‘Diversification key to benefiting from AfCFTA’
The World Economic Forum (WEF) says sub-Saharan African countries, including Malawi, need to diversify and align their industrial policies with the Africa Continental Free Trade Area (AfCFTA) to benefit from Africa’s biggest single market.
The call by the WEF in a new study published this week comes a few weeks after Malawi ratified AfCFTA, effectively consenting to the trade deal after years of securing a consensus to ratify the continent’s free trade area.
The study titled Connecting Countries and Cities for Regional Value Chain Integration, has established that there are insufficient inter-linkages between African economies on the continent’s supply chains.
It says countries need to enhance their competitiveness regionally from either a cost or a production standard point of view, adding that countries are better-placed to produce a wider variety of sophisticated products.
Reads the report in part: “Increased complexity in production typically goes hand-in-hand with higher value addition.
“This enables countries to capture greater production benefits by allowing them to participate in increasing steps of the value chain.”
The study says by diversifying and increasing their variety of exports, countries are able to increase trade possibilities with other countries.
Local development economists have consistently argued that Malawi’s limited export basket is one of the key reasons it could benefit less from the continental free trade market.
In an interview yesterday, University of Malawi’s Chancellor College economics professor Ben Kaluwa said the country will not immediately accrue the benefits if it does not diversity its export basket.
He said: “This is an issue we have been talking about for long time that Malawi has a limited export basket and its products do not compete favourably on the international market.
“Policymakers need to encourage value addition and quality so that our products compete well on the market otherwise this agreement will benefit little or nothing for the country.”
Commenting on the same, economist Edward Chilima observed that it will be difficult for the country to make the most of international trade if does not invest in small and medium enterprises (SMEs).
“We have not invested in areas where we have comparative advantage enough to create industries that can produce and export,” he said.
Malawi Confederation of Chambers of Commerce and Industry had earlier advised that the AfCFTA has to be backed up by increased productive capacity, enhanced regional value chains and removing internal obstacles to the growth of SMEs so that African countries, including Malawi, can compete in a liberalised market. n
