A survey of more than 400 CEOs from 44 countries in Africa and two outside has reflected the importance of small and medium-sized enterprises (SMEs) in Africa.

The continent's bias towards the export of primary commodities, however, reduces the relative developmental value that would accrue from trade in higher value-added manufactured goods, trade finance institution the African Export-Import Bank (Afreximbank) African relations and trade policy consultant Patrick Utomi said on December 14.

The Africa CEO Trade Survey, conducted by private sector trade organisation the Pan-Africa Private Sector Trade and Investment Committee (Paftrac), gauged the sentiment of business leaders towards the African Continental Free Trade Area (AfCFTA) and the perceived opportunities, benefits and challenges presented by it.

During the unveiling of the survey results, Paftrac chairperson Professor Pat Utomi said Africa's marginalisation in global trade was, in no small part, owing to its reliance on primary commodities and a bias towards extractive sectors, which consequently also impacted on intra-African trade.

"Trade remains an important driver of economic growth and the means through which African nations can insulate themselves from economic shocks. However, Africa has not captured enough trade and growth enhancing benefits, accounting for 17% of the global population, while its portion of global trade has stagnated below 3%," he noted.

Initially, the export of primary commodities helped African countries achieve some of the highest growth rates in the world, but increased their exposure to global volatility and adverse trade shocks.

"Excessive reliance on primary commodities and low levels of intra-African trade, despite integration efforts and established regional economic communities, means that African economic fortunes remain contingent on commodity price movements and external shocks.

"The enhancement of intra-African trade is essential to mitigate global volatility, and enhance diversification and competitiveness of economies. Africa has charged ahead with economic integration. This is an important step to rationalise African regional trade, deepen economic integration and create economies of scale and regional value chains to accelerate the process of industrialisation of African economies," said Pat Utomi.

However, preliminary estimates suggest AfCFTA could significantly expand industrial production and intra-African trade, with intra-African trade expected to more than double in the first decade of implementation, he highlighted.

"A study by Afreximbank showed that, as intra-African trade comprises higher skills and technological components compared with trade with other regions, the AfCFTA can improve the diversification of sources of growth and trade of African Union member states," he pointed out.

Further, an integrated African market is also likely to result in increased flows of foreign direct investment (FDI) to the benefit of the participating economies, and these countries could shift FDI from natural resources to industry and manufacturing as investors seek out the advantages of increased market size and enhanced economies of scale, said Pat Utomi.

Enhanced integration of African economies into the global economy will also strengthen countries' multilateral and bilateral trade positions.

"The promotion of economic integration under the AfCFTA has the potential to raise efficiency gains through improved resource allocation to expand sectors to address expanded markets and consumer choices, and improved access to international capital markets and investment flows. This also has the potential to accelerate technology transfers and increase inflows of FDI into Africa," he said.

However, the developmental impact of the AfCFTA, especially in terms of economic development, depends on the strength and transformation of the African private sector.

Meanwhile, SMEs account for between 40% and 50% of most African countries' gross domestic product, and an estimated 80% of jobs in sub-Saharan Africa are in SMEs, said development finance institution the International Islamic Trade Finance Corporation (ITFC) relationship management trade finance senior manager Hamady Soma Ba.

"The private sector and SMEs, therefore, are significant and important in alleviating poverty and supporting development in countries. SMEs play a critical role and the private sector needs to support and receive benefits from the AfCFTA to have the developmental impact we want to see in Africa," he noted.

Further, more than 50% of the CEOs who responded to the survey represent SMEs, and the survey showed high levels of optimism, with 71% of respondents indicating that the AfCFTA will encourage them to invest to grow their business regionally. More than half of respondents, 57%, also believe the AfCFTA will open up new markets to export regionally and 62% believe it will provide the necessary frameworks to export more regionally, said Patrick Utomi.

However, key challenges remain that will have a negative impact on Africa's economic recovery prospects, and 64% of CEOs identified a lack of access to finance as the biggest challenge. Further, 61% of CEOs identified the ongoing impact of the Covid-19 pandemic on economic opportunities as a challenge and 48% identified a slowdown or lack of public sector investment and expenditure as a key challenge.

"The survey results reflected the importance of SMEs in Africa, with an estimated 80% of employment in sub-Saharan Africa provided by SMEs. Addressing the concerns of SMEs, therefore, is important to address the success of the AfCFTA," he said.

The positive sentiment expressed by respondents demonstrated the potential of AfCFTA and the eagerness of the private sector to take advantage of the market access opportunities it offers, said Pat Utomi.

"However, several key constraints need to be addressed to ensure intra-African trade opportunities can be exploited to the benefit of African SMEs, and implementation must support African SMEs to take full advantage of the opportunities presented by AfCFTA," he said.