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Post-Covid-19: AFCFTA to Stimulate Economic Growth and Industrial Development in Africa

The African Continental Free Trade Agreement (AfCFTA) focus on the creation of a free trade area covering goods and services on the African continent, with free movement of persons and investments, and thus pave the way for deeper integration on the continent including the customs union and the single market.

The agreement is seen as critical for growth and job creation for the continent over 1.3 billion people, a $3.4 trillion economic bloc and a pathway for new era of development.Intra-Africa trade has been historically low. Africa has missed out on the economic booms that other trade blocs have experienced in recent decades. Three years ago Intra-African exports were 16.6% of total exports, compared with 68% in Europe and 59% in Asia.

The continent already have competing and overlapping trade zones ECOWAS in the west, EAC in the east, SADC in the south and COMESA in the east and south. However, only the EAC, driven mainly by Kenya, has made significant progress toward a common market in goods and services.
Regional economic communities (REC) will continue to trade among during the programme implementation.

This project will also expand intra-African trade through better harmonization and coordination of trade liberalization and facilitation across the RECs and across Africa in general. The AfCFTA is also expected to enhance competitiveness in the industry and enterprise level through exploitation of opportunities for scale production, continental market access and better reallocation of resources.

Coming together for the good

African leaders held an Extraordinary Summit on the African Continental Free
Trade Area (AfCFTA) from 17-21 March 2018 in Kigali, Rwanda, during which the
Agreement establishing the AfCFTA was presented for signature, along with the
Kigali Declaration and the Protocol to the Treaty Establishing the African Economic Community relating to the Free Movement of Persons, Right to Residence and Right to Establishment.
The legally scrubbed documents were signed on 16 May 2018.

In total, 44 out of the 55 AU member states signed the consolidated text of the
AfCFTA Agreement, 47 signed the Kigali Declaration and 30 signed the Protocol on Free Movement. The Agreement
Establishing the African Continental Free Trade
Agreement (AfCFTA) entered
into force on 30 May 2019 for the 24 countries that had deposited their instruments
of ratification. As at 22 July 2019, only Eritrea has yet to sign the consolidated text of the AfCFTA Agreement.

The operational phase of the AfCFTA was launched during the 12th Extraordinary Session of the Assembly on the AfCFTA
in Niamey in July 2019. The AfCFTA will be governed by five operational instruments, i.e. the Rules of Origin; the online negotiating forum; the monitoring and elimination of non-tariff barriers; a digital payments system and the African Trade Observatory.

On 29 April 2019, Sierra Leone
and the Saharawi Republic deposited their instruments of ratification with the depositary, paving the way for the AfCFTA’s entry into force. Nigeria and Benin signed the AfCFTA Agreement during the 12th Extraordinary Session of the Assembly of the African
Union on the AfCFTA in Niamey, Niger on 7 July 2019, which marked the launch of
the operational phase of the AfCFTA Agreement. Of the 55 AU member states, only Eritrea has yet to sign the Agreement.

The 28 countries that have deposited their instruments of AfCFTA ratification with the AUC Chairperson are Ghana,
Kenya, Rwanda, Niger, Chad, Congo Republic, Djibouti, Guinea, eSwatini (former Swaziland), Mali, Mauritania,
Namibia, South Africa, Uganda, Ivory Coast (Côte d’Ivoire), Senegal, Togo, Egypt, Ethiopia, The Gambia, Sierra Leone, Saharawi Republic, Zimbabwe,
Burkina Faso, São Tomé and Príncipe, Gabon, Equatorial Guinea and Mauritius. Cameroon and Angola officially
approved ratification of the AfCFTA Agreement on 31 October 2019 and 28 April 2020, respectively. H.E. Mr. Wamkele Mene was officially appointed the first Secretary General of the Secretariat on 19 March 2020.The AfCFTA Secretariat will be hosted by Ghana.

The Trillion Dollar
Investment Framework

The African Continental Free
Trade Area to fully operationalize through private sector-driven investments
across various sectors on the continent by the year 2030. The objective is to create a private sector led blended-finance vehicle for infrastructure and
strategic projects investments on the continent, through leveraging development finance institutions, banks, credit institutions as well as sovereign and private funds.

This major step would be supported by a set of monitoring and incentive mechanisms to ensure that projects are better prioritized,
adequately funded and deployed in a faster way.
The Framework also envisaged to serve as a broader instrument allowing for better
coordination of public policies while promoting cross-border projects with high impact.

Investment beyond funds

The Commissioner in Charge of Trade and Industry at the African Union Commission, HE Albert Muchanga, said: “AfCFTA is the largest and most ambitious development programmes to be marshalled by the continent. This requires equal resolve in its implementation. The Trillion Dollar Investment Framework has been designed against this background and will promote Public-Private Partnerships in the financing and implementation of the AfCFTA agreement.”

Paulo Gomes, former Executive
Director at the World Bank and member of the AfroChampions Initiative’s Executive Committee said; “With the Investment Framework designed by the AfroChampions Initiative, we would give ourselves the means for genuine economic cooperation to boost inclusive growth; the scheme will greatly intensify African trade, which represents only 17% of trade on the continent.”

“ For over 30 years I have monitored and actively invested in the African market as head of multiple sovereign wealth funds in the Gulf Region. Though opportunities abound, the executional risk has hampered many great ideas. Thanks to AfroChampions’ advocacy, the ‘Trillion Dollar  Investment Framework’ could help to catalyse these investments for all stakeholders ” also added Soud Ba’alawy, Founder of Dubai-based ENSPIRE fund.

All eyes of the world will turn towards Africa after Covid-19 pandemic

The African Continental Free Trade Agreement is seen as one of the possible responses for the continent to the COVID-19 crisis’ economic impact. AfCFTA will foster economic development and wealth creation after the global health crisis. Building long term continental resilience and improving volatility management, through accelerated export diversification in an increased intra Africa trade could be achieved through a rapid and ambitious implementation of the AfCFTA.

The variations in GDP from 2019 to 2020 are huge: Algeria at -5.9 percentage points; Egypt, -3.6; Morocco, -5.9; Nigeria, -5.6; South Africa, -6. Indeed, given the oil and commodity shocks, decreases in labour productivity and total factor productivity, and increased costs of international trade that will particularly hurt smaller economies, Africa is acutely exposed, a report noted.

AfCFTA is an opportunity for countries and companies to help each other grow, as they have done in other regions. But trade liberalization has the potential to damage the economics of the poorest countries, so it is crucial to have supportive policies.

Leading experts on Africa’s development, says the speed and scope of the continent’s Post-COVID-19 recovery will depend on the effective implementation of the African Continental Free Trade (AfCFTA). While trade will enhance economic interdependence of countries and increase the opportunity cost of conflict.

Countries participating in a free trade area easily cooperate on security issues. For instance the Economic Community of
West African States (ECOWAS), which established in 1998 a moratorium on small arms and implemented an import ban on weapons not approved by member states.

Although infrastructure development is on the increase in Africa there is still a long way to go to make trade easier between countries. It is difficult to build a value chain across the continent when there are countless custom stamps, customs signatures and certificates to simply move a container from one country to another. In order to make AfCFTA successful logjams and bureaucracy process should be reduced.

Meanwhile, standardization of regulations is going to be extremely important. Harmonizing regulations such as; one-stop border posts and common rules and harmonizing regulations to ensure that the flow of goods happens far more quickly and easily. Monitoring on a monthly basis will be important to see how the barriers are being dismantled and where gaps remain.

The continent has the opportunity to create a trade buffer for itself. With all countries united in one giant bargaining unit, it will hold far more sway than before.The continent could stride onto the trade negotiation stage as one enormous market. This could lead to a new engine of growth across the continent.

Africa needs to take several steps to boost trade, such as fostering skills for entrepreneurship and providing more access to credit and capital. Business and political leaders will need to think creatively about continental joint ventures to build strong production and manufacturing networks across the continent. Notably, though, the “start trading” on July 1, 2020 has been delayed till next year due to the pandemic, this huge African market has great potential to be a new engine of growth across the continent.

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