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Sunday, January 17, 2021 /07:00
AM / by FDC Ltd/ Header Image Credit: FT
AfCFTA's
secretariat says adoption will be slow as many nations lack border facilities.
In 2019, 14.4% of official African exports went to other African countries, a
small proportion compared with the 52% in intra-Asian trade, according to
Afreximbank.
Most
African countries are not ready to implement the terms of the African
Continental Free Trade Area when the new zone comes into effect on January 1,
according to the head of the trade bloc's secretariat.
Fifty-four
African nations have committed to join AfCFTA but of the 33 countries to have
ratified the agreement so far, many lack the customs procedures and
infrastructure to facilitate tariff-free trade, said Wamkele Mene,
secretary-general of the AfCFTA secretariat.
"It's
going to take us a very long time," said Mr Mene, a South African trade expert
elected by the African Union last February. "If you don't have the roads, if
you don't have the right equipment for customs authorities at the border to
facilitate the fast and efficient transit of goods... if you don't have
the infrastructure, both hard and soft, it reduces the meaningfulness of this
agreement."
Mr
Mene insisted that the free trade area, which covers a population of 1.2bn and
countries with combined output of $2.6tn, could still be transformative. "We
want to move Africa away from this colonial economic model of perpetually being
an exporter of primary commodities for processing elsewhere," he said. "We want
to stop approaching tariffs as a tool for revenue. We want tariffs to be a tool
for industrial development."
In
2019, 14.4% of official African exports went to other African countries, a
small proportion compared with the 52% in intra-Asian trade and 73% between
European nations in the same year, according to Afreximbank, a Cairo-based
multilateral trade finance institution.
"We
want to stop approaching tariffs as a tool for revenue. We want tariffs to be a
tool for industrial development"- Wamkele Mene, secretary-general of the AfCFTA
secretariat
David
Luke, who co-ordinates trade policy at the UN Economic Commission for Africa,
said that goods traded within Africa were more processed than the raw materials
exported from the continent to China, India, Europe and other major trading
partners.
"Policymakers
have understood that, although trade on the continent is limited, this is
valueadded trade," he said. "This is where the jobs are coming from, as opposed
to trade with the rest of the world, which is mostly commodities."
Trade
experts said the single market also offered investors potential economies of
scale, enabling them, in theory, to manufacture goods in one country and export
them tariff-free to the whole
continent. Jeffrey Peprah, chief executive of Volkswagen, Ghana, said he hoped
eventually to export cars assembled in Accra to other West African countries.
Mr
Mene warned it might take years to bring countries' laws into line with new
requirements. Ethiopia, for example, prohibited foreign investment in its
financial sector, a potential breach of AfCFTA rules, he said. As a result, the
secretariat could see a flurry of legal challenges from countries on behalf of
their corporations, he said. "I'm not saying countries must rush to dispute
settlement. All I'm saying is that, if they do, the jurisprudence will bring
clarity to the body of trade law that we've developed in the form of this
agreement."
For
the agreement to work, one western diplomat said the free trade zone must
benefit producers in smaller, poorer countries as well as those in more
industrialized parts of the continent. Many countries saw the free trade area
as a way of boosting their exports but few had embraced the corollary that they
would need to import more, the diplomat said. Mr Mene said the secretariat was
working with Afreximbank to establish a pan-African trading platform to allow
smaller enterprises to trade effectively across borders and in different
currencies. "Often in trade agreements the big winners are the already
industrialized countries and the big corporations who can access the new
markets literally overnight," he said.
If
AfCFTA created too many losers and not enough winners, Mr Mene said, there
could be a similar backlash against free trade as had occurred in the US and
parts of Europe. Then Africans too would conclude, he said, "these trade
agreements don't work".
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