Questioning the Commitment to the AfCFTA Implementation

The African Continental Free Trade Area (AfCFTA), an Initiative of the African Union, continues to impress as a groundbreaking effort critical to enhancing economic integration in Africa for the promotion of intra-African trade. During the 2^nd Ministerial Retreat of the Council of Ministers on the AfCFTA held in Nairobi, Kenya in late May, it emerged that the continent compares poorly with other regions in intra-trade. While presidents continue to confess their and nations’ dedication to the implementation of the AfCFTA, the commitment of countries to the execution of the trade agreement is still in question. The implementation of the framework to boost African trade still faces critical issues including the adoption of the AfCFTA agenda and work program and enhancing clarity and efficiency in intra-trade processes while creating a conducive environment for business.

Among other areas, the 2^nd Ministerial Retreat majored on discuss rules of origin, tariff revenue losses, agricultural trade, customs facilitation, and trade liberalization which are critical in economic integration in Africa and boosting intra-African trade. However, nations’ commitment to the implementation process can only be speculated considering past delays in the implementation of the trade agreement. The AfCFTA was forced to implement a pilot phase of the initiative on guided trade involving five nations after the realization that no trade had taken place one-and-a-half years after its launch in 2021. Put into perspective, it was not until this guided trade initiative that Kenya exported its first goods, Exide batteries, to Ghana questioning the commitment of nations to the implementation of the framework.

A Poor Intra-African Trade Situation

The impact of slow intra-African trade is highlighted by 34% of households in Africa who live below the international $1.9 per day poverty line while 40% of the continent’s wealth is held by a few. The African Continental Free Trade Area is seen as a critical initiative in boosting intra-African trade and investment, influencing local business growth, revolutionizing industrialization, and creating jobs for a growing youthful population. The UNCTAD estimates that intra-African trade stands at 14.4% of the total African exports which is low compared to other regions across the globe. This is in comparison with the USA at 60%, Europe at 70%, Asia and 40%, and the Americas at 46% of the total intraregional trade.

The AfCFTA has been cited as likely to boost intra-African trade by 33% while also cutting the trade deficit in the country by 51%. This is critical for a continent where poverty and inequalities are unprecedented despite having the fastest-growing population. While Africa is a net exporter for over two decades in agriculture for instance, over 81% of the continent’s imports come from outside while 78% of exports end up in the rest of the globe. This is an indication of the need to continuously enhance economic and regional integration within the continent to boost domestic trade activity.

It is therefore notable that increasing intra-African trade is a matter of urgency given its role in the continent’s economic development and prosperity. While the intra-African trade compares poorly with the rest of global regions, boosting its performance can reduce the overall dependency on external markets and foster self-sufficiency by spurring entrepreneurial activity to raise local solutions. Notably, a more sufficient African would hold better against global economic shocks, enhance better regional integration growing peace and cohesion, and create a sustainable economic ecosystem for the continent. It can also be anticipated that intra-African trade growth would drive economic and trade diversification, foster innovation, and stimulate increased industrialization which would potentially reduce poverty and improve living standards through job creation.

Implementing the Trade Agreement: A precursor for Intra-African Trade Growth

The AfCFTA is expected to increase trading activity and boost economic growth through the elimination of tariffs and trade barriers among member nations which could create a single market consisting of over 1.3 billion people and a combined $3.4 trillion GDP. The implementation of the framework can therefore enhance intra-African trade by facilitating efficient domestic movement of goods, services, and investment which would in turn boost job creation, economic growth and industrialization. With players calling for inclusivity and participation of various business stakeholders and sectors in exploring new opportunities, the implementation of the AfCFTA could drive trade by encouraging diversification, innovation, and competitiveness among African businesses. Moreover, this is associated with access to bigger markets, the possible expansion of business operations, and increased visibility of African supply and value chains in critical areas such as infrastructure for poverty reduction.

African nations should see regional integration as a precursor for intra-trade growth and recognize the importance of encompassing both trade in goods and services with the effective inclusivity and participation of various sectors in trade. Thus, there is a need for nations to aggressively gravitate towards recognizing the importance of effective cross-border trade by handling customer procedures inefficiencies and trade facilitation challenges currently impacting AfCFTA members. The effective reduction in transaction costs and the promotion of efficient flows in trade across the African borders can enhance trade integration and drive more trading within the continent.

The support framework for the AfCFTA implementation to support intra-trade needs to recognize the need for investing in institutions. Critical infrastructure such as export promotion agencies, trade facilitation agencies, and efficient customs processes are critical in enhancing capacity for service provision and supporting businesses. African nations will also need to work collaboratively and closely by engaging in regular dialogue, sharing of best practices, and in tackling trade challenges to maximize the potential for growth for intra trade. Nations will also need to encourage the development of regional value chains by identifying and supporting complementary industries for increased collaboration in value addition as opposed to the export of raw materials. Moreover, it should not be lost on private businesses, governments, and civil society on the need for creating awareness on the AfCFTA, it’s benefits to businesses and stakeholders, and opportunity creation for greater participation, especially among women and youth, in intra-African trade.

These are the writer’s own opinions and do not necessarily reflect the viewpoints of Liberty Sparks. Do you want to publish in this space? Contact our editors at [email protected] for further clarification.