Editorial:Will Africa’s free-trade area live up to the hype?

Wednesday, July 24, 2019

Africa is moving towards a more integrated, rules-based trade regime, but this is unlikely to transform the continent’s economic prospects.

Africa’s largest trade agreement, the African Continental Free Trade Area (AFCFTA) agreement, has been hailed as a game-changer for intra-African trade. If properly implemented, it could provide a framework to ease the cost of doing business in Africa, but until the continent addresses nontariff barriers, such as infrastructure backlogs and border corruption, it is likely to fall far short of expectations.

This hasn’t stopped African countries from hyping up the agreement as a significant milestone on the road to creating a single African market and a single-currency union.

Various reports suggest that as a large, unified market of up to 1.2-billion people, the AFCFTA could attract up to $4-trillion in consumer spending and business investment; boost intra-African trade by 33%-52%, depending on the degree of tariff liberalisation; and generate a cumulative $3.4-trillion gain in GDP over the long term.

Intra-African trade is dismal at present, hamstrung by border delays and infrastructural constraints that account for the high logistics costs associated with doing business on the continent. The upshot is that intra-African trade accounts for only about 16% of Africa’s trade with the rest of the world, compared with 25% for Latin America and almost 50% for Asia.

The AFCFTA is supposed to forge a single continental legal regime for trade matters. It should include substantially lower tariffs, simplified rules of origin and customs procedures, and regulations for trade in services, as well as the remedies to use when these trade rules are broken.

However, the enforcement of a rules-based trading regime will depend on effective monitoring as well as African trading partners pursuing dispute settlement cases against one another, something they’ve traditionally shied away from.

SA- with its relatively diversified industrial export base on a continent where most countries still export primary commodities — should be one of the biggest winners from a continent-wide free-trade agreement, if implemented properly.

However, though the AFCFTA agreement came into force on May 30 for SA and the other 23 early adopters, there are as yet no tariff schedules, no rules of origin and no rules for specific services sectors to regulate trade between the signatories.

A Guest Editorial