Interview Michael Kottoh “The private sector ultimately is the driver and beneficiary of the AfCFTA”
Michael Kottoh, Managing Partner of KONFIDANTS and Head of Research at the AfroChampions Initiative, provides an update on the Zlecaf implementation process through the actions AfroChampions has taken to support the process.
Last year you published the AfCFTA Year 0 report measuring African states’ commitments to implement key AFCFTA measures. What reactions did you receive to the report? Is another report being prepared for Year 1 and what is the value of conducting such exercise on a regular basis?
The AfCFTA Year Zero Report basically sought to measure the level of the continent’s commitment and readiness for implementation of the AfCFTA. At the time of publication in May 2020, we found the level of both commitment and readiness of the continent as a whole to be very low – despite the spectacular speed at which the AfCFTA operationalisation process itself was unfolding. The report also revealed two main groups of countries. The first group was countries that are highly committed to the AfCFTA but poorly prepared for implementation. The second group was countries that have low commitment but have very high implementation capacity and readiness. The report generated a lot of discussion among key stakeholders – the African Union, member states, regional bodies, and the private sector. And these were the early months of the Covid-19 pandemic so there was a lot of debate over whether the Start of AfCFTA Trade – which was scheduled for July 2020 – should be postponed or not, especially in light of the low implementation preparedness and the travel and economic disruptions of the pandemic. The report brought a new perspective to this debate by arguing that both the low preparedness of countries and the pandemic were in fact reasons why the Start of Trade should not be postponed. We argued that countries would only speed up their AfCFTA preparedness if trade could begin. And that AfCFTA could be used as one of the continent’s weapons in its war against the pandemic – if member states member states could agree an initial start of trade focused on “pandemic goods” such as pharmaceuticals, PPEs and food products. One of the impacts of the report is that it helped to inform various campaigns by the AU to get more member states to ratify the agreement, submit their offers for negotiations and speed up ongoing work on country implementation strategies.
Our goal is to publish a report every year, and so we are coming out with the second edition of this report in May 2021 – to be called the AfCFTA Year One Report. The second edition will have some new indicators that were not in the first edition; so it will provide different kinds of insights into countries commitment and implementation capacity that we did not see in the first edition.
These report series is valuable in many ways. First, is that it enables the continent to measure its overall level of commitment towards the AfCFTA process as well as the overall level of implementation capacity of member states.
Second, it enables individual countries to measure their own commitment levels and and implementation capacity levels relative to those of their peers. Based on the indicators of the report, they can see their strengths and weaknesses and where to make improvements.
Then, it provides an important benchmarking tool against which to measure progress year-on-year towards commitment and implementation capacity levels.
Moreover, and from a business perspective, it sends signals to investors from within or outside the continent – as having public reforms and policies progressively converging and transposing the AfCFTA into national laws can help harmonizing the African market and make it more ‘worth investing’ into.
Finally, this benchmarking exercise is a pioneering piece – as it is a piece of African expertise to drive debates and discussions amongst African and foreign experts also. We have seen a number of interesting studies and scenario planning analyses from global institutions and think tanks, but it will be important in the future than more analytical and insight about the AfCFTA implementation is coming from the continent itself – as part of an effort to endorse and appropriate the new African common market concept and our collective achievements. We hope we can contribute to this evolution.
AfroChampions assists, among others, African states in their local implementation of the Continental Free Trade Agreement. How do you do this? With what results?
As an organisation that works with both the private and public sectors, AfroChampions has been rolling out country-level AfCFTA implementation support and collaborates with both the local business community and key government entities. At the governmental level, we have been assisting governments in the process towards developing their national AfCFTA implementation strategies. We have been disseminating findings from our various AfCFTA benchmarking reports to assist countries with strategic insights, analysis and recommendations to shape their country implementation strategies. We are also working through business associations in the various countries to assist SMEs in various countries to prepare their AfCFTA business strategies and to better understand how to navigate the continental market. At the level of advocacy, we are also working with business associations to use the findings of our AfCFTA benchmarking reports to undertake advocacy engagements with their governments in order to improve their countries commitment and implementation preparedness. Finally, we are working to facilitate investments into “AfCFTA certified investment projects” in countries via the AfCFTA Trillion Dollar Framework, and strategic partners of the Framework such as the AfroChampions promoted Orango Investment Corporation. There is a lot of things in the AfroChampions pipeline of AfCFTA implementation support that will become more evident in the months ahead.
In other areas, we have worked with the Africa CDC (through the AfroChampions convened PANABIOS Consortium) to sponsor the rollout of the “Trusted Travel Platform”, a digital Covid passport to help open up the continent to travel and trade in the wake of the pandemic. Today, the continent’s largest airlines from Ethiopian Airlines to Kenya Airways and sub-regional carriers like Asky Airlines have all signed up to the platform; and several laboratories across the continent have connected. In view of the pandemic’s disruptions to trade and successful start of AfCFTA, we consider this to be a key area of collaboration with the AU, the Africa CDC and other stakeholders to assist countries and we are very proud of the progress thus far.
One of AfroChampions’ major projects is the AfCFTA Trillion Dollar Investment Framework, developed in collaboration with the African Union’s Trade and Industry Department – which is built around mechanisms for certifying flagship African investment projects, an investment vehicle (Orango) and a mechanism for selecting eligible certified projects for this investment vehicle and other financing partners of the Framework. Where do we stand today on the eligibility criteria for these projects?
The AfCFTA Trillion Dollar Investment Framework is perhaps the most ambitious private sector led investment agenda in the history of the continent. And we are proud that the Summit of African Heads of State officially endorsed it in February 2020 and requested Finance and Trade Ministers to work with the private sector to implement it. The Framework is borne out of the basic idea that the private sector ultimately is the driver and beneficiary of the AfCFTA. As such it must take “investment and commercial ownership” of the common market; and play the lead role in implementation – because taking ownership of the AfCFTA is the best way to take advantage of it through trade and investment.
The Framework seeks to stimulate US$1 Trillion worth of investments into the AfCFTA by 2030. There are two broad categories of investments under the Framework. First is investment in key strategic areas that solve the fundamental obstacles to the success of the AfCFTA such as infrastructure for example. We call these “the AfCFTA enabler investments.” The framework outlines 5 main areas of enabler investments namely, Transportation & Logistics, Digital Connectivity, Cheap and Reliable Power to Industry, Value Addition & Manufacturing, and Removal of Non-tariff Barriers. The second category of investments is in areas and projects that ensure that the AfCFTA positively impacts the everyday life of the ordinary African. We call these “investments in the opportunity areas.” These opportunity areas include: “Feeding the people”, “Housing the people”, “Moving the people”, “Clothing the people”, Healthcare, Creative Sectors, Tourism, Education, Financial Services, etc. These are all channels through which the AfCFTA can and should benefit ordinary Africans.
“The AfCFTA Trillion Dollar Investment Framework is perhaps the most ambitious private sector led investment agenda in the history of the continent”
What the Framework seeks to do therefore is to help stimulate investments that are using the AfCFTA to achieve the above developmental objectives – by certifying such projects as “AfCFTA certified investments”. Projects are thus certified on the basis of both their commercial viability (ie the possibility for each project to be self-sustained over time and create solid and lasting revenues without depending heavily on subsidies or political patronage or bloating government debt) as well as their potential socio-economic impact on the continent – and they have to comply with a certification charter. When a project is certified, it elevates the profile of the project and helps project developers to raise capital and obtain government support. The Framework already has and is still expanding a rich pool of financing partners and government partners who have committed to respectively prioritize the financing and the regulatory approvals of certified projects. And it is that unique ecosystem of the Framework that sets it apart as an innovative and transformational platform for stimulating great investments in the continent. Within this ecosystem, AfroChampions and its partners have also launched a special purpose pan-African investment vehicle called Orango Investment Corporation; which is designed to take the lead in investing in certified projects, demonstrate proof of concept and crowd-in financing into certified projects.
Now let me give you a practical example of a project. For example, as a result of the AfCFTA, it is possible for investors to collaborate to launch a multi-country affordable housing and mortgage project – a cross-border housing program built on the AfCFTA – with capital, talent, raw materials and inputs being sourced from African countries at low cost because of the rules of origin and lower tariffs etc. If real estate investors and project developers can put such a project together and submit it for certification under the Trillion Dollar Framework, it will be certified as an “AfCFTA certified project”. The certification system will rate and certify projects according to whether they are 3-star projects, 5-star projects or seven-star projects. The idea is that a five-star project has a bigger potential impact on the AfCFTA than a 3-star project but they both have a potential positive impact that we want to see implemented. And projects that do not meet the minimum certification criteria will not be certified. After projects are certified, they will be monitored to ensure that their implementation is in compliance with the certification charter. Monitoring is a critical aspect – something we heard well during the AfroChampions Boma meetings gathering investors, is that project execution is a frequent challenge on the continent and as such must be overcome. The monitoring process, focusing on key relevant aspects (deadlines, use of disbursements, project leaders’ performance, ability to meet the expected impacts) can help better anticipate issues for project implementation – sometimes there are unexpected issues that can and should be addressed. But it also creates an obligation of accountability. Certifications can be revoked if projects fail to comply with the charter principles of responsible and impactful AfCFTA investments. That’s the whole idea.
“The Governments have a huge role to play in project success”
It is also worth mentioning that Governments have a huge role to play in project success. And so, the framework also monitors and ranks governments according to the extent to which they are providing the necessary regulatory and incentive support and the enabling environment for certified projects to be implemented successfully.
The final stages of the consultative process to finalize and launch the certification framework is at its advanced stages, and we expect to officially announce the beginning of project certifications and start accepting projects for certification by middle of 2021. We believe that this Trillion Dollar Framework for Africa will become one of the great success stories in both the AfCFTA and Africa’s economic transformation.