This week, Africa defied the odds with the historic signing of the African Continental Free Trade Agreement (AfCFTA), touted as a major milestone that will unlock the continent’s current untapped potential in trade and investment as well as goods and services.
However, the reluctance by 10 countries, including the continent’s economic heavy weights — South Africa and Nigeria — to sign the agreement, has taken the shine off this major victory by the African Union. Moreover, the agreement will still need to be ratified by national parliaments to become a reality.
That 10 countries did not sign the agreement reflects the underlying inherent threat to the effectiveness of the agreement that will have to be addressed – national interests which will play out either in form of tariff or non-tariff barriers that may hinder effective implementation of CFTA.
As Dr Donald Kaberuka observed, while political will is crucial, the bigger challenge is addressing the fears and concerns raised by countries that are still reluctant to sign the agreement because they see the free trade area as a zero-sum game in which one country’s gain is equivalent to another’s loss.
For example, there are fears by economies with limited local production capacities about the possibility of becoming dumping grounds for cheap and substandard products from elsewhere on the continent.
Some fear that opening up borders will lead to insecurity and job losses. In some countries, the private sector is still very weak that it cannot compete in regional markets.
Whether the fears are legitimate, there is a need for further consultation with the different stakeholders to ensure that these fears are addressed. But, perhaps more importantly, there is a need to challenge the myths that could undermine the effective implementation of the agreement.
Priority has to be given to engaging the key stakeholders of the agreement — the active involvement of the general public, including raising awareness, in particular among the private sector about the opportunities afforded by the free trade area.
Businesses need to be sensitised by governments on the potential of CFTA to allow them to establish trade linkages or push their governments to negotiate for these opportunities.
According to the Harvard Business Review, Africa has the potential to become “the world’s next great manufacturing centre.” China is expected to lose 85-100 million low-cost, labour-intensive manufacturing jobs by 2030, and Africa stands to capture many of them.
This explains why it is important to empower every African to tap into these opportunities created by free trade partnerships between government and businesses.
Africa must fast-track elimination of non-tariff barriers, including excessive documentation at borders, and step up investments in infrastructure not only to reduce the cost of doing business but also to enable the African private sector to be competitive in the global economy.
At the end of the day, it is the population that will gain in terms of more jobs, more investments and lower cost of doing business as well as lower general price levels.
With the signing of the CFTA, African leaders now have another golden opportunity to make Africa rising a reality by ensuring its effective implementation.