GLOBAL TRADE
Long way before Africa's single market moves at full steam
DEC 20, 2020
AGENCE FRANCE-PRESSE
https://www.rappler.com/business/long-w ... full-steam
JOHANNESBURG, SOUTH AFRICA
Disappointment lies in wait to anyone hoping that African trade will enjoy a barrier-free Big Bang come New Year's Day
Touted as the world's largest single market in terms of the number of member nations, Africa's ambitious blueprint for free trade kicks into gear on January 1, bringing together more than 50 economies from Algeria to South Africa.
The African Continental Free Trade Area (AfCFTA) was supposed to become technically operational months ago, but the launch was delayed by complications blamed on the coronavirus pandemic and the slow pace of negotiations.
But disappointment lies in wait to anyone hoping that African trade will enjoy a barrier-free Big Bang come New Year's Day.
Jakkie Cilliers, head of African Futures and Innovation at the Pretoria-based Institute for Security Studies, says it will be a long way before tariffs are scrapped, red tape is slashed, and much-trumpeted gains are realized.
A brainchild of the African Union, AfCFTA has been signed and ratified by all 55 AU states except Eritrea since its ceremonial birth in July 2019 after 17 years of haggling.
Internal trade within the continent of 1.2 billion people currently stands at a meager 16%, while 65% of their commerce is with European countries.
AfCFTA's plan is to boost intra-African trade by 60% by 2034 by eliminating almost all tariffs, creating an economic bloc of $3.4 trillion.
If fully implemented, the AfCFTA will lift 30 million Africans out of extreme poverty and 70 million from moderate poverty, according to World Bank estimates.
But in an interview with Agence France-Presse (AFP), Cilliers cautioned about the grinding task of scrapping duties and other impediments to trade.
This means it will be a long time before tangible results are felt in the world's poorest continent, he said.
There are considerable tariff requirements that still need to be agreed on between the various countries,
Cilliers said.
The intention is that the agreement be fully operational in actual effect by 2034 when something like 97% of all tariffs will be eliminated.
Nigeria, Africa's largest economy, only deposited its ratification instrument on December 5 after having signed it
https://www.rappler.com/business/nigeri ... er-11-2020 a few weeks earlier.
Market integration
Integrating over 50 markets that are at very different levels of development will be daunting, Cilliers said.
There is still a significant amount of negotiations that have to occur,
he warned.
Trade negotiations are incredibly complex because every individual tariff line needs to be negotiated and agreed upon.
Another problem
is that the relationship between the AfCFTA and many of the existing
8 regional blocs needs to be sorted out.
Other issues to be thrashed out are how to dovetail existing or future trade agreements between Africa or individual African countries with Europe, China, and the United States.
Non-tariff and political barriers could prove tricky.
Corruption of government officials, slow processing of documentation around the borders...and lack of capacity will remain a challenge going forward in implementing the continental free trade area and making it real,
said Cilliers.
Wamkele Mene, AfCFTA's secretary general, has said Africa
continues to be trapped in a colonial economic model
and has to "
aggressively" implement the new deal.
Africa accounts for only 3% of the global economy, and it being parceled into 55 different economies has been a "
huge inhibitor" to rapid continental economic growth, said Cilliers.
The whole intention of the continental feature idea is to build regional value chains and to allow Africans not only to trade commodities but also to trade more value-added goods,
he said.
If Africa does not proceed down this road it will increasingly become irrelevant.
