The Zimbabwe Independent

Possibilit­ies as the AfCFTA roars to life

- Ceteris Paribus eben mabunda

THE African Continenta­l Free Trade Agreement (AfCFTA ) finally became operationa­l this week following delays due to the ravaging effects of the novel coronaviru­s that is threatenin­g to paralyse the globe.

Initially, the liberalise­d trade on the continent was supposed to start in July 2020 after 54 of the 55 countries signed the agreement.

The trade area is set to be fully operationa­l by 2030 and has the potential of being the world’s biggest free-trade zone by area with a potential market of 1,2 billion people. The continent has a Gross Domestic Product (GDP) of US$3 trillion. This can make the African free trade area, the world largest free zone since the formation of the World Trade Organisati­on.

Intra-African trade under the AfCFTA is expected to grow by over 50%, unlocking exports worth US$84 billion and integratin­g the market beyond national economies through promotion of free movement of investment­s and human capital.

AfCFTA secretary-general Wamkele Mene said, “54 out of 55 countries have signed the agreement; 33 have ratified the agreement and over 40 countries have submitted their offers which signals that Africa is ready to start trading on the basis of new rules and preference­s that will ensure market integratio­n.”

Eritrea is the black sheep while 20 countries including Tanzania, Burundi and South Sudan have signed but are yet to ratify AfCFTA .

Africa’s intra-continenta­l trade accounts for 15% of the total GDP compared to 58% in Asia and slightly over 70% in Europe.

The accord seeks to revolution­ise the low continenta­l trade by eliminatin­g cross-border tariffs on 90% of goods, facilitate free movement of people and capital, promote investment and pave way for a continent-wide customs union.

Several preparator­y initiative­s have been implemente­d to ensure smooth integratio­n and inter-state co-operation for the success of the trade bloc.

So far, 41 countries have submitted tariff offers which outline frameworks on tariff negotiatio­ns. Tariff consultati­ons on provisions and levies are expected to end in July 2021.

For the unhinged trading between buyers and sellers, the Economic Commission for Africa (ECA) launched a businessto-business e-commerce platform — AT EX in 2020.

ECA partnered the African Export-Import Bank (Afreximban­k) which serves as a broker for the payment systems and logistics.

The AfroChampi­ons Initiative led by former South African president Thabo Mbeki and Nigerian billionair­e businessma­n Aliko Dangote in 2020 tabled a U$1 trillion investment fund to support the AfCFTA . The fund is designed to spur infrastruc­ture and industrial investment to unlock AfCFTA ’s 2030 goals.

Market watchers say the pact is a giant leap toward fostering regional economic growth but there are fears that African markets are ill-prepared due to high levels of competitio­n.

Africa is dogged by other challenges such as tariff and non-tariff barriers, poor infrastruc­ture, a weak transporta­tion network, government bureaucrac­y, high levels of corruption and few supportive policies.

Considerin­g the wide disparity in socio-economic developmen­t in Africa, bridging the heterogene­ity gap is also problemati­c.

Over 50% of Africa’s GDP is contribute­d by Egypt, Nigeria and South Africa while six sovereign island nations collective­ly add 1%. The AfCFTA has the greatest income disparity compared to other blocs and more than double the levels witnessed in the Associatio­n of Southeast Asian Nations (ASEAN ) and the Caribbean Community (CAR ICOM).

For the effectual implementa­tion of the AfCFTA , several bottleneck­s have to be addressed such as addressing fair mechanisms in income gaps, improving investment­s in power and infrastruc­ture.

But Africa can learn from the recent protracted conclusion of the Brexit that the triumph of the bloc hinges on the unity of member states.

Mabunda is an analyst and TV anchor at Equity Axis, a leading financial research firm in Zimbabwe. — ebenm@equityaxis.

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