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SINGLE MARKET FOR AFRICA STARTS

03/01/2021 00:02:00 BY MFANUKHONA NKAMBULE

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mfanukhona@times.co.sz

MBABANE – The much awaited African Continental Free Trade Area (AfCFTA), which will see Eswatini penetrate a market consisting of 1.2 billion people, started on Friday.

It must be said that January 1, 2021 was an important occasion in the history of Africa as a webinar featuring South Africa’s President Cyril Ramaphosa was organised to celebrate this milestone. Even though Eswatini lost the bid to host the AfCFTA secretariat to Ghana, it is still an active member of the economic bloc, which aims at bringing together 1.2 billion people in an E49.6 trillion (US$3.4 trillion) bloc.

This will be the largest free trade area since the establishment of the World Trade Organisation.

To mark the occasion, a lunchtime ceremony that included speeches by some African Union Heads of State and government, representatives of development partners and the private sector as well as showing of videos on different aspects of trade and development in Africa was held on New Year’s Day.

Keynote speakers were Ramaphosa, the current Chairperson of the African Union, Mahamadou Issoufou, President of Niger and AU Champion of the AfCFTA, Moussa Faki Mahamat, the Chairperson of the African Union Commission and Wamkele Mene, the Secretary General of the AfCFTA.

Senator Manqoba B. Khumalo, the Minister of Commerce, Industry and Trade, said: “this is a great milestone for the African continent.”

Khumalo said the country was excited that local businesspeople will now be able to trade across the African continent. “This is very much in line with our export driven economy strategy as a ministry,” he said.

The minister said he was excited that the AeTrade platform that the country is privileged to host would start opening out of the Royal Science and Technology Park (RSTP) to support the AfCFTA. Early in the new year, he said the AeTrade Group will be announcing the launch of the platform for local SMEs to use.

Eswatini to take advantage

He applauded the AU leadership and that of AfCFTA for working very hard to achieve this milestone. He said Africa has now laid a foundation for being the economic giant that has been predicted. “Eswatini will take this opportunity with both hands,” said the minister.

Currently, it is said that the percentage of trade that African countries do with each other is a mere 16 – 18 per cent. The bulk of the continent’s trade is with the rest of the world, and most African exports are in raw materials including extractive commodities like oil, gas and minerals which are vulnerable to market volatility.

It is said that under AfCFTA trading, tariffs on various commodities where rules of origin have been agreed will be drastically reduced and traders of all sizes will have access to a much bigger market than they used to before.

Non-tariff barriers (NTBs) to trade will also be addressed and a mechanism for speedy reporting and resolution of NTBs has been put in place.

The African Union (AU) said the bigger market would spur producers to upscale and so support increased industrialisation and value addition on the continent. It is envisaged that more employment opportunities will be generated for Africa’s burgeoning youth population.

The AfCFTA will also be a tool for mitigation of Covid-19 by allowing free and unhindered trade in health products across the continent. The Times SUNDAY can mention that this move is thought to be relevant at this point in a time where the continent is ravaged by COVID-19.

The agreement establishing the AfCFTA was signed in March 2018, in Kigali Rwanda, following conclusion of the main legal texts. It has been reported that 54 member states of the African Union have signed, and 30 countries have deposited their instruments of ratification with the Chairperson of the African Union Commission.

For sake of simplicity, the main objectives of the AfCFTA are to create a single market for goods and services, facilitate the movement of persons, promote industrial development and sustainable and inclusive socio-economic growth, and resolve the issue of multiple memberships, in accordance with agenda 2063. Basically, it lays a foundation for the establishment, in future, of a continental common market. Sources close to AU told the Times SUNDAY that there was a possibility of introducing a single currency for Africa in future.

The new economic bloc backers said it would boost trade among African neighbours while allowing the continent to develop its own value chains. The World Bank estimated it could lift tens of millions out of poverty by 2035. “There is a new Africa emerging with a sense of urgency and purpose and an aspiration to become self-reliant,” Ghana’s President Nana Akufo-Addo said during an online launch ceremony.

COVid-19 game changer

Critics, on the other hand, say obstacles, which range from ubiquitous red tape, poor infrastructure to the entrenched protectionism of some of its members must be overcome if the bloc is to reach its full potential. Trade under the AfCFTA was meant to be launched on July 1, 2020, but was pushed back after COVID-19 made in-person negotiations impossible.

However, the pandemic also gave the process added impetus, said Wamkele Mene, secretary-general of the AfCFTA secretariat. “COVID-19 has demonstrated that Africa is overly reliant on the export of primary commodities, overly reliant on global supply chains,” he said. “When the global supply chains are disrupted, we know that Africa suffers.”

Every African country except Eritrea has signed on to the AfCFTA framework agreement, and 31 have ratified it, including Eswatini.

Certain observers such as Gyude Moore – a former Liberian minister who is now a senior fellow at the Center for Global Development – say the real work begins now. “I would be surprised if they can have everything set up within 24 months,” he told Reuters news agency. “For long-term success, I think we’ll need to look at how long it took Europe. This is a multi-decade process.”

Historic challenges including Africa’s poor road and rail links, political unrest, excessive border bureaucracy and petty corruption will not disappear overnight. And an annexe to the deal outlining the rules of origin – an essential step for determining which products can be subject to tariffs and duties – has not been completed yet.

Meanwhile, 41 of the zone’s 54 member states have submitted tariff reduction schedules.

Members must phase out 90 per cent of tariff lines – over five years for more advanced economies or 10 years for less developed nations. Another seven per cent considered sensitive will get more time, while three per cent will be allowed to be placed on an exclusion list. Finalising those schedules and communicating them to businesses must be done quickly, said Ziad Hamoui of Borderless Alliance, a group that campaigns for easier cross-border trade.

In his New Year’s Eve Speech, Ramaphosa spoke about his enthusiasm for the new partnership, “We are just a few hours away from the birth of the African Continental Free Trade Area, which will fundamentally change the economic fortunes of our continent. It is the start of a new era of trade between African countries…when [the continent] will realise its great potential of its abundant natural and human resources.”

It is said that AfCFTA has the potential to increase intra-African trade by 50 per cent, according to the United Nations (UN)’s Economic Commission for Africa, while the World Bank suggests the agreement could mean an E1.1 trillion in income for the rest of the world.

Despite the clear benefits and historic accomplishment, other media publications in Europe quoted experts saying the agreement will face a number of hurdles in practice. This includes lack of modern and efficient infrastructure, unclear information about processes, and barriers for women-led businesses, and the economic destruction brought on by Covid-19 that could reverse years of progress in the region.

Some also fear that large economic gains made in the diverse economies will be unequally distributed. Regard

less, there are high hopes for the agreement. “We want to move Africa away from this colonial economic model of perpetually being an exporter of primary commodities for processing elsewhere,” the trade bloc’s secretariat, Mene, told the Financial Times. “We want to stop approaching tariffs as a tool for revenue. We want tariffs to be a tool for industrial development.”