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. （PHOTO / AFP）
The first goods will begin to flow under an Africa-wide free-trade pact on Friday, the culmination of more than five years of negotiations on cutting cross-border tariffs.
The accord comes to fruition at a time when trade tensions are rising across much of the rest of the world. The 55-nation African Union will mark the occasion in a ceremony that comes just hours after the UK leaves the European Union’s single market and a new post-Brexit trade agreement enters into force.
Africa could be the world’s biggest free-trade zone by area when its treaty becomes fully operationally by 2030. The African Continental Free Trade Area (AfCFTA) aims to bring together 1.3 billion people in a US$3.4 trillion economic bloc that will be the largest free trade area since the establishment of the World Trade Organization.
The African Continental Free Trade Area (AfCFTA) aims to bring together 1.3 billion people in a US$3.4 trillion economic bloc that will be the largest free trade area since the establishment of the World Trade Organization
The accord “will fundamentally change the economic fortunes of our continent,” South African Presdent Cyril Ramaphosa, who holds the AU’s rotating chairmanship, said in a speech on Thursday. “It is the start of a new era of trade between African countries, when the continent will produce the goods and services it needs, when its economies will grow, industrialize and diversify, when it will realize rhe great potential of its abundant natural resources.”
Trade under the AfCFTA was meant to be launched on July 1 but was pushed back after COVID-19 made in-person negotiations impossible.
However, the pandemic also gave the process added impetus, said Silver Ojakol, chief of staff at the AfCFTA’s secretariat.
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“We saw the impact on our economies of the disruption of imports due to the pandemic,” he said. “So there’s actually been an increase in political will to boost intra-African integration.”
Intra-African trade fell to 14.5 percent of the total in 2019, from 15 percent the year before. The free-trade pact could bolster the proportion to 22 percent, and commerce within the continent could rise to more than US$231 billion even if all other conditions remained unchanged, the African Export-Import Bank said in report published on Dec 15. Internal shipments accounted for 52 percent of total trade in Asia and 72 percent in Europe, according to Afreximbank data.
The accord seeks to lower or eliminate cross-border tariffs on most goods, facilitate the movement of capital and people, promote investment and pave the way for a continent-wide customs union.
All but one of the 55 nations recognized by the African Union have signed to join the area and more than half have ratified the accord. Eritrea, which has a largely closed economy, is the sole holdout.
41 of the zone’s 54 member states have submitted tariff reduction schedules
The formation of the trading bloc could cushion the region against continuing coronavirus-related uncertainties and escalating trade tensions, as well as lessen its exposure to adverse terms of trade and price cycles for commodities, Afreximbank said last month.
Historic challenges including Africa’s poor road and rail links, political unrest, excessive border bureaucracy and petty corruption will not disappear overnight.
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And an annex to the deal outlining the rules of origin - an essential step for determining which products can be subject to tariffs and duties - has not been completed yet.
Meanwhile, 41 of the zone’s 54 member states have submitted tariff reduction schedules.
Members must phase out 90 percent of tariff lines - over five years for more advanced economies or 10 years for less developed nations. Another 7 percent considered sensitive will get more time, while 3 percent will be allowed to be placed on an exclusion list.
On the same day as trading under the AfCFTA began, the China-Mauritius Free Trade Agreement, the first free trade agreement that China has signed with an African country, also entered into force
Finalising those schedules and communicating them to businesses must be done quickly, said Ziad Hamoui of Borderless Alliance, a group that campaigns for easier cross-border trade.
Still, proponents of the zone are confident that initial steps towards its implementation will already allow member states to double intra-African trade by 2025.
"Economic integration is not an event. It’s a process,” said the AfCFTA secretariat’s Ojakol. “We must start somewhere.”
CHINA-AFRICA TRADE POTENTIAL
On the same day as trading under the AfCFTA began, the China-Mauritius Free Trade Agreement, the first free trade agreement that China has signed with an African country, also entered into force.
Meanwhile, African leaders and businesses are eying greater potential of trade with China.
"The AfCFTA implementation will further tap business opportunities that China is enjoying with Africa," said Jacob Makambwe, Secretary General of the Southern Africa Cross Border Traders' Association in Zambia.
Dina Mufti, spokesman for the Ethiopian Foreign Ministry, said that Ethiopia is keen on attracting more Chinese investments despite the fact that Chinese firms are already the largest investors in Ethiopia.
"Africa needs to learn from other global trading blocs, which grew their economies through partnerships. Those partnerships bring technology, fiscal capital, people, and knowledge," Yoofi Grant, chief executive of the Ghana Investment Promotion Center, told Xinhua.
"Although partnerships need to be broad and global in nature, a partnership with China, in particular, is critical, looking at the role of Chinese investments in bridging the infrastructure gap on the continent," said Grant, adding that "we see a lot of roads, railways, and bridge projects in Africa financed by the Chinese."
