AfCFTA fraught with hurdles
There is no question that the goals of the African Continental Free Trade Area (AfCFTA) are laudable given its aim of increasing trade on the continent, potentially creating a market with a combined GDP of $2.5-trillion.
Estimations by the IMF indicate that AfCFTA could result in a 2%-4% increase in the continent’s combined GDP and make a dent in alleviating poverty and creating employment. Manufacturing, for example, could potentially double in size, creating millions of new jobs.
INFRASTRUCTURE
The African Development Bank has noted increased investment into Africa as a result of AfCFTA. It announced that infrastructure investment in Africa had increased in 2018 to more than $100bn, with about a quarter of that amount coming from China. A reliable infrastructure network, particularly an improved road network, more efficient ports and a reliable source of energy are essential if increased trade is to be realised.
However, to succeed, AfCFTA needs to overcome more than just improving its infrastructure. Many lowincome African countries will initially have reduced fiscal resources once trade tariffs are eliminated.
TRUST IMPERATIVE
Trust between members of AfCFTA is imperative if the initiative is to succeed. The agreement has already been tested with tension between two of the continent’s largest economies, SA and Nigeria, at a recent African Union summit to decide on the first secretary general of the AfCFTA.
Both SA and Nigeria had candidates in the final three with SA’s candidate ranked as the panel’s first choice.
Nigeria, however, refused to withdraw its candidate, resulting in several rounds of voting before SA’s candidate, Wamkele Mene, was confirmed as the first AfCFTA secretary general.
BORDERS CLOSED
In August 2019 Nigeria closed its borders to trade with neighbouring countries, ostensibly in a bid to halt the smuggling of food products.
The ban, however, meant all imports and exports with its neighbours came to a grinding halt.
Nigeria was one of the last countries to sign the AfCFTA agreement but has yet to ratify it. In a recent CNBC interview Niyi Adebayo, Nigeria’s trade minister, said the country’s National Action Committee would not recommend ratifying the AfCTFA agreement unless they were certain the trade policy won’t hurt local industries.