CONTINENTAL DEAL

Boosting intra-African trade through AfCFTA

All African states, save for Eritrea, have signed up to the agreement.

In Summary

•It is expected that up to 90 per cent of goods and services traded within the continent will benefit from preferential trade terms.

•This includes elimination of tariff barriers.

African leaders pose for a group photograph as they meet to sign a free trade deal that would create a liberalized market for goods and services across the continent, in Kigali, Rwanda March 21, 2018. /REUTERS
African leaders pose for a group photograph as they meet to sign a free trade deal that would create a liberalized market for goods and services across the continent, in Kigali, Rwanda March 21, 2018. /REUTERS

The Africa Continental Free Trade Area (AfCFTA), billed as a catalyst for intra-African trade, officially commenced operations on January 1, 2021, six months later than initially anticipated.

Through the AfCFTA, tariff and non-tariff barriers that have historically posed as an impediment to intra-African trade will be conclusively dealt with.

Specifically, it is expected that up to 90 per cent of goods and services traded within the continent will benefit from preferential trade terms, inclusive of the elimination of tariff barriers.

To date, all African states, save for Eritrea, have signed up to the AfCFTA, while all but twenty African states have ratified the AfCFTA.

Within the East African region, only Tanzania, Burundi and South Sudan are yet to ratify the agreement.

In a bid to ensure that the East African Community (EAC) is not left behind in taking advantage of the agreement, Tanzania, Burundi and South Sudan have been urged to complete the ratification process of the AfCFTA before 01 June 2021.

It is anticipated that the successful implementation of the AfCFTA will have tangible benefits on the African continent, inclusive of accelerated industrial development, expanded economic diversification and enhanced job creation.

Indeed, where AfCFTA is successfully implemented, intra-African trade stands to increase by 33 per cent in the medium term, from the current 16 per cent.

 This will boost the competitiveness of the African market bringing the market closer to other regional blocks across the globe, inclusive of the Asian, European and North American trading blocks.

However, it is noted that due to the structure of AfCFTA, that is its reliance on regional trading blocks such as EAC, Common Market for Eastern and Southern Africa (COMESA), Southern African Development Community (SADC) and the Economic Community of West African States (ECOWAS) to achieve its envisioned objectives, the success of AfCFTA depends on the ability of these regional trading blocks to develop and implement localised implementation strategies.

Therefore, closer to home, it is up to the EAC to catalyse the implementation of the agreement within the region, in order to ensure that its benefits are accessible to the East African market.

To achieve this, EAC member states, in conjunction with the Economic Commission for Africa (ECA), have commenced preparation of a regional policy that will form the framework through which AfCFTA will be successfully implemented in the region.

This presents an incentive for the EAC region to expedite its integration objectives. While the integration process has been hampered by political headwinds, the AfCFTAs potential to catalyse the growth of the EAC market ought to fast-track the integration process in order to maximise the EAC’s market gains through the agreement.

However, nationalistic trade policies within the region threaten the achievement of these objectives.

Where positive progress toward regional integration is achieved within the EAC, and the AfCFTA is successfully implemented, intra-EAC trade is expected to increase by nearly $1 billion, as estimated by the Office of Eastern Africa of ECA.

Similarly, regional integration, coupled with the AfCFTA, is expected to create up to 1.9 million jobs within the region.

Karen Kandie – MD, IDB Capital