PwC roots for SMEs role in African trade

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According to PwC, free trade agreements are not designed to meet the needs of emerging market economies or smaller financial institutions, and thus risk marginalising the small and medium enterprises (SMEs) and the agriculture sector in areas where financial inclusion is still low.
The TFTA deal which was signed last month will pool the interests of the East African Community (EAC), Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (Comesa), whose members have a combined GDP of more than $1 trillion (Sh102 trillion).

The recently signed African Tripartite Free Trade Area (TFTA) agreement should incorporate financial co-operatives if its impact is to trickle down to the small sectors of the economy, a new paper by financial advisory and audit firm PricewaterhouseCoopers says.

According to PwC, free trade agreements (FTAs) are not designed to meet the needs of emerging market economies or smaller financial institutions, and thus risk marginalising the small and medium enterprises (SMEs) and the agriculture sector in areas where financial inclusion is still low.

The cooperative movement in Kenya forms the backbone of the key agriculture sector, and is also plays an important role in the SME sector.

“FTAs should make special provisions for cooperative financial institutions in recognition of the distinctive benefits they can provide for emerging economies, especially within the under-financed agricultural and small business sectors,” said Anna Jerzewska, PwC senior associate for customs and international trade.

“Emerging markets face the pressing challenge of how to develop their agricultural sectors, turn SMEs into companies that can compete on a national or regional scale and raise the living standards of their people,” she said.

The TFTA deal which was signed last month will pool the interests of the East African Community (EAC), Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (Comesa), whose members have a combined GDP of more than $1 trillion (Sh102 trillion).

READ: Africa’s largest free trade area to launch in December

The first phase of the deal is largely focused on liberalising trade in goods and services in the three blocs, with PwC stating that the inclusion of cooperatives could come in the second phase which will focus on investment services and trade-related measures.

The schedule for dismantling trade barriers in the various trading blocs is being worked out and the agreement would still have to be ratified by national parliaments within two years. The TFTA envisions the eventual merger of the three blocs.

Kenya is a member of EAC and Comesa, meaning that under the new deal the country is likely to add SADC member states to the list of states with which it has a trade pact.