In spite of continuous efforts to boost regional commerce, African countries are still more engaged with the global market than with each other. To tackle this imbalance, strategic investments in cross-border value chains across crucial sectors on the continent are essential, claims Joy Kategekwa, director of the regional integration coordination office at the African Development Bank.
“Regional value chains provide a pathway to democratize involvement in intra-African trade. We are transitioning from a system where entire products are produced within one jurisdiction to a framework centered on trading components,” she elaborates in an interview with African Business during the African Economic Conference held in Gaborone, Botswana.
Kategekwa highlights that firms operating across multiple jurisdictions can benefit from financial incentives for their initiatives.
“With the AfCFTA, we are signaling that if you add value on the continent with materials sourced from Africa, they will be recognized as locally manufactured for preferential tariff benefits. This sends a powerful message to producers: create it, and we will buy it.”
“Essentially, this is the promise of the AfCFTA, which ultimately pertains to job creation, income growth, structural economic transformation, and a new era for Africa,” she adds.
Kategekwa identifies agriculture as the most promising sector for developing regional value chains.
“The World Trade Organization’s list of net food-importing countries reveals a notable number of African nations, which is contradictory,” she points out. “The Bank is significantly invested in establishing special agricultural processing zones.”
She also underscores the pharmaceutical industry as a sector with immense potential, especially in light of recent pandemics like Covid-19 and Mpox, which have highlighted Africa’s urgent need to strengthen its vaccine development capacities.
“The Bank is making substantial investments in the African pharmaceutical manufacturing initiative based in Kigali, Rwanda, aimed at enhancing Africa’s capabilities to produce essential pharmaceutical goods,” she states.
While the Bank can aid in building foundational support, Kategekwa emphasizes that the private sector is vital for nurturing cross-border value chains.
“The government does not engage in trade. These opportunities are for the private sector. The private sector propels industrialization, creates employment, and encourages innovation. We must see the private sector as the engine of growth in Africa,” she asserts.
Need for Policy Enhancements
Nonetheless, Kategekwa points out that for investments in multi-country value chains to thrive, policymakers need to ease regulations concerning the movement of individuals.
Travel within Africa remains notoriously difficult, plagued by high costs and complex visa regulations that inhibit cross-border movement. The urgency for reform in this domain cannot be overstated, she stresses.
“The requirement for most Africans to obtain visas to enter other African countries is one of the starkest contradictions to the continent’s aspirations for regional integration,” she stated during the unveiling of the ninth edition of the Africa Visa Openness Index, in collaboration with the African Union.
“Take tourism into consideration; every country wants to benefit from tourism revenue given Africa’s rich array of historical attractions. Yet, visa limitations prevent Africans from contributing to each other’s tourism income.”
Ethiopian Airlines Expands Cross-Border Network
Samson Arega, group vice president of customer experience at Ethiopian Airlines, acknowledges that cross-border integration provides a major opportunity for the aviation industry.
“The AfCFTA has the potential to significantly enhance air travel by increasing demand for passenger and cargo services. Improved mobility will foster economic development, create jobs, and strengthen regional integration,” Arega tells African Business.
However, he points out challenges such as restrictive bilateral air transport agreements, insufficient infrastructure, and protectionist policies. The lack of harmonized aviation regulations across different jurisdictions also poses a substantial barrier to the industry’s growth, he notes.
Regardless, Arega mentions that Ethiopian Airlines has established joint ventures with other African carriers to broaden its reach and leverage economies of scale—an embodiment of the cross-border collaboration that Kategekwa advocates.
“Our partnerships with airlines such as Asky Airlines, Zambia Airways, and Malawi Airlines reflect our pan-African vision. These collaborations not only extend our network but also elevate aviation standards across the continent by sharing our operational expertise. This strategy fosters regional connectivity, supports local economies, and aligns with the AfCFTA’s goals by facilitating trade and mobility,” he concludes.
