How SMEs must prepare for intra-African trade

Intra-African commerce refers to the exchange of commodities, services, and investments between African nations.

It promotes regional integration and economic cooperation by involving trade flows and economic connections among African states.

Historically, many African countries relied significantly on commerce with countries outside the continent, resulting in little trade among African states. 

However, there is a rising realisation of the potential benefits of intra-African trade, which has resulted in attempts to expand trade volumes and deepen economic integration throughout the continent.  

The African Continental Free commerce Area (AfCFTA), which took effect on January 1, 2021, is a critical effort aimed at increasing intra-African commerce. 

The AfCFTA intends to create a single market in Africa with free movement of goods, services, and investments.

To encourage commerce and economic growth within the continent, it attempts to abolish trade barriers such as tariffs, non-tariff barriers, and restrictive regulations. 

The AfCFTA gives African countries a framework for improving regional value chains, increasing competitiveness, and attracting investment.

Overall, intra-African trade provides a huge potential for African countries to establish economic linkages, improve regional integration, and promote long-term development throughout the continent.

Small and medium-sized firms (SMEs) can benefit from preparing for intra-African commerce since it offers up new markets and opportunities.

Here are some preparations that SMEs may make for intra-African trade:

Create a thorough market entrance plan

Create a clear market entrance plan based on your research and understanding of the target market. Establish your goals, pricing plans, marketing approaches, and distribution routes.

Consider market size, competitiveness, and the accessibility of local resources.

Review and adjust your approach on a regular basis in response to market input and changing conditions.  

Begin by completing extensive market research on the African nations of interest.

Determine the size of the market, its potential for development, the competitive landscape, customer behaviour, cultural subtleties, the regulatory environment, and trade obstacles.

This study will assist you in understanding market trends and making sound judgments.  

Determine particular target market categories within the African nations into which you intend to expand. 

Consider demographics, purchasing power, customer preferences, and market gaps.  

You may adapt your products/services and marketing methods to your target market by segmenting it.

Business owners must examine the competitors in their desired market categories.

Determine your top rivals' market share, strengths, shortcomings, and unique selling points. Understanding the competitive landscape can help you differentiate your services and successfully position yourself. 

Create alliances and networks

Create connections with local partners, distributors, and suppliers in the target nations.

Networking with local firms and industry groups may give useful insights and help you break into a new market.

Working with established partners can assist in navigating cultural intricacies, distribution networks, and regulatory requirements.  Business owners must participate in intra-African trade fairs, exhibits, and industry events.

These events give opportunity for potential partners and industry experts to network, share expertise, and create partnerships.

I will advise business owners to join Business Associations, trade organisations or chambers of commerce in your chosen nation or area.

These organisations frequently provide networking platforms, business matching services, and industry analyses.  

Connect with possible partners by using internet platforms and professional networks. Participate in industry-specific forums, social media groups, or online communities.  

Government agencies and trade promotion organisations play an important role in promoting trade and investment.

I will advise business owners to contact these organisations to gain access to market intelligence, trade missions, company matching services, and financing possibilities.  Attend intra-African trade networking events, seminars, conferences, and business forums.

These events allow attendees to meet and network with possible partners, industry experts, and government authorities. 

Improve your logistics and supply chain skills

Make sure your logistics and supply chain operations are efficient and ready to handle rising trade volumes. Locate reputable shipping companies, customs brokers, and warehouse facilities.

Streamline your operations to reduce the time and cost of shipping items across borders.  

To begin, evaluate your present logistics and supply chain activities.

Determine your strengths, shortcomings, and opportunities for development.

Examine your procedures for transportation, warehousing, inventory management, and order fulfillment.  

Identify dependable transportation providers, freight forwarders, customs brokers, and warehousing facilities with intra-African trade expertise.

Look for partners that are familiar with the local logistics scene and can successfully manage customs processes and regulatory restrictions.  

Use excellent inventory management strategies to optimise stock levels and save holding costs.  

To minimise stockouts or excess inventory, business owners must ensure visibility and traceability across the supply chain. 

Spend money on digital infrastructure.

Use technology to make commerce and communication easier. Create an online presence with a professional website and e-commerce platforms to reach clients in various African nations.

Small and medium-sized enterprises (SMEs) should build an online presence through e-commerce platforms or their own websites.

This allows them to promote their goods or services, attract a larger consumer base, and simplify transactions across African marketplaces.

Integrating secure payment channels and streamlining shipping operations will be critical.

Investigate digital payment systems and online marketplaces that specialize on intra-African trade. SMEs should invest in dependable, high-speed internet access. 

Recognise and handle financial risks

Examine the financial hazards of cross-border trading, such as currency volatility, payment delays, and nonpayment.

To begin, SMEs must identify and examine the possible financial risks connected with intra-Africa commerce.

Currency exchange rate swings, payment delays or defaults, credit risks, liquidity concerns, and regulatory compliance issues are examples of such risks.

Consider the possibility and possible impact of each risk on your company. SME risk management rules and procedures related to intra-Africa trade operations must be developed further.

Outline techniques for minimising and managing financial risks, such as clear standards for credit assessments, payment terms, currency management, and compliance with applicable trade legislation. 

Ensure that all requirements are followed

Learn about the local legal and regulatory requirements in each target nation. Product certifications, labelling regulations, import/export documentation, and tax duties are all part of this.

Seek expert help, such as legal counsel or trade advisors, to ensure that you follow all applicable rules and regulations.

SMEs must extensively investigate and become acquainted with the trade legislation and requirements of the countries with which they intend to conduct business. 

Import and export rules, customs processes, licence requirements, product standards, labelling requirements, and any other applicable restrictions are all included.

Take note of both national restrictions and regional trade agreements or blocs (for example, the African Continental Free Trade Agreement - AfCFTA). 

Business owners must engage with legal professionals, trade consultants, or industry groups that are knowledgeable with intra-Africa commerce.  

Seek direct counsel from customs authorities regarding compliance requirements, procedural changes, or particular difficulties pertaining to your trade activity. Clear communication and collaboration can help to speed up customs clearance and eliminate compliance concerns. 

Andrews Ayiku
Lecturer/Business Coach
University of Professional Studies Accra
ayiku.andrews@upsamail.edu.gh