Why COMESA

REASONS TO INVEST

Reasons to Invest in COMESA 

Africa´s ambitions for a prosperous future were ratified in April 2019 when the threshold conditions required to activate the Africa Continental Free Trade Agreement (AfCFTA) were met. July 2020 marked the beginning of trading under the agreement.  The AfCFTA aims to create a single continental market for goods and services in member nations of the African Union. The AfCFTA owes much to Africa´s existing and already operational regional economic and trade organizations, including COMESA. 

 Africa’s 54 countries vary widely in size, population, natural resources and business climates.  African states are growing at different speeds and, like the rest of the world, are subject to disruptions stemming from regional and global economic or sector downturns and trade wars, as well as political conflict and climate change.  Notwithstanding the existence of unpredictable global scenarios, it is important to highlight the positive contribution being made by Africa´s regional economic and trade blocs to strengthening the continent’s value proposition for existing and prospective investors.  

The Bottom Line 

• The COMESA Free Trade Area is composed of 16 of its 21 Member States, and offers a market of 457 million people. 
• Africa is the second fastest growing region in the world after Asia and has been growing at a CAGR of 4.6 percent since 2000. 
• COMESA’s growth has been higher than Africa’s since 2013 and it is forecast to have real GDP growth exceeding 6 percent per year in 2019 and 2020. (AfDB) 
• Population and urbanization rates in Africa and COMESA are expected to grow faster than any other region worldwide, offering a rapidly growing consumer market. 

Foreign investors view COMESA as an attractive destination for their growth plans as demonstrated by the steady increase of the bloc’s inward FDI stock over the past nine years; CAGR 7.73% growth year on year during the period 2010 – 2018. In addition to that, COMESA reports stability of FDI inflows despite the unpredictable global FDI environment. According to UNCTAD´s World Investment Report, FDI into COMESA has remained stable over the four years from 2015 to 2018, with inflows ranging from US$19.3 billion to US$20.6 billion.

Global Access to a Large, Diversified, Integrating and Resilient Market 

• COMESA offers a fully operational and functional free trade area with duty free access to 16 of its 21 Member States.  Members of the COMESA FTA apply zero percent import duty on goods originating from the Member States in accordance with the COMESA Rules of Origin. 
• COMESA Member States are located on strategic world trade routes such as the Suez Canal, the Red Sea, the Mediterranean Sea, and the Indian Ocean, and are in close proximity to global markets including Europe, the Gulf, Asia and the rest of Africa.

Real and Sustainable Growth 

• With a total GDP of USD 754 billion in 2018, the COMESA economy is about the same size as Turkey and larger than that of Switzerland, Sweden, Austria, Thailand, Norway or Hong Kong.  
• According to the African Development Bank, Africa’s GDP growth, estimated at 3.4 percent for 2019, is projected to increase to 3.9 percent in 2020 and to 4.1 percent in 2021. 
• According to COMSTAT, COMESA GDP growth for 2019 is estimated at 5.3 percent and latest IMF estimates for 2020 are just over 8 percent, doubling current estimates for the continent’s estimated GDP growth rate. 
• Nine COMESA Member States grew above 5 percent in 2019, and they are expected to maintain this growth in 2020, with four of them predicted to grow by more than 6 percent. 

Perception vs. Reality 

• According to Mckinsey, the top companies in Africa “are, on average, both faster growing and more profitable than their global peers”. 
• The opportunity that Africa represents is highlighted by the numbers.  According to UNCTAD´s World Investment Report (WIR), FDI into Africa in 2018 increased by 10.9 percent to US$47 billion while the world experienced a downfall of 13 percent. This trend seems to continue in 2019. Early estimates predict a modest FDI inflow increase of 3 percent in Africa while the world looks set to decline by 1.3 percent.  
• African investors are an important source of FDI into Africa.  Average planned greenfield FDI into Africa by African investors in manufacturing alone was nearly 20 percent of total FDI over the 2015 -2018 period, peaking in 2016 at 31 percent of total manufacturing investment into the continent. 

Business Friendly Reforms 

• In the World Bank´s Doing Business (DB) Report 2018, Sub-Saharan Africa, was the region with highest total number of reforms (83) across all indicators.  
• Two years later, in the Doing Business Report 2020, nearly half of the 21 COMESA Member States have improved their scores, and over two-thirds have either improved the score or they have remained unchanged. Furthermore, COMESA Member State Mauritius has made it into the Top 20 best Doing Business locations, ranked at number 13.
• More than half of COMESA Member States scored above the Sub-Saharan Africa average.