African Continental Free Trade Area (AfCFTA), the ambitious trade pact to create a single market for free movement of goods and people and bolster the economic integration of Africa, officially came into force on January 1, 2021. Though it has completed one year of existence, the much celebrated initiative is yet to fully take off.
Pandemic that triggered lockdowns and closure of borders was, of course, a major factor that slowed down the process. But the full realization of the potential of AfCFTA, experts say, depends on significant policy reforms and trade facilitation measures by the signatory nations.
There are several challenges that Africa should address for the smooth functioning of ACFTA. Ability to travel seamlessly for goods and people across Africa is the essence of the pact. The rules of origin, a criterion where participating countries must source their products locally, have been the main bone of contention that has delayed the take-off of the trade deal. The AFCTA secretariat recently claimed that the negotiations on the rules of origin are mostly completed. But many feel more thorny issues have to be sorted out.
Bridging the infrastructural gaps is basic for the member countries to function as a single economic entity. Poor transportation in Africa continues to impede market access and analysts feel that under the AFCTA, there are apprehensions that the countries with better infrastructure and manufacturing base could corner key benefits. Synchronized investment and competition policies will be crucial to limit market dominance by a few actors.
Border closures and tough business regulations have been hindering Africans from traveling and working in a number of countries on the continent. The xenophobic attacks in South Africa and Nigeria reflect the insecurity of local residents. The local residents are feeling threatened by the presence and more importantly success stories of migrants. Indeed, ACFTA needs a change of mindset and a broader vision while crafting domestic policies and recognizing skill sets available across the border.
ACFTA creates a huge market of 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at US$3.4 trillion. The best way of promoting this pact and intra African trade is to promote African products in regional markets. Africans have to choose local brands instead of the global ones. This will create jobs and lift millions out of poverty.
A recent report by the United Nations Conference on Trade and Development (UNCTAD) , brought out as recently as December this year, has outlined some recommendations on how the continent can optimally benefit from AFCTA. It pointed out that for the common market to be fully operational, large, medium, and small enterprises need to have “good access” to each other’s markets and skill sets should move across the border, responding to the market demands.
It also needs to prioritize digitalization, financial inclusion, infrastructure revamp and regulate movement of goods by creating harmony in regulatory framework. Supporting regional value chains while leveraging the digital economy, the report says, holds the key to development.
Going ahead, AFCFTA secretariat has to strengthen its dialogues with African leaders and businesses to find solutions for the existing challenges facing intra-African trade. A consensus built on collective efforts only can lend ACFTA the required momentum. As the African proverb goes, to go far, go together.
