It is expected that trade on the African continent will commence within the rules of the African Continental Free Trade Area (AfCFTA) on 1 July unless otherwise decided amid the Covid-19 coronavirus pandemic a year after its operational phase was launched by the heads of state and government of the African Union (AU) during the 12th Extra-Ordinary African Union Summit held in Niamey, Niger, on 7 July 2019.
The establishment of the AfCFTA marked a historic achievement for economic integration in Africa and signals the reaching of an important milestone in the continent’s long integration history. It is one of the flagship projects of the AU’s Agenda 2063, which represents a critical step forward on the journey of Africa towards the operationalisation of an integrated market and is meant to culminate in the formation of the African Economic Community set up in accordance with the Abuja Treaty and accelerate Africa’s economic growth and development.
The establishment of the AfCFTA is an event of great importance in the institutional evolution of the African continent, and it will shape the future of Africa in the coming years. It is expected that the AfCFTA will remove the obstacles that hinder the efficient utilisation of the continent’s abundant resources, secure more policy convergence and simplified trade regimes, allow more opportunities to depend on locally available raw materials, and maximise regional and continental value addition.
There are great hopes that the AfCFTA will lead Africa to the new horizons that were in the minds of the founding fathers of the Organisation of African Unity (OAU) in the early 1960s, who were committed to harnessing the natural and human resources of the continent for the advancement of the African peoples in all spheres of human endeavour. The AfCFTA will play a pivotal role in realising the AU’s Agenda 2063 for Africa, which is to promote an integrated, prosperous and peaceful Africa driven by its citizens and representing a dynamic force in the global arena.
At present, there are two contradictory factors at work in Africa. The first is the fact that the African continent has all the resources needed to attain economic growth and sustainable development, but the second is that the continent is still lagging behind its huge potential. Africa’s participation in global trade today stands at around three per cent, and in intra-African trade it stands at around 15 to 18 per cent.
However, the intra-regional trade of other regions of the world stands at 60, 40 and 30 per cent in Europe, North America, and the Association of Southeast Asian Nations (ASEAN) countries, respectively, which is much higher when compared with intra-African trade. This low intra-African trade means that is necessary to deepen the regional market integration that will enable the African countries to attain accelerated growth and sustainable development, since trade is widely accepted to be the engine of economic growth and sustainable development.
The importance of the AfCFTA comes from the fact that it will cover a market of 1.2 billion people with a combined GDP of $2.5 trillion across the 55 member states of the AU. It will be the largest free-trade area since the formation of the World Trade Organisation (WTO) in January 1995 in respect of the number of participating countries.
The African states should focus on two main goals to maximise the benefits of the AfCFTA: the first is to accurately determine the factors needed for its successful implementation; and the second is to understand clearly what the benefits of its implementation are.
BENEFITS: The factors required for the successful implementation of the AfCFTA include the elimination of all forms of trade barriers, the facilitation of trade through cooperation and coordination between the customs authorities in the various African states and the provision of technical assistance and capacity building for least-developed countries (LDCs).
They also include coordination between the African Union Commission (AUC), the Regional Economic Communities (RECs) and the national governments of the states parties to the AfCFTA in order to overcome any overlap between different economic communities, as well as the creation of an environment conducive to the private sector, which is a key player in driving investment into game-changing projects on the continent.
Cooperation between the African states is vital to the deployment of their human resources, and it will contribute to the promotion of closer solidarity and economic development. There is a need to maintain an accurate and updated repository of trade information at the continental level in order to enable policy-makers, business-support organisations such as industrial federations and trade unions, and the private sector to make evidence-based and informed policy and business decisions. Finally, it is important that there is a joint commitment to implementing the AfCFTA as a comprehensive, cooperative, sustainable and mutually beneficial agreement.
The successful implementation of the AfCFTA will produce many opportunities and benefits, including creating a single continental market for goods and services, with the free movement of business persons and investments and the expansion of intra-African trade through better harmonisation and coordination of trade liberalisation and facilitation across the RECs and Africa in general. It will enhance competitiveness at the industry and enterprise level through the exploitation of opportunities for production at scale, continental market access, the better allocation of resources and the reduction of the continent’s reliance on external resources.
In addition, it will stimulate investment and innovation, foster structural transformation, improve food security and enhance economic growth and export diversification. It will rationalise the overlapping trade regimes of the main regional economic communities and create a single market in which the eventual elimination of tariffs and non-tariffs barriers will provide a push for the development of industrial capacities, encourage the emergence of continental value chains, contribute to promoting intra-African trade and help to create jobs and ensure economic prosperity in Africa.
In quantitative terms, the Economic Commission for Africa (ECA) has estimated that the AfCFTA has the potential both to boost intra-African trade by 52.3 per cent by eliminating import duties and to double this trade if non-tariff barriers are also reduced.
The AfCETA is not only a trade agreement, but it is also an inclusive undertaking for Africans from all walks of life. It is a great institutional development for the continent, and the responsibility of all stakeholders now is to seize this golden opportunity to put Africa in its right position in the international trade arena.
There is no doubt that the AfCFTA will be a great leap forwards in the economic integration of the African continent, but the existence of exportable and competitive products will be the decisive factor in maximising its benefits.
As AU commissioner for trade and industry Albert Muchanga said in May, “Africa has enough policies and strategies on industrialisation and economic diversification, including export diversification. The task at hand is to move to the stage of developing competence and excellence in the actual operations of manufacturing and agro-processing across Africa.”
The writer is an expert on international trade.
*A version of this article appears in print in the 18 June, 2020 edition of Al-Ahram Weekly