The Covid-19 crisis has, if at all, increased the importance of the AfCFTA. Instead of slowing it down, there is no doubt that regional and continental integration is picking up speed. Dounia Ben Mohamed calls for more unity
ONThe African Continental Free Trade Area (AfCFTA), which has been signed by 54 African states (Eritrea has yet to sign and ratify the agreement), was adopted in Kigali on March 21, 2018 and at the AU summit in Niamey, Niger, in July 2019 Called to life with the dismantling of tariffs on July 1, 2020, they will come into full effect.
The numbers are well documented and speak for themselves: 1.3 billion people with an annual economic output of 3.4 trillion US dollars. Using official estimates, many of which underestimate the informal sector, intra-African trade is 15%. The African Union estimates that the removal of tariffs will increase intra-African trade by 60% by 2022.
The current global pandemic has highlighted the need for resilient manufacturing and the need for functioning supply chains on the continent. The measures taken by the AfCFTA aim to encourage the development of a vibrant manufacturing and industrial sector, thereby strengthening the resilience of African economies to external factors such as fluctuations in commodity prices in world markets and exchange rate fluctuations.
Increased competition and access to new markets will help accelerate economic growth, even in the most fragile countries, and also improve the competitiveness of economic operators. Success, proponents say, will be determined by the emergence of new African champions who drive growth in the same way that companies like Dangote have over the past two decades.
Covid-19 increases the need for integration
The Covid-19 crisis, in which the borders have closed and trade has declined across the continent, has admittedly – at least in the short term – changed the conditions of competition.
A silver lining of the current crisis is that efforts towards regional integration are urgently accelerated and regional and continental value chains and trade are strengthened. In order to achieve a recovery in the V-curve, the UN Economic Commission for Africa (UNECA) is urging African countries to accelerate the process of bringing the AfCFTA into operation by July. One area that is being worked on is pharmaceuticals, which are working with manufacturers to help them export more within the continent at zero cost.
“The intra-African market can help mitigate some of the negative effects of Covid-19 by limiting reliance on external partners, particularly for pharmaceuticals and staples,” said Stephen Karingi, director of UNECA’s Regional Integration and Trade Division a press conference in Addis Ababa in April.
In the best-case scenario, UNECA will go down this year from its original forecast of 3.2% to 1.8%. The virus’ impact on some of Africa’s largest trading partners will also be greater than initially thought. The European Union, China and the United States account for 52% of Africa’s exports and their economies are expected to experience sharp economic decline before recovering in 2021.
The general consensus is that the AfCFTA can be considered a success so far. The speed with which it was ratified and the progress of the discussions surprised most of its critics. In the next phase, however, we learn how much progress has been made on the way from planning to implementation. The role of the private sector and civil society in the implementation phase will be paramount.
But even in the past two years, significant practical measures have been taken to help integrate the continent. Senegal starts an interregional bus connection with Gambia; Rwanda has announced the abolition of visas for all African nationals. Nigeria followed suit with its own visa on arrival. Plans for a trans-Maghreb railroad have been agreed and plans for a single African market for air transport are moving forward. Covid-19 will only accelerate the need for some of these projects and make the consolidation of the aviation sector a necessary step for survival.
The process is picking up speed
Political differences must be resolved as countries rebuild their economies. The signs are that this global crisis has realigned the mind, encouraging greater collaboration and a more unified approach. In 2018, the Boston Consulting Group published the report Pioneering One Africa: The Companies That Make Their Way Across the Continent. It was emphasized at the time that “the economic integration of the continent, which many see as key to its further development, is evident”.
Much of the integration was found to have been driven by “local entrepreneurs and fast growing African companies and multinationals…. The main drivers come from the continent, led by African companies. Africa invests more in Africa, Africa deals more with Africa and Africans travel more to Africa. “
Governments need to work even more closely with the private sector, listening to their concerns but also assisting them to ensure a swift recovery and allow them to integrate larger cross-border investments. According to the report, the share of intra-African exports in total exports rose from 12% in 2006-2007 to 18% in 2015-2016.
The AfCFTA will create the largest trading bloc since the WTO, with the added complexity of having economies at different stages of development. This is why Ibrahim Mayaki, Executive Secretary of the African Union Development Agency (Auda-Nepad), stresses the need for a continental approach by “developing continental strategies and overlaying them with a regional dimension”.
This collective agenda and strategy makes it inevitable that Africa can speak with one voice and be better able to renegotiate cheaper agreements with bodies such as the European Union, the US and the World Trade Organization.
In times of crisis, economic integration can offer a way to more “unity”, ie to more cooperation, complementarity and solidarity between African countries. This crisis can therefore be a catalyst for better cooperation on all African issues, be it security – terrorism, cyber attacks, piracy – energy or infrastructure. Covid-19 has reminded us that there are common challenges that African countries must face, which we cannot solve alone.
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