AfCFTA timeline starts to count in July

That will be decided during the forthcoming African Union meeting slated to take place in the next three months, according to the officials who gathered in Arusha on Thursday 25th April, 2019.

The proposed African Continental Free Trade Area is not simply a `Free Trade Agreement` it is about establishing a unified continental market with 1.2 billion potential customers and where the private sector is the major engine to make it happen.

This was the tone from the discussions of the meeting held in Arusha about how the East African Private Sector including Small and Medium Enterprises (SMEs) could benefit from the African Continental Free Trading Area (AfCFTA)

The one-day meeting, organized jointly by the East African Business Council (EABC) and the United Nations Economic Commission for Africa (ECA), convened close to 40 key players from the region`s private sector. The office for Eastern Africa of ECA estimates large potential gains from the AfCFTA, including an increase in intra-African exports of Eastern Africa by nearly Tshs.2.3 trillion ($1 billion) and the job creation of 0.5 to 1.9 million.

`Together African economies have a collective GDP of $2.5 trillion, making it the eighth largest economy in the world. That makes the continent much more attractive to investment, both from within and from outside the continent, ` said Andrew Mold, acting Director of ECA in Eastern Africa. `This should encourage business people to take advantage of AfCFTA and make the investments necessary to sustain economic growth and create employment.`

Nick Nesbitt, Chairman of EABC, emphasized the importance of the continent having a clear vision to put an end to the fragmentation of the internal market. `I really applaud everybody who has been involved in creating the AfCFTA because their vision is the one of Pan-Africanism. It is something our founding fathers aspired for a long time. Our thanks to ECA for being at forefront of this conversation and pushing the agenda forward so that the continent becomes a single economic trading bloc, ` he said.

Kenneth Bagamuhunda, Director General of Customs and Trade at the East African Community Secretariat, cited the experience of Regional Economic Communities as the building blocks for the AfCFTA. `The AfCFTA should build on what has already been achieved in regional negotiations like the Tripartite Free Trade Area, as well as within our respective regional blocks,` he said. Bagamuhunda also highlighted governments need to set a conducive environment for the successful implementation of AfCFTA.

The AfCFTA was signed in March 2018, at a historic meeting of the African Union in Kigali. 52 of 55 African Union member states have so far signed the AfCFTA, 22 countries that have ratified the agreement, which was the minimum number for it to enter into force. It seeks to create the largest trade zone in the world, increase intra-African trade by 52% by the year 2022 and remove tariffs on 90% of goods.

A summary of AfCFTA’s progress

  • 52 countries have signed the AfCFTA agreement
  • 22 countries have ratified the agreement as of April 2,2019
  • 15 countries have deposited their instruments of AfCFTA ratification with the AU
  • 7 countries including Gambia have received parliamentary approval for ratification but are yet to deposit instruments with AU.
  • Eritrea, Nigeria and Benin are yet to sign the AfCFTA agreement
  • The AfCFTA Agreement will enter into force; 30 days after the required number of ratifications have been deposited with the AU.

Also read:Africa’s move to push for cheaper, faster trade

EAC to exploit the $1.2 billion continental market after AfCFTA ratification

Members of East Africa`s private sector including small and medium size enterprises are preparing to exploit the over Tshs.2.7 trillion ($1.2 billion) continental market after endorsement of African Continental Free Trade Area (AfCTA).

At their meeting in Arusha on Thursday 25th April,2019, members of East Africa Business Council (EABC) who teamed up with United Nations Economic Commission for Africa (ECA) said they foresee large potential gains from the AfCFTA, including an increase in intra-African exports of Eastern Africa by nearly Tshs.2.3 trillion ($1 billion) and job creation of 0.5 to 1.9 million

`Together African economies have a collective gross domestic product (GDP) of $2.5 trillion, making it the 8th largest economy in the world. That makes the continent much more attractive to investment, both from within and from outside the continent, ` said Andrew Mold, the acting Director of ECA in Eastern Africa.`This should encourage business people to take advantage of AfCFTA and make the investments necessary to sustain economic growth and create employment, ` Mold added.

EABC Chairman, Nick Nesbitt emphasized the importance of the continent having a clear vision to put an end to the fragmentation of the internal market. `I really applaud everybody who has been involved in creating the AfCFTA because their vision is the one of pan-Africanism,` Nesbitt said. `It is something our founding fathers aspired to. Our thanks to ECA for being at forefront of this conversation and pushing the agenda forward so that the continent becomes a single economic trading bloc, ` he added.

Speaking at the same gathering, Director General of Customs and Trade at the East African Community Secretariat, Kenneth Bagamuhunda cited the experience of regional economic communities as the building blocks for the AfCFTA.

`The AfCFTA should build on what has already been achieved in regional negotiations like the tripartite free trade area, as well as within our respective regional blocks, Bagamuhunda said. He also highlighted governments need to set a conducive environment for the successful implementation of AfCFTA.

The AfCFTA was signed in March 2018, at a historic meeting of the African Union in Kigali. 52 of 55 African Union member states have so far signed the AfCFTA (Eritrea, Nigeria and Benin are yet to sign the agreement) , 22 countries have ratified the agreement, which was the minimum number required for it to enter into force. Gambia`s parliament approved the AfCFTA on Tuesday 23rd April,2019, becoming the 22nd nation to do so, and effectively meeting the minimum threshold for the agreement to come into force.

The AfCFTA seeks to create the largest trade zone in the world, increase intra-African trade by 52% by the year 2022 and remove tariffs on 90% of goods.

Also read: Africa’s move to push for cheaper, faster trade

Why Central Africa is dragging Africa’s growth

Central Africa remains one of the continent’s least integrated regions due mostly to an infrastructural deficit and several other barriers

Intra-African trade is expected to grow by 52 per cent by 2022 once the Africa Continental Free Trade Agreement (AfCFTA) comes into force in all the African countries.

The AfCFTA is expected to see the removal of tariffs on 90 per cent of goods.

And with this, countries which have not been big players on the continental stage will gain some advantage. Some of these countries are in Central Africa which includes Cameroon, Central African Republic, Chad, Congo, Democratic Republic of Congo, Equatorial Guinea and Gabon.

Increasing economic growth in Central Africa

According to a report by the African Development Bank (AfDB), GDP growth rate in Central Africa accelerated slightly to hit 2.2 per cent from 1.1 per cent in 2017.

However, this remained below the African average of 3.5 per cent.

In 2018, the Central African countries’ growth was driven primarily by the rebound in raw material prices, principally oil.

Real GDP is projected to grow by 3.6 per cent in 2019 and 3.5 per cent in 2020 if Central Africa takes advantage of global economic growth, rising oil prices, macroeconomic reforms and natural resources.

Challenges to Central Africa’s growth

The Central African region faces several challenges among them the security situation; a possible economic downturn linked to a fall in oil prices and the need for economic diversification, improvements to the business climate and governance, and the development of human capital.

The report by AfDB says that in general, Central Africa remains one of the continent’s least integrated regions due mostly to an infrastructural deficit, tariff and nontariff barriers, low economic diversification and weak human capacity.

After the election, there was speculation that the DRC was mulling joining the EAC but no official stand has been communicated regarding this.

Volatile security and political instability

Several multifaceted conflicts for the control of natural resources or involving armed gangs characterize a volatile security situation and political instability.

Central Africa’s fragility is caused by the lack of good governance and structures to guide the exploitation of resources equitably.

These conflicts have been exacerbated by countries’ inability to tackle insecurity and reconstruction, high poverty and governance deficit, according to the AfDB report.

The Central African Republic, Chad and the Democratic Republic of Congo are the three countries considered the most fragile in Central Africa.

The four other countries may be seen as more resilient, though they have pockets of fragility.

Establishing a Central Africa common market

Effective regional integration would increase business and investment flows and stimulate the development of national markets.

This would help mitigate institutional and infrastructural deficiencies and spark structural transformation that would encourage fair and sustainable development and reduce fragility.

To boost this structural transformation through regional integration, Central Africa should develop human capital, add value through infrastructure, improve commercial potential, promote an investment climate for private sector development, and establish a common market.

Central Africa is having difficulty prospering despite the legislation and various treaties and institutions established to govern regional integration.

Implementation failures by member states, exogenous shocks, internal conflicts, natural resource dependence, poor economic diversification and security issues continue to be obstacles.

Yet, regional integration is clearly a path to the structural transformation that, in turn, should reduce factors of fragility in the region, notes the report.

Integrating Central Africa for economic growth

The report notes that fragility is closely linked to the poor governance of the region’s natural resources, recurrent security issues and political instability.

It adds that strengthening the resilience of the countries in the region is essential to achieving inclusive growth.

The report recommends accelerating economic diversification of member states to reduce fragility due to exogenous shocks.

It also proposes developing a financial system to promote inclusive finance and entrepreneurship, especially among young adults and women.

It also calls for the re-establishment of the rule of law and institutional order in fragile states.

The report also recommends strengthening the connectivity of infrastructure for electricity, transportation and information and communication technology.

Combining strengths among countries to develop human capital and enhance countries’ comparative advantages is highlighted as one of the ways to help increase growth.

The report also recommends formulating an effective strategy to implement and monitor regional integration projects and accelerating the conditions for the creation of the future continental free trade area.

With the ratification of the AfCFTA, the UN Economic Commission for Africa (ECA) says the trade agreement will be the world’s largest free trade zone by the number of countries if ratified by all the 55 African countries.

ECA says that once operational, AfCFTA will boost the level of intra-Africa trade in excess of 52 per cent by the year 2020.

The Central Africa Region can reap the benefits from the trade agreement which could see its economy surpass the projections.