Windhoek - Africa is on the verge of accomplishing the feat of having the largest free trade area in the world after the Gambia last week ratified the African Continental Free Trade Area (AfCFTA).
The Gambia became the 22nd nation to ratify the agreement. The African Union (AU) has now met the quorum needed to put in motion the implementation of the free trade area protocol that seeks to boost intra-Africa trade
The AU is now expected to announce, within 30 days, that the FTA has come into force.
This would result in the creation of a single continental market for goods and services, with free movement of businesspersons and investments, and thus pave the way for accelerating the establishment of the continental customs union and the African customs union.
If successfully implemented, the free movement of goods and services, are expected to improve the way Africans travel as well as the traditional way of doing business on the continent.
But, it might be a premature celebration considering that intra-Africa trade is at its lowest. There are too many bottlenecks that are preventing Africans from trading with each other freely.
This is a situation, which has led to the underdevelopment of the continent. Perhaps the best way to put this into context is to refer to how Africa’s richest man, Aliko Dangote cannot sell his cement in Benin.
Dangote’s cement-producing factory in Nigeria is only 40 kilometres from Benin but his company is having difficulties exporting cement to Benin, which prefers to import expensive cement from China – some 10,000 km away.
“It is not about competition, it is about allowing us to go in. The continental free trade area is something, which will go a long way to help the continent but the leaders are not discussing its implementation,” Dangote told a panel discussion during the 2019 Ibrahim Governance Weekend a flagship annual event for Mo Ibrahim Foundation held in Abidjan, Côte d’Ivoire, on April 7.
The AfCFTA also aims to expand intra African trade through better harmonisation and coordination of trade liberalisation and facilitation regimes and instruments across regional economic activities (such as SADC and ECOWAS) and across Africa in general.
Dangote, however, said Africa is very good at designing programmes but the implementation of the designed programmes is key, which is really missing.
He said free trade areas within regional economic activities is not even happening at the moment. He was referring to the fact that it takes him about a week before his cement can be transported to Togo, which is just 210 km from Nigeria. He said this has nothing to do with bad roads but rather usually the customs that delay him all because of corruption.
Without the AfCFTA, the products being produced and being traded within African countries are more expensive than the products coming from outside the continent. With AfCFTA, the continent is being envisaged of creating its own trade industry, which would result in African good quality products being consumed on cheap.
Should AfCFTA be operational those (international) markets may exist or they may be closed off, says the AU. When one looks at the level of international trade and the level of intra-African trade, African countries trade among themselves more on industrial goods than commodities.
But Africa trades with the rest of the world with commodities. The pattern of commodities’ export is that traditionally prices are going down. So there is not much value to be generated from there. The issue is that Africans must industrialise by trading among themselves.
“When we trade among ourselves it would help us create a strong position on trade. This in turn would help us get a good deal on trade and better terms on investments. This is creating a better bargaining position by creating an integrated African market,” the AU told The Southern Times.
The AfCFTA could create an African market of over 1.2 billion people with a total gross domestic product of US$2.5, however, there is a catch.
Africa has different levels of development and 34 of the member states are least developed countries. Others are middle income countries.
When there is this disparity of rich countries and less well-off countries the commitment tends to be different as well.
“Part of the issue is that we are explaining is that if we allow the process to go on, we shall lay a foundation for all the countries to upscale on investments, economic diversification and to generate more jobs. This will help lay the foundation of AfCFTA as well as the foundation of new opportunities for the development of the African economies,” AU’s commissioner for trade and industry, Albert Muchanga, told this publication.
Economic Commission for Africa (ECA) executive secretary, Vera Songwe, is of the opinion that for the continent to implement the AfCFTA, it needs to improve its poor infrastructure.
“AfCFTA may also pose challenges for governments in promoting competition in local markets, as some local companies that are taking advantage of economies of scale may grow faster than others and capture dominant positions in markets,” said Songwe.
A continental free trade area could also prove vital to the way Africans travel at the moment. In some instances, a person has to fly to Europe first to go to another African country.