East Africa: The key to AfCFTA success

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  • The East African Community automatically grew by an additional 80 million people after the Democratic Republic of the Congo joined
  • The East African Community (EAC) continues to be a major growth area for Africa
  • The Covid-19 pandemic reduced Africa’s GDP by 3 per cent in 2020 and raised Africa’s debt-to-GDP ratio by 10 to 15 percentage points by 2021

After the Democratic Republic of the Congo joined the East African Community (EAC) on Friday, April 8, 2022, the region automatically grew by an additional 80 million people.

Despite the Covid-19 pandemic and other global crises such as the Russia-Ukraine crisis, economic estimates have consistently shown a robust economy. The East African Community (EAC) continues to be a major growth area for Africa.

It is estimated by ECA that the Covid-19 pandemic reduced Africa’s GDP by 3 per cent in 2020 and raised Africa’s debt-to-GDP ratio by 10 to 15 percentage points by 2021, from roughly 60 per cent in 2019 as governments borrowed to lessen the socio-economic impact of the pandemic.

According to Mama Keita, director of the ECA Sub-Regional Office for Eastern Africa, African economies are in a state of flux, exacerbated by the Ukraine crisis.

ECA-EABC Webinar: Financing Recovery from Covid-19 and Status of AfCFTA Negotiations and Implications to the Private Sector in the EAC, Keita explained that the Ukraine crisis has pushed food prices to heightened levels not seen since 2008, with oil costs reaching their highest levels since 2008.

African Free Trade Agreement (AfCFTA): Africa’s Marshall Plan

Since the beginning of the Russia-Ukraine crisis, fertilizer prices have risen by 21 per cent.

It was noted that “the recovery of Africa has been impeded by greater inflation and tighter global financial conditions as well as rising interest rates,”

To counter external shocks, such as the Ukraine crisis, she urged public and private sector partnerships to enhance intra-African agri-food, industry, and service trade. She also urged the continent’s recovery from Covid-19 to get back on track.

When asked if Africa needs a second Marshall Plan, Keita said that Africa already has an effective one, in the AfCFTA, that may help it prepare for unpredictable times.

As CEO of the East African Business Council, John Bosco Kalisa told the audience, “The AfCFTA is poised to enhance Africa’s real income by 7 per cent to US$450 billion and intra-African trade by 81 per cent by 2035.”

Kalisa urged the states to ease trade under the AfCFTA because customs processes account for 57 per cent of NTBs. AfCFTA national implementation strategies should include the full participation of the private sector, the removal of NTBs, and the elimination of information asymmetry in order to increase African commerce, he argued.

During a panel discussion on the AfCFTA and its implications for business in the EAC, he made a statement. An official from the EAC Secretariat stated that the EAC Partner States had adopted the EAC Tariff Offer for Category A items (90.1 per cent of the total lines) and submitted it to the AfCFTA Secretariat.

Rules of origin for essential products including cotton, textiles, apparel, and automobiles remain unresolved under the AfCFTA.

EABC CEO Jon Bosco Kalisa. The Ukraine crisis has pushed food prices to heightened levels not seen since 2008. [Photo/EABC]
Making the most out of AfCFTA

The importance of manufacturing, services, and value addition has been correctly identified as a priority area to address in order to get the most out of the AfCFTA. East Africa’s terms of trade and trade potential in the continental market will be boosted by these Free Trade Area components.

The Chairman of the Confederation of Tanzania Industries (CTI), Paul Makanza, called on East African enterprises to provide good quality and affordable products to be competitive under the AfCFTA.

Makanza asked East Africa’s governments to make sure that policies are favourable to the growth and expansion of small and medium-sized enterprises (SMEs) as well as corporate entities across the continent.

According to EABC vice chair, Simon Kaheru, tariffs on intra-African trade are eliminated and trade is liberalized through coordinated and harmonized legal instruments, boosting competitiveness at both the firm and industrial levels.

A call from EABC director Stuart Mwesigwa for greater cooperation on the continent’s technological and skill-development fronts.

Around 150 top government officials, commercial sector participants, media outlets, academics, and development partners from the EAC area attended the ECA-EABC webinar.

To help Africa recover from the Covid-19 and Ukraine crisis, ministers of finance and trade have to institute deep structural reforms, diversification of the productive base, oil exporters using the windfall to support economic recovery and replenish policy buffers and strengthen social safety nets to mitigate the impact of rising food and energy prices.

Advocacy campaigns on the African Continental Free Trade Agreement, the finalization of AfCFTA rules of origin under AfCFTA, and simplifying access to trade finance and trade corridors were advocated by stakeholders to profit from the continent’s 1.3 billion consumers.

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