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AfCFTA to be continent’s main post-pandemic ‘stimulus’ lever

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AfCFTA to be continent’s main post-pandemic ‘stimulus’ lever

AfCFTA secretary-general Wamkele Mene on the impact of Covid-19 on the trade agreement and its role in reigniting growth across the continent. Camera Work: Kutlwano Matala. Editing: Nicholas Boyd.

25th May 2020

By: Terence Creamer
Creamer Media Editor

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The African Continental Free Trade Agreement (AfCFTA) represents the only realistic stimulus option available to resource-constrained African governments for reigniting growth in response to the Covid-19 pandemic, AfCFTA secretary-general Wamkele Mene avers.

The global response to the virus had already disrupted trade and supply chains across the continent, while triggering a slump in the price of key commodities produced by African countries.

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It had also exposed weaknesses in international trading rules, with export restrictions imposed by several developed and developing countries currently hampering Africa’s access to essential products such as pharmaceuticals, medical equipment and personal protective equipment.

The World Bank is forecasting that the sub-Saharan Africa economy will contract by between -2.1% and -5.1% in 2020, from an expansion of 2.4% in 2019, plunging the region into its first recession in 25 years.

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Speaking during a virtual colloquium on Covid-19 and its impact on AfCFTA, Mene said African governments simply did not have the fiscal or monetary policy space to provide significant economic relief for the damage being caused by the pandemic.

“Africa does not have those tools and so for us . . . the only economic relief package is the AfCFTA and implementing it in such a way that we significantly boost intra-Africa trade,” Mene said during the event, organised by the Nelson Mandela School of Public Governance and which coincided with Africa Day.

Intra-Africa trade currently stood at between 15% and 18%, which was far below intraregional trade levels enjoyed in other territories, while regional value chains remained largely under developed or absent.

“[Increased intra-Africa trade] is really the only way that we can ensure that we have a stimulus package for Africa to drive economic growth and get Africa back on track for growth of above the 4% projected ahead of the pandemic.”

Nevertheless, Africa’s Heads of State and Government had agreed to delay the July 1 implementation date set for trading under the AfCFTA, owing to the fact that the pandemic had led to lockdowns or partial lockdowns across Africa and had delayed the finalisation of negotiations on the rules of origin. The AfCFTA Summit scheduled for South Africa on May 30 had also been postponed.

Mene insisted that the delay should not be perceived as a signal of weakening of political support for the AfCFTA, but rather as a necessary adjustment to allow government to prioritise immediate strategies aimed at “saving lives and livelihoods”.

In his Africa Day statement, President Cyril Ramaphosa, who is also chairperson of the African Union, the continent must move ahead with operationalising the AfCFTA soon, describing it as the most ambitious step towards pan-African integration.

Mene said that the global trade and investment response to the pandemic had again underlined the urgency of industrial development in Africa and the need to leverage the AfCFTA to help develop manufacturing capacity and regional supply chains.

Former Trade and Industry Minister Dr Rob Davies, who also participated in the colloquium, said the pandemic had not only highlighted the need for shorter supply chains in Africa, but the need for greater preparedness for the likelihood of future health- and climate-related emergencies.

“We need to be fast-tracking our work on developing productive capacity, through regional value chains in areas that deal with health, such as pharmaceutical products and medical devices . . . and also infrastructure that can withstand flood and droughts. This infrastructure build can be a big stimulus to getting some of our value chains working.”

Davies warned, however, that the architecture of the AfCFTA needed to be aligned with other key policies and objectives to ensure that it achieved a “qualitative” shift in the nature of intra-African trade and did not merely become a conduit for increased trade between African countries of goods imported from elsewhere.

“One of the big questions I think we need to be thinking about is what tweaks and changes do we need to be making to the architecture of the AfCFTA as we develop learnings from the value chains – that might include how we approach tariffs towards the rest of the world to support the emergence of industries and value chains within our continent.”

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