How can African SME’s take advantage of the AfCFTA – Part 1

Author: Mary Gounder, Senior Trade and Regional Integration Expert

Over the past few years, we have been hearing so much about the AfCFTA and the opportunities that would be available across the continent for African businesses. If you are a producer or manufacturer, then this is for you…..

To be able to use the AfCFTA or any other trade agreement to your advantage, you need to understand how it benefits you as the exporter.

Reduced tariffs can give you an advantage over other exporters that may be targeting a specific import market that you want to sell in. However, the reduced tariffs may not necessarily simplify other requirements such as certifications that may be needed. So, it’s important to understand the processes and requirements for exporting and to start with the countries closest to you. We all know that there are considerable challenges in terms of logistics and customs processes across the continent, so it’s important to understand each step so you can avoid unnecessary delays and costs.

Export Process

The export process begins with companies assessing their business and product readiness. The exporters are required to register with Customs, local chamber of commerce and other local ministries. Exporters are required to provide international buyers with quotes, proforma invoices and transport documentation where necessary. Exporters need to understand the terms for the contract of sale as well as the Incoterm® that has been selected.

Export Readiness

When considering exporting products, it is important that the company assesses their export readiness in terms of the business and the products to be exported.

Business Readiness

The readiness of the business should be assessed by considering the following aspects:

• Commitment from the business to develop an international market as the business operations may need to be rearranged.

• Management skills such as experience selling products in other countries, processing export orders and understanding the export processes.

• Financial resources does the business have the funding to export, as developing the international market can be more costly than the domestic market. Is there funding to adapt the product and packaging for the international market?

• Technical expertise to ensure that the product is suited for the international market, as well as to undertake research and development, and have knowledge of potential competitors.

• Capacity to supply and manufacture for the international market as well as to produce at short notice.

• International market intelligence. Do you understand your target market, their requirements and your competitors who are currently exporting to this market?

Product Readiness

The product readiness can be assessed by considering the following aspects:

• Success in the local market. based on potential to find international buyers at competitive prices.

• Product adaptability through assessing the function of the product and whether the packaging/labels/manuals can be adapted to the international market.

• Cost structure of manufacturing the product which includes the materials used and whether they are sourced locally. The manufacturing process may need to cope with bigger orders. The product may be price sensitive and freight costs may be too high.

• Competitors’ products are there advantages over the competitors’ products?

• Product complexity such as the technology required to use the product. Does the buyer require skills to use the product and are there utilization demands such as power/electricity? Would the buyer require after sales services such as repairs or spares?

Once you have assessed your business and product readiness, you can move on to getting your exporter registrations in place. There are so many opportunities when considering new markets, so it’s important to find the right one for your business.