10 June 2020
Opinion piece by Phumza Dyani, Pan African chamber of Commerce Chief Innovation Officer
African Continental Free Trade Area Agreement to set Africa Free
With some sectors and businesses returning to work under level 3 of Lockdown regulations in South Africa, it appears that business is ready to jump back into the market saddle. However, amid all the ongoing crisis and stay at home orders world-wide, it’s best to make the most of the time by understanding present public policy debates, economics and market behaviors at the moment. The Covid19 period was the best educator on how different industries are affected by changes; and how marketers need to mend some ways to counter the impact of the Coronavirus (COVID-19) in the near future.
In fact, over and above the rapid impact COVID-19 has had on how we conduct business, the African Continental Free Trade Area Agreement (AfCFTA) policy debate is at the centre and to be considered as a significant propeller of growth.
According to the African Trade Report 2019, Africa has the potential to achieve great things, noting that its contribution to global trade remains marginal at 2.6 percent, and that, while intra-African trade rose to 18 percent in 2019 from 5 percent in 1980, it remains low compared to intra-regional trade in Europe and Asia.
The report highlights that AfCFTA is scheduled to launch sometime early 2021 and once completed will have a combined gross domestic product (GDP) of more than $2 trillion and 1.27 billion people. The AfCFTA promises significant gains for the continent: $16.1 billion in welfare gains, GDP growth of 1-3%, employment growth of 1.2%, intra-African trade growth of 33% and a 50% reduction in Africa’s trade deficit. It also promises lucrative potential for businesses and investors operating on the continent 90% of tariff-free trade across African markets, reduced trade barriers and liberalisation of services-trade. Whilst the targets seem to be far-fetched, the practicality of the strategies make for sound economic sense and to top it all, the political will is evident.
Africa for a very long time has been a consumer of foreign products and has been the biggest importers of foreign goods, but this is the time for Africa to consolidate efforts and trade amongst each other. A noble idea indeed and logical. This is the beauty of what the African Continental Free Trade Area Agreement presents. Once fully implemented, the United Nations Economic Commission for Africa (UNECA) states that AfCFTA aims to reshape the continent’s social, investment and trade arena in a fundamental manner. It lays the foundation for the African Customs Union, a cornerstone of the African Union (AU) Agenda 2063. The goal is the elimination of tariffs and other barriers to free trade, resulting in free movement of goods, services, investment and people.
Together with this significant potential, businesses and investors also need to account for some of the key challenges that they will face in fully leveraging this agreement. From a Pan African chamber of Commerce Innovation perspective, we believe there is a political will because there’s a consistent narrative on the free trade position for the African continent. African leaders seem to be really pushing for a free trade system for Africa. We also believe that ongoing digitalisation is paving the way for a new African economy, with e-commerce platforms and internet penetration expediting transactions, reducing costs and leading to a new generation of transnational digital consumers. African governments need to capitalise on the opportunities associated with digitalisation, by bolstering regulatory environments and supporting the development of digital ecosystems.
We are one Africa and therefore we should be one market and this can be a lucrative market compared to each country’s battle for leftovers approach. Africa as one market with the African Continental Free Trade Area Agreement in full swing will represent one of the greatest trading areas since the beginning of the World Trade Organisation (WTO). It will create a single market for goods and services, facilitated by the movement of people to deepen the economic integration of the African continent, and in accordance with the pan-African vision of “an integrated, prosperous and peaceful Africa” enshrined in Agenda 2063. This is one way the Pan African Chamber of Commerce believes can help leapfrog and position the continent for global competitive advantage post COVID-19. However, we first need ground-breaking and Innovative ideas and solutions that can address socio economic challenges Africa is likely to face as a result of COVID-19 and beyond.
We need to review how we are structured as a continent. Gone are the days of merely being a minerals supplier to the rest of the world. For a continent as big as Africa, we need to focus on industrialization in order to provide for goods and services to be traded amongst each other. Even beyond trading amongst each other, in the near future there is an opportunity to scale production capacity in order to trade with the world.
Crucial to the implementation of AfCTA will be investment in infrastructure, telecoms, making sure that the trade routes are operational and optimal. African Innovation will be core to developing industries, and will enable able solutions and innovation that suits the African market that in turn will help create new job opportunities for our people. This will in turn improve the economy, improve the standard and quality of life for our people which will result in Africa as a continent improving and upgrading its position in the global marketplace.
In terms of Intellectual Property (IP) we need to collaborate and harmonise our IP laws across different countries. Policies within the respective African countries will have to be enabled to ensure that the supply has the meeting local and continental demand. It’s good to note that some countries have started driving industrial policies that are accommodative.
Many industries are suffering due to this global pandemic situation. For instance, travel industry suffered a major setback, per International Air Transport Association (IATA), global airlines may lose $113 billion in sales if the coronavirus continues to spread at the current rate. As policy makers, economists, non-profit organisations, private and public sectors together we know how to adapt per the changing scenarios and demands. This is what we have to do at the moment as well. This is one way where the African continent can fast- track its development and comparative advantage in the marketplace. African countries can take this risk in order to realise their idea or vision to change their comparative advantage. The continent can build a comparative advantage from an idea. However, it is important to note that this requires intelligent international policies and effort through research, training and human capital.
-END-
Issued by: On Point Enterprises