Intra-African trade is crucial for the continent’s economic growth and with the African Continental Free Trade Area (AfCFTA) kicking off, it is best to have every country on board.
The approach should be one based on leaving no one behind for maximum benefit to the entire continent and the AfCFTA should be made to work as it is the continent’s only path to sustainable development according to David Luke, the Coordinator of the Economic Commission for Africa’s (ECA) African Trade Policy Centre (ATPC).
Luke says that all societies only developed when their productive capacities, productivity and competitiveness were expanded, driven by trade and Africa could not be an exception.
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He adds that there is no plan B so the AfCFTA has to be made to work since as an initiative, its importance cannot be underestimated.
Revenues from trade are in multiples of receipts from sources like investments, remittances, foreign direct investment and foreign aid.
With this understanding, the ECA Office for North Africa in partnership with the Ministry of Industry and Trade of the Republic of Sudan and the International Islamic Trade Finance Corporation (ITFC) is seeking to work together to make implementing the AfCFTA a reality for the North Africa country.
Khaled Hussein, interim director of the ECA Office for North Africa, says that they need to work together and in a very practical way so as to ensure Sudan benefits from the AfCFTA and makes the most of its strong points – its workforce, its agriculture and industry – to increase exports to African countries.
The ITFC is keen to work closely with the partners and be part of this important initiative, the AfCFTA, especially during these challenging times. Intra-African trade is crucial for the economic awakening of the African continent.
Sudan which has rich resources and with its strategic importance will have a huge potential in terms of exports and ultimately, the attainment of greater socio-economic inclusion in the country.
The AfCFTA came into force on January 1, 2021, with the ambition of becoming the world’s largest trade bloc. On implementation, the economic area will generate a market of more than 1.2 billion consumers.
One year into the economic crisis caused by the Covid-19 pandemic, the AfCFTA can play a key role in accelerating Africa’s economic recovery and building back on stronger, more resilient bases thanks to the structural transformation of African economies.
While experts identify significant growth potentials for Sudanese sectors and products such as mining, leather, agro-industries and textiles, much remains to be done to restore and modernize the national financial and industrial sectors, and increase their competitiveness in the African and global trade markets.
This is the case for most of the African countries seeking to reap benefits from the AfCFTA.
The AfCFTA, as the world’s largest free trade area, has the potential of a US$2.5 trillion GDP and ushering in a new era of development. The trade agreement also has the potential to generate a range of benefits through economy of scale, trade creation, structural transformation, productive employment and poverty reduction.
Some African countries are however not yet fully on board the agreement due to technicalities regarding trade and how the tariffs will be addressed to ensure that the agreement is not lopsided against the poorest of these nations.
Protectionism is also playing a role in countries taking an observer role in the agreement.
Eritrea is the only country yet to sign the agreement let alone deposit instruments of ratification. The Horn of Africa nation said that its stance to abstain was informed by its ingrained posture advocating regional integration over continental aspirations like the AfCFTA.
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AfCFTA entered into force on May 30, 2019 after the treaty’s ratification by 22 countries which was the minimum number required by the treaty.
In June 2019, West African neighbours Nigeria and Benin became the 53rd and 54th nations to ratify the agreement. On June 7, 2019, Nigeria which is the continent’s biggest economy signed up during an extraordinary African Union (AU) summit in Niamey.
Due to the Covid-19 pandemic, trading was pushed to commence on January 1 this year from July 1 last year.
The operational phase of the AfCFTA was launched in Niamey where the 27 countries that had ratified the instruments of the AfCFTA, as well as the 28 countries which had signed but not yet ratified, were announced.
There are five key instruments adopted for the AfCFTA including the Rules of Origin which is a regime governing the conditions under which a product or service can be traded duty-free across the region.
There is also the Tariff concessions: under this, it has been agreed that there should be a 90 per cent tariff liberalisation. Over a 10 year period with a 5-year transition, there will be an additional 7 per cent for “sensitive products” that must be liberalised
Another instrument is the online mechanism on monitoring, reporting and elimination of non-tariff barriers, NTBs is another instrument which notes that NTBs are a great hindrance to Intra African trade whether physical, like poor infrastructure, or administrative like the behaviour of customs officials. These are to be monitored with a view to ensuring they are eliminated.
The Pan-African payment and settlement system is meant to facilitate payments on time and in full, by ensuring that payments are made in local currency and at the end of the year there’ll be net settlements in foreign exchange. With the certainty of payments, there will be confidence in the system.
Finally, the African Trade Observatory (ATO) is a trade information portal to address hindrances to trade in Africa due to lack of information about opportunities, trade statistics as well as information about exporters and importers in countries. The trade observatory will have all this information and other relevant data which will be provided by AU member states.
The Observatory is a system that strengthens trade information across the continent through monitoring of regional integration, competitiveness, market access, border procedures and the usage of trade preferences in Africa.
It also helps in equipping national government staff to sustain quality trade data as well as training policymakers and business people to analyse and use the trade data.
The ATO also is creating an online portal, offering a database of trade information and a tool for policymakers to negotiate and monitor tariff removal.
As of December 2019, 13 countries had requested to participate in the pilot phase of the project. The ATO project and its activities were presented to the more than 100 policymakers, high-level officials and relevant stakeholders in December 2019 in Addis Ababa to which all 13 pilot countries participated.
The Observatory will be the source of real-time African trade and market information – spanning countries, products and markets – all in one place.
Read: The EAC should integrate to benefit from AfCFTA
