Africa needs AfCFTA to transform its economies post-COVID-19

IN good times, with Europe accounting for around 30% of African trade, there has been little appetite to upset the status quo. In times of economic unease, African nations, like many around the world, have tended to withdraw into themselves rather than pursue broader trading options.

Repeating this pattern for generations, African nations have historically ceded economic power to external actors, remaining price-takers and struggling to develop their own solutions at times of crisis. Change is in the air

A confluence of factors is lining up to shift Africa from the old way of doing things and drive the continent towards greater prosperity and resilience.

The rise of China as an economic force and major partner (19% of Africa’s trade) has given African leaders experience in opening new trade routes and the benefits this brings.

At the same time, regional trading blocs like Sadc, EAC, Comesa or Ecowas have grown in strength as countries became more adept at spotting gaps in their neighbours’ markets and adjusting areas of specialisation to meet demand.

Building on a decade long trajectory towards greater continental integration and more diverse trading relations, the ratification of the African Continental Free Trade Area (AfCFTA) now has the capacity to eliminate the barriers to intra-African trade and establish wide-reaching economic cooperation.

With COVID-19 already hitting African economies, some may question the timing of the free trade area; however, moments of crisis have often served as times for reflection and readjustment.

Economic instability highlights to African governments and businesses their vulnerability to price shocks and interruption to global trade.

Moreover, the effects of the oil price collapse on African nations dependent on commodity exports shows once again the importance of economic diversification. This can only be realised through rich trade between neighbours, which will help countries currently dependent on commodities broaden opportunities for value-added manufacturing. Opportunities already obvious

The opportunities from more integrated and diverse trade across the continent are evident from the benefits already accruing for a select group of trailblasers.

In Francophone West Africa, harmonisation of currency and regulation has demonstrated what regional co-operation can achieve. Trade hubs like Côte d’Ivoire and Senegal have already emerged (measured as a share of total regional imports).

It is, however, on the Anglophone side that resides the largest trading hub. South Africa alone is the source of about 35% of all intraregional imports in Africa (and about 40 percent of intraregional manufacturing imports).