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AfCFTA and Agenda 2063 hope to tap into the vast number of manufacturing opportunities

AfCFTA and Agenda 2063 hope to tap into the vast number of manufacturing opportunities

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Now that the African Free Trade Area (AfCFTA) has entered into force, one path to success will be effective AfCFTA implementation and better national ownership and consistency with the 2063 agenda of the African Union's socio-economic transformation strategic framework.

Right now, only 10 African countries (Mauritius, South Africa, Seychelles, Morocco, Tunisia, Botswana, Algeria, Kenya, Egypt, and Namibia) are ranked among the top 100 most competitive countries in world, per the 2018 Global Competitiveness Index.

If the AfCFTA is successfully implemented, Africa's manufacturing sector is projected to double in size with annual output increasing to $1 trillion by 2025 and create over 14 million jobs. Notably, one of the key objectives of the AfCFTA is to "enhance competitiveness at the industry and enterprise level through exploiting opportunities for scale production, continental market access and better reallocation of resources."

Agenda 2063 aims at creating a "strong, united, and influential global player and partner," turning African countries into the best performers in global quality of life measures and accelerating inclusive growth, including through industrialization, import substitution, and employment.

The AfCFTA and Agenda 2063 hope to reverse Africa's premature deindustrialization and tap into the vast number of manufacturing opportunities that persist, including in software, auto components, industrial and business machinery, chemicals, agro-processing, and clothing and footwear subsectors, among others. Indeed, some countries already claim advantages in certain subsectors. One example is Kenya, whose relatively strong industrial manufacturing sector accounts for nearly 20 percent of the country’s economic activity and 12.5 percent of all formal jobs, and which has become the primary supplier of motor vehicles for East African markets.

Already, in countries such as Cameroon, Egypt, Kenya, Morocco, Nigeria, Senegal, and South Africa, business-to-business spending is a major contributor to growth, and these countries are beginning to implement policies to capitalize on this opportunity. Increased business-to-business spending will also improve African firms' ability to specialize—an essential determinant of growth in manufacturing—as necessary inputs can be sourced from other businesses or neighboring markets, rather than produced in-house.

The projected increase in Africa's business-to-business spending in manufacturing by $200 billion to a total of $666.3 billion by 2030 presents further opportunities to advance manufacturing for the continent given the free trade area. In fact, manufacturing goods constitute a higher percentage of intra-African exports, compared to extra-African ones (41.9 percent compared to 14.8 percent in 2014). The business-to-business market is made up of thousands of firms, many of them smaller businesses, with substantial demand for materials, goods, and services across a wide range of sectors.

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