Developing Confidence measures: Rwandan entrepreneur Faustin Mbundu reviews the confidence measures needed alongside the African Continental Free Trade Area (AfCFTA), to encourage trade between African countries.

Author:Deau, Olivier
Position::THE AFROCHAMPIONS INITIATIVE: Accelerating the transformation of Africa - Interview
 
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Faustin Mbundu, Chairman of MFK

As a private investor, how do you see the prospects for the AfCFTA?

The free trade area is an excellent initiative, as is the reduction in customs duties in economic communities such as ECOWAS and COMESA. These initiatives enable us to look forward to greater mobility between African countries. The politicians are shouldering their responsibilities by opening the borders at a time when air connectivity, falling mobile phone roaming charges and the internet mean the private sector can expect lower costs and risks. It will probably take some time to establish the AfCFTA, but it is encouraging that ratification laws have been put down in a number of countries.

Is the private sector adequately involved in governmental decisions?

More and more, that is incontestable. At the Kigali summit for the signature of the AfCFTA agreement, an African business forum was organised. Participants from the private sector had the opportunity to speak, to discuss and to put forward ideas.

Some in the private sector don't seem to be in favour of free trade on the continent, to judge by the position of business organisations in Nigeria or the 10 other countries which have not signed the continent's free trade treaty. What is needed to convince them?

Certainly, some people are not convinced. They are afraid that competition will be disadvantageous for them. This is particularly true in certain sectors such as agriculture, or for SMEs which don't have access to substantial financing. We have to make the case that the benefits outweigh the drawbacks but, equally, we must ensure that opening the borders doesn't increase SME failures and thereby smother local entrepreneurship. To do that, we must develop guarantees to ensure funding for promising SMEs.

What is the ideal funding mechanism needed to help these SMEs become regional participants?

The keyword here is confidence. Private finance must be able to protect itself against a range of risks. I think mechanisms such as the MIGA [Multilateral Investment Guarantee Agency, subsidiary of the World Bank] are particularly useful and ought to be duplicated by participants such as the AfDB [African Development Bank]. Private sector investors should be left to get on with their intermediation and financing role, but the continent's financial institutions must help safeguard them against risks such as transfer restrictions, political instability or expropriations, by developing these investment...

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