THE African Continental Free Trade Area (AfCFTA) is ushering in a new era of economic growth and cooperation.
With its unified market of 1,3 billion people and a combined gross domestic product (GDP) of US$3,4 trillion, the AfCFTA presents unparalleled opportunities.
However, fully realising these benefits will depend on establishing fair markets, robust competition policies and adherence to regulatory standards, according to the Competition and Tariff Commission (CTC).
“Creating fair markets is a necessary but not sufficient condition for the success of industries under free trade establishments such as the AfCFTA,” CTC said in its latest report.
“Fair markets ensure equal competition, reduce or prevent monopolies, promote consumer welfare, and attract investment, among other benefits.”
To reap the rewards of free trade, the CTC argues, competition authorities must foster an environment where businesses can thrive.
A level playing field is crucial, allowing all firms — regardless of size or origin — to compete on equal terms.
“Fair markets, therefore, become critical to the success of businesses in a free trade environment as they ensure that all businesses, regardless of size or origin, compete on an equal footing,” it said.
“This level playing field is crucial for fostering a dynamic and innovative market where firms are incentivised to innovate and improve their products and services offerings.”
When markets are fair, CTC said, businesses are driven by merit rather than by anti-competitive practices, leading to a more efficient allocation of resources and better outcomes for consumers.
“The role of competition authorities is, therefore, to ensure that there is a level playing ground for all businesses, which has great influence on business success. In a free trade environment, fair markets help prevent abuse of monopoly power by dominant firms, which can distort competition and harm consumer welfare,” it said.
“Monopolies can lead to higher prices and reduced choices for consumers, while cartels fix prices and limit market entry.
“Competition authorities have the responsibility to dismantle these anti-competitive structures by enforcing competition regulations while ensuring that new entrants have the opportunity to compete and innovate thus encouraging business success and investment in a free trade area.
“This openness is essential for maintaining a vibrant and competitive market landscape where all industries benefit.”
The report noted that fair markets promote consumer welfare by ensuring that businesses compete to offer the best products and services at the lowest prices.
When firms compete fairly, they are more likely to invest in innovation and quality improvements to attract and retain the patronage of customers.
“Under the free trade area setup such as the AfCFTA, competition authorities ought to ensure that competition laws are harmonised across member states to create a consistent and predictable regulatory environment for businesses, enhancing consumer confidence and encouraging cross-border trade,” it said.
CTC said there was a need to ensure cross border collaboration, harmonisation of laws, enhancing public awareness among other actions.
The organisation noted that compliance with the regulatory standards set by competition authorities was crucial for businesses operating in this free trade area.
Understanding and adhering to competition policies and regulations helps businesses avoid legal pitfalls and maintain fair competition.
This includes avoiding engaging in anti-competitive practices, such as price-fixing, market allocation, and abuse of market power. By ensuring compliance, businesses contribute to a level playing field where competition is based on merit rather than unfair practices, it noted.
The organisation said strategic partnerships can be a powerful tool for businesses if they are to thrive in a free trading environment. Collaborating with other companies, whether through joint ventures, alliances, or supply chain partnerships, can enhance capabilities and market access.
Partnerships can facilitate the sharing of knowledge, resources, and technologies, leading to innovation and improved efficiency.
“For instance, a Zimbabwean business might partner with a foreign company to gain access to new technologies or distribution networks which can make it efficient,” the report reads.
“Firms need to take proactive actions for them to remain competitive in a free trade environment due to increased competition that comes with such establishments. These strategies can assist businesses to be competitive under free trade areas such as the AfCFTA.”
Businesses that seek to thrive should invest in research and development to create new products and services that meet evolving consumer needs.
CTC said businesses should adopt innovative survival strategies and leverage the opportunities presented by trading blocs if they are to thrive in the dynamic landscape and contribute to the economic growth and development of the African continent.