The Covid pandemic brought severe economic disruptions worldwide and has by no means spared Africa. A continent that has always had to contend with a wide variety of difficulties, crises and wars is currently having to cope with the different social and economic disasters caused by the virus. Despite all these almost insurmountable challenges, some developments nevertheless give cause for optimism that, especially after the end of the corona pandemic, decisive decisions can be made for the “black continent”. Only in this way can Africa, and especially its population, take several steps forward in terms of social and economic stability.
The Pan-African Free Trade Agreement (AfCFTA), which will enter into force on New Year’s Day 2021, will unite all 55 member states of the African Union under the same trade umbrella. This will create a domestic market with over 1.2 billion people, which will have an aggregate GDP of around 3.4 trillion US dollars. In this article, we now look at those sectors of the economy that will benefit most from this economic merger and which are expected to show the highest growth rates across the continent.
E-commerce & cashless payments
The African e-commerce industry will experience even faster growth than previously predicted, as more and more Africans conduct their business online every day.
Until recently, this sector of the economy has not been able to reach its full potential because of several stumbling blocks that have hindered this growth. And logistics is one of the most important of these. To this day, the lack of a uniform address system in many African cities prevents the delivery of goods to an Internet user via postal or delivery services. Added to this is the problem of the extensive border and customs controls between the individual African states.
The AFCFTA is trying to implement some fundamental changes in this area. One of the cornerstones of these improvements should be smooth interregional trade. However, this also means that investments will be needed to reduce and cut red tape and the associated costs, thus simplifying economic transactions between the individual African nations. Increased cooperation between member states would greatly facilitate the cross-border movement of goods.
Much importance is also currently being attached in Africa to the targeted development of digital payment platforms, as this is the only way for online customers to pay for goods ordered on the Internet without worries and to ensure that their money reaches its intended destination.
Above all, this is good news for all online merchants, who can look forward to improved business opportunities thanks to this progress.
iGaming
iGaming is one of the fastest-growing industries in the world, with annual sales of several billion euros. These figures are mainly made possible by a robust global market presence. Until recently, however, Africa remained somewhat below the radar of this thriving economic sector, as the majority of Africa’s population did not yet have adequate Internet access.
But for some time now, Africa has been plunging into this turmoil. Current statistics show that almost 40% of the population already has access to the Internet. For this reason, many iGaming websites have been able to increase their market share considerably: The most diverse online casinos not only offer their new customers special privileges such as no deposit bonuses without obligatory deposits, but also companies in the online sports betting industry use other privileges to attract new players. The industry is growing and digital online casino review sites like casinodeals.co.za, helping the industry to become a modern and transparent niche.
But even this growth has an obvious drawback, with a sharp rise in gambling addiction in some countries on the continent, Kenya is one example. It is now imperative for those responsible in these countries to warn players of the negative consequences of gambling addiction and to promote and enforce responsible gaming.
It is now up to the governments of African countries to introduce these protective measures and insist on responsible gambling. They would have the power to do so. Here, too, international cooperation will make it much easier to take measures that will also be valid throughout the African Union, that will be lived, and that will ultimately work.
The regional trade
When the first wave of Covid 19 hit our planet in March 2020, there were worldwide fears that the global trading and economic system might even collapse due to rigorous border closures. Fortunately, these predictions proved to be too pessimistic, as current figures show that trade statistics have remained surprisingly stable.
Kenya, traditionally the economic anchor of stability for all of East Africa, was able to reflect this global trend clearly. After the initial paralysis of shock, which lasted until late spring this year, Kenya’s trade figures returned to normal in the summer, according to a report by the Brookings Institution, due to significant increases in trading volumes. Of central importance to this resilience are the country’s regional trade figures, which have benefited from unbureaucratic government measures such as the installation of mobile stations for Covid testing at national borders. These mobile test labs enabled interstate trade to resume its undisturbed course.
But there is still a long way to go before the situation is stabilized, yet other East African countries such as Uganda and Tanzania have agreed to participate in the measures of enhanced cooperation, which will above all facilitate future trade. In any case, the introduction of AfCFTA in 2021 will help to simplify customs formalities, reduce customs duties and thereby save billions of euros.
These measures alone are expected to increase intracontinental exports by more than 80% by 2035, at a time when Africa will represent 20% of the world’s population.
Foreign Investment
A unified African economic union with an at first glance prosperous future represents a desirable option for external investors. Currently, a variety of trade development programs already exist between some African countries and global, national players such as China and South Africa, but also the growing African technology sector receives supportive funding from technology giants such as Google and Facebook.
Currently, most foreign investment is limited to a small number of hand-picked African countries. The AfCFTA wants to counteract this situation and also provide financing for less developed countries such as Chad, Southern Sudan and Sierra Leone. In this context, representatives from South Korea, an economic giant in transition, recently announced that their country would considerably increase its influence in sub-Saharan Africa, i.e. those areas that will benefit from the AfCFTA agreement.
The benefits of these potential collaborations would be manifold, as these new significant investments will be part of the project to lift millions of people out of extreme poverty, as well as to create permanent jobs and improved infrastructure.
After all, the very first targeted financial grants have often led to subsequent further investments. First, however, it remains to be seen whether the AfCTFA’s efforts can actually be put into practice.
Africa’s long-term future
Although the potential economic growth areas of this continent, as defined by the AfCTA, are recognizable and are also supported by this free trade zone alliance in a targeted and comprehensive manner, the path of implementation will be a rocky one. Above all, opponents of global free trade complain about the growing income inequality between the continents. The African nations in particular will have to ensure that social and economic justice finally finds its way into their countries after centuries of discrimination. For example, large sections of the population in individual countries must be freed from extreme poverty, but the ageing and run-down national infrastructure must also be given a huge boost in innovation.
For a continent that has been ravaged and shaken by countless internal conflicts over the last century, a comprehensive continental trade agreement offers the extensive opportunities to achieve real long-term goals and achieve substantial growth in these four core areas mentioned above.
