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Leader of the AfDB calls for incentives to promote cross-border investments by companies

Despite ongoing efforts to enhance regional trade, African nations continue to engage more with the global market than with one another. Addressing this disparity requires strategic investments in cross-border value chains in key sectors throughout the continent, asserts Joy Kategekwa, the director of the regional integration coordination office at the African Development Bank.

“Regional value chains offer a means to democratise participation in intra-African trade. We’re shifting from a paradigm where the entire product must be produced within a single jurisdiction to a model focused on trading components,” she explains in an interview with African Business during the African Economic Conference in Gaborone, Botswana.

Kategekwa emphasizes that companies investing in multiple jurisdictions can access financial incentives for their efforts.

“With the AfCFTA, we’re indicating that if you add value on the continent using products sourced from Africa, we will consider them locally made for preferential tariff treatment. This sends a strong market signal to producers: create it, and we will purchase it.”

“In essence, this is the promise of the AfCFTA, which ultimately relates to job creation, income growth, structural economic transformation, and a new chapter for Africa,” she adds.

According to Kategekwa, agriculture stands out as the most promising sector for developing regional value chains.

“The list of the WTO’s net food-importing countries reveals a significant number of African nations, which presents a contradiction,” she notes. “The Bank is heavily invested in developing special agricultural processing zones.”

She also highlights the pharmaceutical sector as another area with great potential, particularly in light of recent pandemics like Covid-19 and Mpox, which have underscored Africa’s need to enhance its own vaccine development capabilities.

“The Bank is making strong investments in the African pharmaceutical manufacturing initiative based in Kigali, Rwanda, aiming to boost Africa’s capacity to produce essential pharmaceutical products,” she states.

While the Bank can help lay the foundational work, Kategekwa insists that the private sector is essential for fostering cross-border value chains.

“The state does not participate in trade. These opportunities are for the private sector. The private sector drives industrialization, creates jobs, and fosters innovation. We must view the private sector as the catalyst for growth in Africa,” she says.

Need for Policy Enhancements

However, Kategekwa points out that for investments in multi-country value chains to flourish, policymakers must relax restrictions on the movement of people.

Travel within Africa remains notoriously challenging, characterized by high costs and complicated visa regulations that deter cross-border exploration. The urgency for reform in this area cannot be overstated, she asserts.

“The fact that most Africans require visas to enter other African nations is one of the greatest contradictions to the continent’s regional integration aspirations,” she stated during the launch of the ninth edition of the Africa Visa Openness Index, in collaboration with the African Union.

“Consider tourism; every nation aspires to benefit from tourism revenue given Africa’s wealth of historic attractions. Yet, visa restrictions hinder 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 presents a significant opportunity for the aviation sector.

“The AfCFTA has the capability to substantially increase air travel by boosting demand for passenger and cargo services. Improved mobility will promote economic growth, generate jobs, and enhance regional integration,” Arega tells African Business.

However, he notes that the airline faces challenges such as restrictive bilateral air transport agreements, inadequate infrastructure, and protectionist policies. The lack of harmonized aviation policies across various jurisdictions is also a considerable barrier to the industry’s expansion, he adds.

Nevertheless, Arega mentions that Ethiopian Airlines has formed joint ventures with other African airlines to expand its presence and take advantage of 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 exemplify our pan-African vision. These collaborations not only extend our network but also enhance aviation standards across the continent by sharing our operational expertise. This approach promotes regional connectivity, supports local economies, and aligns with the AfCFTA’s objectives by facilitating trade and mobility,” he concludes.

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