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Most African countries are not ready to implement the terms of the African Continental Free Trade Area when the new zone takes effect on January 1, according to the head of the trade bloc’s secretariat.
Fifty-four African countries have pledged to join the AfCFTA, but of the 33 countries that have ratified the agreement so far, many lack the customs procedures and infrastructure to facilitate duty-free trade, said Wamkele Mene, secretary general of the the AfCFTA secretariat.
“It will take a long time,” said Mene, a South African trade expert chosen by the African Union last February. “If you don’t have the roads, if you don’t have the right equipment for the 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, the importance of this agreement is reduced. ”
Mene insisted that the free trade area, which covers a population of 1.2 billion and countries with a combined output of 2.6 trillion dollars, could still be transformative.
“We want to move Africa away from this colonial economic model of being a perpetual exporter of commodities for processing elsewhere,” he said. “We want to stop addressing fees as a tool to generate income. We want tariffs to be a tool for industrial development ”.
In 2019, 14.4 percent of official African exports went to other African countries, a small proportion compared to 52 percent in intra-Asian trade and 73 percent between European nations in the same year, according to Afreximbank. , a multilateral trade finance institution.
David Luke, who coordinates trade policy at the UN Economic Commission for Africa, said that goods traded within Africa were more processed than raw materials exported from the continent to China, India, Europe and other major trading partners. .
“Policy makers have understood that although trade on the continent is limited, it is about value-added trade,” he said. “This is where jobs come from, as opposed to trade with the rest of the world, which is primarily commodities.”
Trade experts said the single market also offers investors potential economies of scale, allowing them, in theory, to manufacture goods in one country and export them duty-free across the continent. Jeffrey Peprah, CEO of Volkswagen, Ghana, said he hoped to eventually export Accra-assembled cars to other West African countries.
Mene warned that it could take years to adapt country laws to the new requirements. Ethiopia, for example, banned foreign investment in its financial sector, a possible violation of AfCTFA rules, he said.
As a result, the secretariat could see a number of legal challenges from countries on behalf of their corporations, he said. “I am not saying that countries should rush to dispute resolution. All I’m saying is that if they do, the case law will bring clarity to the body of business law that we have developed in the form of this agreement. “
For the deal to work, a Western diplomat said the free trade zone must benefit producers in the smallest and poorest countries, as well as those in the most industrialized parts of the continent. Many countries saw the free trade area as a way to boost their exports, but few had accepted the corollary that they would need to import more, the diplomat said.
Mr Mene said that the secretariat was working with Afreximbank to establish a pan-African trading platform that would allow smaller companies to trade effectively across borders and in different currencies. “Often times, in trade deals, the big winners are already industrialized countries and large corporations that can access new markets literally overnight,” he said.
If the AfCFTA created too many losers and not enough winners, Mene said, there could be a backlash against free trade similar to what had occurred in the United States and parts of Europe. Then Africans would also conclude, he said, that “these trade agreements don’t work.”
