expected to consider political and economic factors, making it less  predictable and less favourable for African suppliers. On the other  hand, this shift could encourage African countries to focus on regional markets and develop industries tailored to their domestic economies.

It could be excellent, from academic perspectives, to evaluate and assess the impact of AGOA in relation to Africa?

For Africa, the African Growth and Opportunity Act (AGOA) meant establishment of several mainly export-oriented industries, like textile or car manufacturing. For instance, almost 2/3 of cars manufactured in RSA are being exported to US and Europe, with only 1/3 being sold on the local market and tiny part exported to other African countries (20k out of 600k prod).

They created employment opportunities for locals but never contributed to local markets and industries development, technology and knowledge sharing. Collapse of AGOA would mean additional opportunities for African industries and producers to target local and regional markets and develop industrialization strategies considering their national interests first (like Trump does).

Assessing the reactions over the tariffs world-wide, and talking about the future U.S.-Africa trade, and the African Continental Free Trade Area (AfCFTA), what next for Africa?

The African Continental Free Trade Area (AfCFTA) gives Africa a chance to embark on the hard and long journey of developing intraregional trade. Still this emerging market could be easily used by non-African suppliers as a tool to expand their presence, given that without protection nascent African industries are hardly able to compete in price and from time to time in quality. Especially now, when we are clearly seeing that the US are more interested in selling then buying. So any external aid and knowledge sharing assistance in this sphere should be received with caution.

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