- By enhancing intra-African trade, AfCFTA estimates that the continent with gain $195 billion by 2045.
- These gains are projected to be mainly realised in industry, services, agrifood, and energy sectors.
- By collaborating under AfCFTA, countries can greatly boost regional supply chains for the global electric vehicles market.
African countries need to embrace a set of reforms critical in driving Africa’s free trade plan, AfCFTA. The call comes even as more African leaders sign the agreement on the African Continental Free Trade Area (AfCFTA).
AfCFTA has the potential to transform regional trade and thereby lift billions of livelihoods in Africa out of poverty. To realise these benefits however African leaders need to go beyond blueprints.
“It is not for lack of blueprints that Africa has not structurally transformed,” United Nations Economic Commission for Africa (UNECA) Secretary-General Antonio Pedro said.
Mr Pedro was speaking at the Africa Regional Forum by UNECA on the sidelines of the Annual Investment Meeting 2023 in UAE.
While calling for reforms, Mr Pedro said for AfCFTA to work, it “will require the effort of everyone.”
“As UNECA we have a convening function bringing states together, formulating common positions, and deploying technical systems with a view to translating ideas into actions,” he explained.
AfCFTA is one of the flagship projects of Agenda 2063: The Africa We Want. A total of 54 Africa Union member states have signed the AfCFTA agreement as of May 2023. By 2035, AfCFTA projects to help member states increase their incomes by 7 percent to $450 billion.
Accelerate reforms in intellectual properties
By enhancing intra-African trade, AfCFTA estimates that the continent will gain $195 billion by 2045. These gains are projected to be mainly realised in industry, services, agrifood, and energy sectors.
Beyond policy, stakeholders need to accelerate reforms in intellectual properties, digital trade as well as linkages to boost competition.
Further, as the world turns to green production systems, AfCFTA members will need to explore harmonised policies for carbon trading. From severe drought to floods, natural disasters associated with climate change pose a huge risk to economies.
However, linkages under AfCFTA could boost countries’ resilience. This will be by lowering their overreliance on sectors facing huge risks of climate change-induced disasters.
Further, by facilitating the flow of goods across borders, AfCFTA will help countries to diversify sources of climate-vulnerable produce.
“It is possible to have a green AfCFTA,” said Director, Regional Integration and Trade Division, UNECA, Dr Stephen Karingi.
Boost regional supply chains
Further, by collaborating under AfCFTA, countries can greatly boost regional supply chains for the global electric vehicles market.
Currently, DR Congo is arguably the source of lithium and cobalt, key minerals used in making electric vehicle batteries.
A 2021 BloombergNEF study says by setting up plants in DRC, pollution related to electric battery production could be cut by a third. This is due to DRC being home to cathode raw materials and its use of hydroelectricity.
The call for reforms by policymakers in Africa syncs with May 5th observations by the International Monetary Fund (IMF).
In a report, IMF notes that cuts in tariffs and nontariff barriers under AfCFTA, along with a trade-enabling environment from infrastructure, to financial development, and domestic security, would substantially boost intra-African trade in goods and services, and support linkages into global value chains.
Further, regional trade integration could be critical for African countries to cope with rapid population growth, climate change, and emerging geopolitical fragmentation.
Regional value chain hubs
“One possible explanation for Africa’s scarcity of local cross-border value chains, therefore, is that its largest economies—Egypt, Nigeria, and South Africa—may not yet have acquired the size and higher-end manufacturing that would allow them to act as regional value chain hubs in the same way that China, Germany, or the United States do in their respective regions,” the IMF report reads in part.
Anthony Kamole, the Managing Director of DR Congo’s National Investment Promotion Agency (ANAPI) also cites literacy levels and lack of standards as other challenges facing AfCFTA. Additionally, harmonising communication between Anglophone and Francophone countries would help drive AfCFTA agenda.
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Mr Kamole was speaking during the Annual Investment Meeting 2023 in Abu Dhabi where ANAPI is wooing UAE investors into DRC. The resource-rich country has identified mining, agriculture, energy as well as health as investor-ready sectors.
“We have a lot of opportunities. 80 million hectares of arable land; nine countries bordering us, presenting millions of consumers to investors… If you set up in DRC, you have access to a market in 10 countries! This is a huge opportunity. AfCFTA is a good opportunity,” explained Mr Kamole.
For Nigeria, educating the relevant stakeholders–citizens, MSMEs–saw the West African country delay in joining the AfCFTA framework.
Solving the challenge of common currency
“Nigeria wasn’t in a hurry to join AfCTA. The government set out to first orient all the stakeholders–citizens, private sector, SMEs–on the implications of the trade deal,” Mariam Yalwaji Katagum, Minister of State for Industry, Trade and Investment noted.
Currently, the country, which has over 41 million SMEs is conducting workshops to bring them to speed on the benefits of AfCFTA.
Beyond solving the challenge of a common currency, he observed that is critical for governments to inform Africans on how they stand to gain under AfCFTA.
The United Nations estimates that Africa’s population will grow rapidly in the coming decades due to declining mortality and high fertility. As a result, the continent’s working-age population (ages 15–64) is set to rise to over 1.5 billion by 2050.
With a large and growing labour force, AfCFTA stands to tap from opportunities for rapid growth, aided by a reduced dependency ratio that will power increased domestic savings.
“Sometimes when you want to travel to some African countries, you have to fly to Europe for a connecting flight,” Mr Kamole noted, highlighting the transportation challenges needing reforms.
Common standards for products and services
Latest data shows the cargo transported by trucks would double to 403 million tonnes under AfCFTA. Projections note that truck demand would jump by 39.3 percent in West Africa, and 19.8 percent from West Africa to Southern Africa.
Establishing common standards on products and services will be critical. Equally important will be agreement on taxation and trade systems across the continent. Further, a fresh look at the entire set of regulations on investments would be critical, he noted.
The IMF report said under the first phase of AfCFTA, member countries will need to agree on rules of origin relating to automobiles, textiles, and clothing and complete the process of submitting tariff schedules to spur growth.
