Africa’s Pulse, the World Bank’s April 2023 economic update, forecast that the growth in Sub-Saharan African economies is slated to drop from 3.6% in 2022 to 3.1% in 2023. The forecast came as no surprise. With the escalation of political, geopolitical, and economic tensions across the globe, Africa had more than a fair share of the global woes. The pandemic, the Ukraine war, and security issues within the continent coupled with the global recession continue to drag down Africa’s economic growth.
Amidst these bleak prospects, the African Continental Free trade Area (AfCFTA) remains a beacon of hope for the continent. In fact, AfCFTA seems to be the most pragmatic antidote for many of the continent’s economic, social, and development ailments.
Established in 2018, AfCFTA’s ambitious game plan included a structural transformation of the continent creating a seamless African market of 1.3 bn people through the free movement of goods, services people and capital, deepening economic integration, and ensuring inclusive socio-economic development. Rather, it is perceived as a route for creating income, jobs, and economic and social empowerment. The slow pace of the implementation of AfCTFA has become a matter of grave concern.
The mandate of AfCTFA was to eliminate trade barriers and boost intra-Africa trade. The onset of the Pandemic hampered its progress. Even now, 2 years after Africa’s free trade was launched in January 2021 with great fanfare, it is still limping. Experts and multilateral organisations are justifiably concerned about the lag.
The growth in Africa’s global trade over the years has been modest. The share of intra – African trade also is insignificant, currently accounting for only 15 percent of the continent’s total trade which is far below the intraregional trade in other parts of the globe like Europe and Asia. According to the IMF, with timely implementation, AfCFTA can boost intra-African trade by 52.3 percent by 2025, raise Africa’s income by up to US$450 billion by 2035, and lift 30 million Africans out of extreme poverty.
IMF report argues that implementation of the AfCFTA, backed by other reforms, could infuse deeper trade integration. It has the power to stimulate trade, particularly of value-added merchandise within the continent as well as with the rest of the world, ultimately unlocking Africa’s economic potential.
There are compelling reasons for accelerating the implementation of the free trade agreement. The rapid growth in technologies, rising working-age population, and changing global environment are only a few among the many reasons. It holds the key to achieving the appropriate scale of economies in production, augmenting productivity, and facilitating cross-border value chains. The closer regional trade integration through AfCFTA is the perfect strategy to boost growth rates and living standards in African countries and insulate them from global shocks.
The primary challenges that restrain the progression of intra-African trade are a fragmented trade policy landscape and a weak trade environment. Multiple regional economic communities (RECs) and their substantial tariff and nontariff measures (NTMs) with limited integration within-bloc and between-blocs are major barriers. This is compounded by a weak trade environment that lacks transport networks and complicated border processes.
Therefore, IMF rightly advocates AfCTFA to expedite the lowering of tariffs and NTMs across the continent as planned, along with improvements to the trade environment through better transport and telecommunications infrastructure, access to finance, and domestic security. There is an urgent need to wrap up negotiations on rules of origin and also rope in the remaining 10 of the 54 signatories to ratify the agreement.
Undeniably, there have been some significant positive strides. Eight countries, representing five regions across the continent, Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda, Tanzania, and Tunisia—have already commenced trading under the AfCFTA’s Guided Trade Initiative (GTI), Further, the African Union has announced 2023, as the “Year of AfCFTA: Acceleration of the African Continental Free Trade Area Implementation” to generate greater political commitment to turn the vision into reality.
We cannot forget that integration of 54 economies is a huge and cumbersome process and not a one-time event. Yet, in the face of dampened growth prospects and rising debt levels, it is imperative that African countries sharpen their focus on the quick implementation of AfCFTA. Let it be the pondering point for the African nations on the eve of this year’s Africa Day on May 25.
