For a long time, intra-regional trade in Africa has lagged behind of other regions yet there is a huge potential that lies untapped. The African Union, a regional governing body with 55 member states, began negotiations in 2011 to foster trade within the continent and this resulted to the formation of African Free Trade Area. The treaty was signed on 21st March 2018 and was ratified by 26 member states and more are expected to come on board as negotiations go on. If implemented successfully, the contribution to the economic and social life of ordinary Africans across various countries will be unprecedented.
But first, what’s African Continental Free Trade Area?
The African Continental Free Trade Area (ACFTA) is a continent-wide free-trade agreement brokered by the African Union (AU) and initially signed on by 44 of its 55 member states in Kigali, Rwanda on March 21, 2018. The objective is to create a single continental market for goods and services, with free movement of business persons and investments, and thus paving the way for accelerating the establishment of the Continental Customs Union and the African customs union. The agreement initially requires members to remove tariffs from 90% of goods, allowing free access to commodities, goods, and services across the continent. The United Nations Economic Commission for Africa estimates that the agreement will boost intra-African trade by 52% by 2022.
What’s in for the hospitality industry?
While agriculture and manufacturing industries stand to benefit the most, the hospitality sector will also get a pie of the impending boom. The sector is anchored by tourism owing to its role as an economic opportunity and development catalyst. In 2017, tourism export revenues in Africa more than tripled, increasing from $14 billion to approximately $47 billion. The treaty will greatly boost intraregional tourism and the growth has been on the rise but is yet to reach its full potential and supports more than 21 million jobs. Currently, four out of 10 international tourists in Africa come from the continent itself, according to the UNCTAD Economic Development in Africa Report 2017: Tourism for Transformative and Inclusive Growth.
The tariffs imposed on international tourists have for some time now inhibited the growth of the tourism industry and in extension the hospitality sector. In Kenya for example, to enter the parks, international tourists pay to double the rate paid by the citizens. The hotels and holiday homes on the other hand also add an extra charge for the foreign guests as well. However, with the operationalization of the free trade area treaty, this will come to an end and open the gate to an influx of international tourists. Latest statistics released by Kenya’s ministry of tourism show international arrivals increased by 9.8 percent to 1.4 million from the previous year’s 1.3 million posting a Ksh120 billion ($1.2 billion) in revenues.
Nevertheless, it will not be an easy walk in the park. The treaty will also see aggressive marketing by various member states as each tries to take a bite out of the tourism boom pie. Also, a threat for local players will be foreign investment from other African countries into Kenya’s market which is becoming increasingly lucrative. To this end, Kenya and the players in the hospitality industry need to move beyond destination marketing and invest abundantly in guest experience. This guest experience reform should begin at the immigration port of entries all the way to the game parks and resorts. This will ensure that the international tourists coming to Kenya will leave with permanent footprints of a memorable experience and would want to return or recommend the visit to their fellow country people. These reforms combined with the existing advantages like having a considerable marketing budget and a heritage of being a great tourist spot having been voted as the best world top safari destination multiple times gives Kenya a head start in the scramble for revenue in intraregional tourism. Africa is on the rise!
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