The report “Forging an African Services Market” by the United Nations Development Programme (UNDP) explores the potential of the African Continental Free Trade Area (AfCFTA) in enhancing intra-African trade in services. It highlights the critical role service sectors play in Africa’s economic growth and industrialization.

The African Continental Free Trade Area (AfCFTA) presents a significant opportunity for Africa to deepen its economic integration by enhancing intra-African trade in services. Service sectors are critical to Africa’s growth, industrialization, and trade, contributing 55% to the continent’s GDP and employing 34% of the formal workforce. However, despite this potential, Africa accounts for only 2% of global services trade. This report explores the challenges and opportunities in services trade and proposes actionable policy measures to leverage AfCFTA for increased intra-African services trade.

Key Service Sectors in Africa

• Transport Services: These are crucial for intra-African trade gains, potentially accounting for up to 25% of the increase in service production.
• Tourism Services: These depend on good transport networks and are significant contributors to economic activity.
• Communication Services: Essential for the growth of creative industries and digital services.
• Healthcare and Education Services: These sectors are vital for human development and can benefit from increased trade and investment.

AfCFTA and Services Trade

• Progressive Liberalization: AfCFTA aims to reduce trade barriers, facilitating the movement of services across Africa.
• Modes of Supply: Services are traded through four modes: cross-border supply, consumption abroad, commercial presence, and movement of natural persons.

Challenges in Services Trade

1. Businesses face numerous barriers when trading services across borders, including complex legal requirements and procedural limitations.
2. There is a lack of detailed data on intra-African services trade, making it difficult to assess the full potential of services trade within the continent.
3. Despite efforts to liberalize services trade, many African countries still maintain restrictions that limit market access for foreign service providers.

Opportunities and Recommendations

1. AfCFTA Protocol on Trade in Services: The AfCFTA Agreement provides a framework for progressive liberalization of services trade, ensuring equal treatment for services and suppliers from member states. Key provisions include Most-Favoured-Nation Treatment, Transparency, Mutual Recognition, Market Access, and National Treatment.
2. Market Entry Guidelines: Developing practical guidelines can help businesses navigate legal requirements and procedures for entering service markets across Africa. These guidelines should include templates for structuring market entry information and key elements such as licensing procedures and regulatory frameworks.
3. Digitalization and Services Trade: Embracing digital platforms can streamline cross-border services trade by facilitating regulatory coordination and trade formalities. A continental services observatory can also help businesses explore opportunities and complete licensing/registration formalities.
4. Regional Economic Communities (RECs): RECs can serve as building blocks for integration and policy harmonization in the services sector. They can facilitate the sequencing of services liberalization, develop mutual recognition frameworks, and monitor implementation.
5. Data Collection and Analysis: Establishing a systematic framework for collecting and analyzing data on intra-African services trade can provide insights into trade patterns and help policymakers make informed decisions.

Conclusion

The report underscores the importance of services in Africa’s economic development and suggests practical measures to maximize the benefits of AfCFTA in enhancing intra-African trade in services. By implementing these strategies, Africa can deepen its services market integration and foster economic growth.

To Read the full Report click here