What’s Up With the African Continental Free Trade Area?
The beauty of the African continent lies in the economic, social, innovative, and cultural diversity of its people. The African man or woman is so unique that deep in the psyche of their beings are the solutions that would transform the continent in conformity with the efficient and effective utilization of the enormous resources we have been endowed with. Amidst the growing challenges the continent faces today, Africa’s population is equivalent to 16.72% of the total world population (Worldometers, 2019). With such alarming population growth, I believe that now more than ever, we as Africans have been presented with an opportunity to provide innovative solutions for the fundamental problems that arise herein. This opportunity in question is prevalent in several policies, such as the 17 Sustainable Development Goals, the AU Agenda 2063, the Abuja Treaty of 1991, etc. The latter is a Treaty that established the African Economic Community, which served as the foundation of different economic blocks on the continent (African Union, 2019).
All of these succeeding policies set the stage for establishing the African Continental Free Trade Area, which according to many people, will do wonders in terms of economic prosperity and direct foreign investment for Africa and its people. Despite the compliments that this agreement has received buried in the poetic language of diplomacy, the African Continental Free Trade Area has significant challenges and opportunities that need to be explored and addressed if we want to enjoy the outcome we so dearly desire. Let’s explore the scope of those challenges and opportunities.
Facts About the African Continental Free Trade Area
The ACFTA is geared toward creating a continental market that will allow the flow of goods and services, as well as promote continental integration and driving foreign direct investments. It will also facilitate the creation of a customs union that will channel economic negotiations in a unanimous voice that reflects Africa’s interests. The agreement, which was endorsed by 44 African Heads of States in Kigali, Rwanda on 21 March 2018, came into force officially on 30 May 2019. The ACFTA, as initially planned, would bring together fifty-four African states with a combined market of more than 1.2 billion people and more than $3.4 trillion in GDP (African Union, 2019).
According to Al Jazeera, 52 African States have signed the agreement since its adoption in Kigali, Rwanda, in 2018. The purple area in the image above represents countries that signed the preliminary agreement but haven’t yet ratified it. Benin, Eritrea, and Nigeria are, however, to sign the agreement, and they are represented in grey. The orange area shows that among the fifty-two countries that have penned their signatures to the ACFTA, only twenty-two countries have ratified the agreement as part of their integration and trade laws (Al Jazeera, 2019). This means that the countries that have ratified it will be bound by the trade policies enshrined in the agreement.
The drive to promote Africa’s identity has been greatly encouraged by intra-African trade and regional integration in the last four decades. Despite the strides taken by different African states to boost their trading relations with fellow African countries, the continent’s total trade volume is accounted for by 16 per cent of intra-African trade. You would have no choice but to wonder why. This poor trading performance is as a result of a mismatch in the need/consumption relationship. Professor Ali Mazrui once said that “Africa produces what it does not consume and consumes what it does not produce.” It is but sacrosanct that our raw materials produced within the continent are meant to feed the hungry industries of more industrialized countries in the developed world. This leaves us as Africans in a position of waiting to receive the second and third class of finished goods whose raw materials are gotten from Africa.
The Continental Free Trade Agreement is key to helping Africa address this mismatch of the need/consumption relationship. For instance, manufacturing industries contribute 10% of Africa’s combined GDP, whereas the contribution of small to medium enterprises (SMEs) to the continent’s overall GDP is at fifty per cent. SMEs also contribute to eighty per cent of Africa’s employment (CGTN America, 2019). The implementation of this agreement will create a level playing field for SMEs across the continent to overlap in different regions of the African market. This will end up creating more jobs, and it will lead to a rapid increase in the production of goods and services that meet the needs and consumption demands of the continent. According to Temi Ibirogba (Program & Research Associate at the Center for International Policy) in an interview with CGTN America, Africa is set to experience a 60% intra-Africa growth rate by 2022 because of the implementation of the free trade area (CGTN America, 2019).
I also believe that the agreement will give the African continent and her people a stronger voice to sit at global economic platforms to negotiate with economic giants of the world. For instance, business, as usual, allows superpower economies to exploit African states when negotiating economic deals because of bilateral relationships. With a single trade area that dictates fair agreements that reflect the African agenda, we stand a chance to face limited exploitation as we face today. On the other hand, African nations have been shackled in the nucleus of trade wars among world economies such as China, the USA, and Russia. Having the largest trade zone in the world would put Africa some steps further in defending her interests, and not falling into the trap of neocolonialism under the guise of development loans and foreign aid.
Could we celebrate our success as a continent if there are no challenges to tackle for our success to be worth celebrating? The answer is no. Our African stories and achievements have been inspired by the shared challenges we have faced and addressed using corporate strategies with similarities that reflect our cultural diversity. This sets the pace with firm conviction that the implementation of the African Continental Free Trade Area agreement has challenges that will obliterate in accomplishment.
Inequality & Disparity
The economies of African states differ in size, yield, and potential. For example, Nigeria, South Africa, and Egypt form a combined fifty per cent of Africa’s overall gross domestic product (CGTN America, 2019). These economic giants have enjoyed their dominance for decades on the African continent. One of the objectives of the ACFTA is to facilitate a better reallocation of resources and enforce continental market access. This will create chaos because countries have maintained their economic priorities for decades and have benefitted based on their terms and aspirations. It is also not clear who determines how these resources are reallocated and the pace at which market access is granted to African countries at the expense of states with more massive production bases looking to export to places where they could get more yields outside of Africa. From another perspective, it would take decades for small African economies to catch up with the bigger ones because the means of production are not equal, and neither is the opportunity of making a profit.
Corruption is a deterrent to development in most African countries. This problem is accompanied by poor fiscal discipline, lack of transparency, and accountability in the daily operations of African governments. Corruption is one problem that affects a country’s ease of doing business index. Having high ease of doing business score encourages entrepreneurs to integrate into and scale across other markets. Entrepreneurs running SMEs, manufacturing industries, and major corporations will be ill-motivated to integrate their business into other economies that have alarming issues of corruption. The corruption perception index is relatively different in countries, and this will create an imbalance that allows the least corrupt African countries to get into trade deals with their counterparts of the same attributes. If the latter becomes the case, it will invalidate the objective of the ACFTA to create a level playing field for African economies.
Job Creation Vs Population
One of the most competitive markets is that of jobs. Africa has a fast-growing population with limited employment and a reduced standard of living. According to the African Union, more jobs will be created by lowering tariffs as part of the implementation of the ACFTA (Al Jazeera, 2019). I stand to refute this because the blueprint for creating more jobs for Africa’s 300 million and more young people is not clearly articulated in the agreement. Let us examine the following issues keenly. The xenophobic attacks against Nigerians and other Africans in South Africa were as a result of unemployment. This happened when the ACFTA was not yet endorsed. With its endorsement, there is going to be an unprecedented increase in intra-African migration, which will also lead to a significant disruption in the job market. Reducing tariffs is not a sustainable strategy to create more jobs and avoid the insecurities that will arise from high unemployment rates in African countries. In actual sense, the ACFTA in itself will generate unemployment across Africa in situations where more skilled workers migrate to displace low-skilled workers from different sectors across the continent.
It is commendable to shower praises and applauds to the AU and the people of Africa for the inception of the ACFTA. However, it is noteworthy for us as Africans to avail ourselves in every step of its implementation because we are the biggest stakeholders who can drive our own development. As we seek to benefit from the opportunities that come with the ACFTA, we must be on our guards to address the numerous challenges that will ambush the continent expectedly and unexpectedly. Mitigating the challenges mentioned about could be a great step to guaranteeing the sustainability and relevance of the ACFTA.
- African Union. (2018). AU Member Countries Create History by massively signing the AfCFTA Agreement in Kigali | African Union. [online] Available at: https://au.int/en/pressreleases/20180321/au-member-countries-create-history-massively-signing-afcfta-agreement-kigali [Accessed 7 March 2020].
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- Kazeem, Y. (2019). Africa’s hope for a historic continental free trade area is off to a shaky start. [online] Quartz Africa. Available at: https://qz.com/africa/1235235/africa-continental-free-trade-area-44-countries-sign-agreement-without-nigeria/ [Accessed 7 Nov. 2019].
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- Youtube.com. (2019). Al Jazeera English | Will Africa’s historic Free Trade Agreement succeed? | Inside Story. [online] Available at: https://www.youtube.com/watch?v=eMXu7KTxmVs [Accessed 2 May 2020].
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Insightful article with great insights on the ACFTA.Great work! Indeed the challenges are inhibiting but we hope that once each country ratifies, there will be enhanced trade across the continent.