The signing, by 44 African countries, of the African Continental Free Trade Area (AfCFTA) is encouraging, albeit that the development is at odds with the current global backlash against freer trade.
It should be noted that South Africa did not sign the agreement in Kigali, Rwanda. However, President Cyril Ramaphosa did initial a declaration, indicating that South Africa would indeed become a signatory once the legal and other instruments associated with the AfCFTA were processed and ratified by South African stakeholders and Parliament. In the meantime, South Africa is also helping to advance the so-called trilateral free trade area, involving members of the Southern African Development Community, the East Africa Community and the Common Market for Eastern and Southern Africa.
The AfCFTA move is encouraging, as trade between African countries, at about 18% of total African exports and 14% of imports, remains low by international standards. Therefore, any genuine effort at improving prospects for intra-African trade should be supported even in the face of global trade adversity.
Studies show that the growth, development and industrialisation spin-offs could be significant. For its part, the United Nations Economic Commission for Africa (ECA) argues that liberalisation could raise infra-African trade by more than 50% and that small and medium-sized enterprises, which account for 80% of the region’s businesses, would be major beneficiaries.
A joint report by the African Union (AU), the ECA and the African Development Bank argues further that the most important AfCFTA gain would be its long-term contribution to the economic restructuring of African sectors. Titled ‘Bringing the Continental Free Trade Area About’, the document argues that liberalisation would spur more productive, industrialised and export-orientated sectors, while improving prospects for investment.
However, tariff liberalisation alone will simply not cut it in a context where nontariff barriers remain, in most cases, a bigger impediment to trade than does actual protectionism. In fact, the same joint study asserts that, while tariff reductions from the AfCFTA would increase intra-African trade by 52%, additional trade facilitation measures would more than double it.
For this reason, the AfCFTA will only be effective if accompanied by supportive measures that ensure the opportunities associated with tariff liberalisation can, in fact, be exploited and shared across countries. Such nontariff remedies are included in the ‘Boosting Intra-African Trade Action Plan’, which was also endorsed at the same 2012 AU Assembly where the establishment of the AfCFTA was decided by the AU Heads of State and government.
The action plan comprises seven components, including trade policy, trade facilitation, productive capacity, trade- related infrastructure, trade finance, trade information and factor market integration. Without steady and material progress on all of these issues, any aspiration towards freer African markets will remain simply that.