Africa’s free trade area takes off slowly | Africa | DW
The African Continental Free Trade Area (AfCFTA) celebrates its first anniversary on January 1, 2022.
With the exception of Eritrea, all African countries are signatories to the agreement.
Over time, signatory countries commit to eliminate import tariffs on 97% of goods traded between African states.
Many hope this will increase trade between African countries, which in turn will boost the manufacturing sector and create jobs, bringing more prosperity and social equality to those on the continent.
African nations currently trade more internationally than among themselves. Intra-African trade accounts for 17% of African exports, which is low compared to 59% for Asia and 68% for Europe, according to the World Economic Forum.
But the AfCFTA wants to do more than just boost trade in goods – its scope includes services, investment, intellectual property rights and competition policy, although these aspects are still under negotiation. .
The continental body aims to make those dreams come true by 2064.
But since Africa officially started trading under the AfCFTA in January 2021, the practical impacts of the deal have been minimal, said Matthias Boddenberg, head of the German Chamber of Commerce and Industry for the Southern Africa.
Disruptions to global supply chains due to coronavirus restrictions in 2020 have limited the potential of the AfCFTA, Boddenberg said.
âManufacturers in neighboring Botswana could not supply wire harnesses for the automotive industry in South Africa because the borders were closed,â he said, giving an example.
Tanzanian economist Gabriel Mwang’omda, however, believes that the free trade area is a learning curve for the continent.
He argued that the vastness of Africa makes it impossible for the AfCFTA to be successful within a year.
âWe were expected to start slowly,â Mwang’omda told DW.
A difficult start
In the pre-pandemic era, Africa’s trade in goods and services accounted for around 3% of global exports and imports.
In 2019, African countries recorded exports of $ 462 billion (407 billion euros) and imports of $ 569 billion in merchandise trade. This represents a decrease of 3% on average compared to 2018.
The World Trade Organization (WTO) and the International Monetary Fund, in their October 2020 world trade forecasts, lowered Africa’s economic growth by -8.0% and 3.0% respectively.
The World Bank has also confirmed it with -3.3% in 2020.
This crisis pushed the region into its first recession in 25 years, pushing up to 40 million people into extreme poverty across the continent and erasing at least five years of progress in the fight against poverty, according to the WTO .
The AfCFTA began operations against the background of these economic forecasts.
Other issues have also slowed down the exploitation of business opportunities under the deal.
African businesses, especially those in smaller countries, were not sufficiently informed about the benefits of the deal, Boddenberg said.
âIf the African Union were to conduct direct marketing campaigns to businesses, it could boost intra-African trade,â he told DW.
For Mwang’omda, the trade agreement does not have the full support needed despite the fact that almost all countries are signatories to it.
“The political will is not 100% and not all countries are committed to implementing this free trade area agreement,” he said.
There are high hopes that the 54 signatory countries will grow together to form a single market.
Although the COVID pandemic delayed the start of the free trade zone, economists said the pandemic also had some benefits: Lockdown to curb the spread of the virus forced many companies to go digital and start. to use online solutions to reach employees, customers and customers.
The extent to which companies have benefited from economic growth and new jobs beyond national borders will only become apparent later.
Promoting free trade in Africa requires more than the AfCFTA deal, the experts said.
The continent needs to build vital infrastructure such as roads, bridges, railways and airways to facilitate intra-African trade.
“It is always more expensive to travel from Tanzania to DR Congo, than from Tanzania to China, Dubai or India,” said Tanzanian economist Gabriel Mwang’omda. âA Kenyan trader will prefer to buy sugar from Brazil rather than neighboring Uganda.
“This tells you that poor infrastructure is hampering the successful implementation of the free trade area,” Mwang’omda added.
There are other obstacles, such as long waiting times at border posts, corruption and excessive bureaucracy.
But the ongoing negotiations to shape the deal are taking place behind closed doors, and it is impossible for non-state actors to see how they evolve.
Another big challenge is that little data is available on trade in Africa, according to Alastair Tempest, managing director of the South African industry association Ecommerce Forum Africa.
Regional economic blocks
There are currently eight regional economic blocks recognized by the African Union, including the East African Economic Community (EAC), the Economic Community of West African States (ECOWAS) and the Common Market. of Eastern and Southern Africa (COMESA).
Alastair Tempest said he believes these blocs will use the Africa-wide trade deal to their own advantage.
“What is certain is that some of the regional economic communities will promote the development of trade within their own borders with new regional value chains,” he said.
But Tanzanian economist Mwang’omda is not so optimistic. He believes that the many problems between the AfCFTA and the current regional economic blocs constitute a major obstacle to free trade across the continent.
Edited by: Kate Hairsine and Keith Walker