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Monday, 14 October 2019

Africa’s biggest deal

Hopes are high that the African Continental Free Trade Area (AfCFTA) agreement will trigger a new era of development on the continent, reports Doaa El-Bey

Doaa El-Bey , Sunday 14 Jul 2019
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The African Continental Free Trade Area (AfCFTA) was the highlight of the African Union summit in Niamey, the capital of Niger, earlier this week.

The landmark 55-nation AfCFTA “will reinforce our negotiating position on the international stage. It will represent an important step,” Egypt’s President Abdel-Fattah Al-Sisi said at the summit’s opening ceremony on Sunday. Egypt is the African Union (AU) chairman throughout 2019. AU Commission chairman Moussa Faki described the free trade deal as a “historic” moment.

The start of the free trade zone was widely hailed by the media as well as political commentators.

Mohamed Hegazi, former deputy to Egypt’s foreign minister, described it as the first step in the road towards the development of the continent.

“But it is just one step on the long road of development that is outlined in the 2063 Agenda for Africa,” Hegazi pointed out.

AfCFTA, which is meant to strengthen inter-African trade and thereby improve the continent’s economic standing on the world market, is expected to unite 1.3 billion people and create a $3.4 trillion economic bloc.

One of the targets policy-makers hope to achieve from the agreement is creating more jobs in more diverse industries, from services to manufacturing. Also, a functioning trade zone in the continent could make Africa more attractive for European investors.

However, the implementation of the deal is likely to face several obstacles. They include border restrictions, poor roads and railway lines within the continent, corruption and poverty, especially in war-torn areas.

The trade agreement is one positive step that should be followed by several steps in order to see its outcome on the ground, said a diplomat who preferred to remain anonymous.

“Unless matters like border restrictions, scheduled tariff concessions, conflicts and security issues are resolved, the free trade agreement will not be able to meet its objectives,” he said.

A balance between the national interest of every country and intra-African trade is vital for the implementation of the deal, he explained.

However, the diplomat added, the deal was given a major boost as Nigeria, Africa’s biggest economy, ratified it this week after a long delay.

As the AfCFTA comes into effect, signatories agreed to drop 90 per cent of their tariffs for imports from other African states. This is expected to boost intra-African trade by more than 50 per cent. Dropping the remaining tariffs is expected after a decade in order to protect key industries. By that time, intra-African trade is expected to double.

At present, only 17 per cent of the exports of African countries go to other African countries in comparison to intra-regional trade levels of 59 per cent with Asia and 69 per cent with Europe.

The free trade zone should be operational starting July 2020.

The AfCFTA is the world’s largest trade bloc since the creation of the World Trade Organisation in 1994.

Fifty-four out of 55 AU member states agreed to the deal in March 2018, with only Eritrea holding out. Only 19 countries ratified the deal then. In early April this year, Gambia ratified the agreement. By the end of the month, Sierra Leone and the Saharawi Republic — the 21st and 22nd countries required to ratify the agreement to allow it to come into force — endorsed it. The agreement came into force on 30 May.

Nigeria, one of the strongest economies in the continent, and Benin were the last two states to sign the free trade agreement before the opening of the Niamey summit this week.

The free trade agreement comes in line with the AU Agenda 2063 that is meant to bring Africa together in a multitude of ways.

AGENDA 2063: “The Africa We Want”, launched in 2013, is Africa’s plan for development and economic growth in 50 years. It has 14 initiatives in the areas of infrastructure, education, health, science, technology, culture and peacekeeping.

The free trade agreement, Hegazi said, will further enhance intra-African relations on bilateral as well as multilateral levels, a factor that will facilitate the implementation of the initiatives of Agenda 2063.

In the meantime, Agenda 2063 will in its turn contribute to the full implementation of the free trade zone. That is, each will work in the interest of the other and both will be in the interest of the continent, Hegazi explained.

And while the continent will face obstacles to implement the free trade deal as a result of internal factors — including corruption and conflicts and external factors, namely the resistance of states like India and China that have been involved in trade with Africa for decades — the agreement of more than half the African states to establish a free trade zone indicates that they are willing to overcome these obstacles, the diplomat said.

“Dreams like railway networks that would link the national rail services of the countries concerned, a road from Cairo to Cape Town or free movement of citizens in the continent are now more achievable than before,” he said.

 *A version of this article appears in print in the 11 July, 2019 edition of Al-Ahram Weekly under the headline: Africa’s biggest deal 
 
 
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