EDITORIAL: To take off, AfCFTA must not ignore gravity

Saturday July 6 2019

The African Heads of States and Governments

The African Heads of States and Governments pose during African Union (AU) Summit for the agreement to establish the African Continental Free Trade Area in Kigali, Rwanda, on March 21, 2018. AFP PHOTO  

The EastAfrican
By The EastAfrican
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Finally the moment of truth has come as the African Continental Free Trade Area rolls off the blocks in Niamey, the capital of Niger.

The momentous occasion comes shortly after a reticent Nigeria, one of the three initial holdouts, indicated it would sign up to the deal.

Even though hurdles can be anticipated, the launch of AfCFTA must be celebrated because of the promise it holds.

More than 60 years since the first African country gained Independence, trade flows on the continent are still pretty much tied to colonial structures.

Only 17 per cent of intra-African goods are directly traded. That compares with 59 per cent and 69 per cent for Asia and Europe respectively.

With a combined population of 1.2 billion and some $3 trillion in GDP, borderless trade across Africa can do more than anything else to accelerate the fight against poverty.

It is projected that by dropping 90 per cent of the tariffs currently imposed on goods and services originating from member countries, the AfCFTA will boost intra-African trade by more than half.

Growth will be exponential when the remaining tariffs are completely dropped after the 10-year interim period of adjustment.

Despite the obvious benefits, Africa’s leaders will need to be conscious of the pull of gravity. Most of the elements that must be in place before the deal can operate smoothly are missing. The physical infrastructure that should connect markets is rickety or non-existent.

Barriers to investment and protectionist policies stand in the way of private capital that could deliver quick wins for infrastructure development.

Financial policies and trade laws are in disharmony and manufacturing is at different stages of development and in the majority of cases, it is low-volume and not supported by modern technology.

The African Development Bank estimates that the continent will need nearly $130 billion of annual investment in infrastructure to bridge the current gap.

It is such variance that poses the most immediate risk to the success of AfCFTA since, on the surface, it appears to create natural winners and losers.

If the experience of the regional economic communities is anything to go by, the weaker economies are likely to clamour for deferrals.

And the fears are not simply confined to small states. Nigeria, Africa’s largest economy, took time to commit because of concerns over how its industry will fare in the face of competition from high-tech economies such as South Africa.

The African Union Commission, therefore, has a tough task ahead to keep countries focused on the benefits and practical solutions to some of the concerns raised by member states.

For instance, fast-tracking the integration of Customs and trade information systems on the continent could partially address fears that rules of origin will be breached to the detriment of some member countries.

Adoption of common quality standards and helping countries with a deficit to build capacity in such areas, would bring the laggards at par with their more established counterparts.

Opening up the skies would provide immediate connectivity, as the continent works on building missing rail and road links and interconnecting power pools.

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