Calls for Africa’s market access

September 26, 2015

A new business study focusing on how foreign companies can enter the lucrative sub saharan African market has concluded that joint partnerships and franchising primarily benefits to domestic companies.The study said certain government actions like what South Africa and Kenya are implementing could not be more encouraging steps such as the introduction, and the subsequent reduction of, the common external tariff like Tanzania is doing, a reduced ‘Foreign Investment Taxes’ with example being Ethiopia, and the progress on the comprehensive agreement on Investment all seem to bode well for foreign commercial relations.However, at the same time, the level of concern over national security-related issues and the expansive wording in the related legislation, as well as the markedly slow progress in the overall implementation of reforms is very unsettling for business.The document which I have a copy was based on a survey of some 2,000 member companies operating in sub saharan Africa.Drawing attention to the “negative taxation” concept, which has been introduced in several African countries in what experts call protectionism,to specify the prohibited and restricted industries for foreign investors.

The study said it was initially welcomed as a major step towards the opening-up of the African countries market which could pave the way for a level playing field for domestic and foreign businesses.If Africa is to shift towards a consumption based economy countries need to roll-out the ‘negative taxation’ and the gradual approach currently being adopted risks compromising this aim which increases the number of challenges to reforms. Foreign companies have reported for the past two years consecutive years that their earnings before interest and tax margins are more likely to be greater outside ‘protectionist’ countries than non-protectionists states.Misallocation of capital, unproductive state-sectors, lower external demand, less favourable demographics, a heavily-controlled regulator environment and the natural trajectory of moving up from a low base over the last five years were the reasons attributed to the reduction.The study authors have called for increased market access for the private sector, including foreign business, in staying true to the African government’s commitment for economic development.

While foreign business acknowledges that African countries are reforming in parts, it is the persistence of market access barriers that has left some foreign businesses wondering if country’s reform agenda is really intended for them as well.The study suggest African countries do away with hidden restrictions on, for instance, licensing for environmental projects and notes at best it leaves a mixed picture suggesting that part of region’s reform agenda including new restrictions and that several African countries are even closing off altogether in some areas of its economy. In fact, never before has the foreign business community seen such a contradictory government agenda of reform and closing up.Overall, African countries are continuing with their pledge to further open their economy to growth in a bid to boost growth.Having read this report, I hold the view that African countries should relax market access, among others, for an open, equitable and well-regulated market that stresses fair competition.Overall, Africa should make unswerving efforts to attract foreign investment and foreign technology, and improve the mechanism for the continent’s opening up.

Contador Harrison