AfCFTA: Trade’s high stakes and big winnings

By The Africa Report
Posted on Thursday, 15 April 2021 16:17

The African Union (AU) Chairperson and Rwandan President Paul Kagame (1st R) delivers remarks at the 10th Extraordinary Session of the Assembly of the African Union (AU) on the African Continental Free Trade Area (AfCFTA) in Kigali, Rwanda, on 21 March 2018.(Xinhua/Gabriel Dusabe)

“I don’t want anybody to be under the illusion this is going to be easy. It’s going to be difficult, but we’ve got to do it,” Wamkele Mene, secretary general of the African Continental Free Trade Area (AfCFTA) told The Africa Report in February.

In any case, if you are a difficult problem, join the continental queue: demography, climate change, jobs…. Trade is no silver bullet. Nevertheless, the engagement of African leaders to create the AfCFTA is one of the most encouraging efforts at driving development in recent decades.

For now, trade between African countries accounts for just 16% of the continent’s trade, compared to 60% for countries trading with each other within the European Union. But the upside goes further than a narrow trade bump, lucrative as that might be; it opens up a common market of 1.2 billion people, with a combined economic weight of $2trn. A fully realised AfCFTA will have structural impacts in both the politics and economics of Africa.

Collective vision

First, the politics. Africa’s borders were a European project, many of them drawn at the Berlin Conference of 1884. West African countries, for example, often have ethnic groups running along horizontal bands up from the coast, with vertical borders locking in political tensions.

There is a real desire among African leaders to get beyond this complicated heritage and embark on a new collective path – one that will give them heft at the international level. For South Africa’s President Cyril Ramaphosa, speaking at the signing ceremony, it was a “historic moment which was dreamt of by the founding fathers of the African Union.”

Given this global moment of often ugly nationalism, it may be time to take a lesson from Africa. But it is also intensely important for the continent to grapple with those great challenges mentioned above – demography, climate change, jobs – in this small window, before rising temperatures and robotics close off the old routes to prosperity. A free-trade zone can be the start of something more profound, as European leaders realised in the 1960s.

Other issues become more tractable when placed in a trade framework. The Sahel’s security problem won’t be fixed by free trade, but the overarching frameworks of security dialogue and strengthening state capacity are mutually reinforcing. Success in the AfCFTA is low-hanging fruit that can be parlayed into more and deeper integration efforts, which will be vital in confronting future challenges.

Next the economics. African leaders argue that the AfCFTA can also be the launchpad for an extended period of prosperity. Stand at the Kasumbalesa border post between the DRC and Zambia today, and truckloads of minerals rumble by, which “keeps Africa trapped in [a] colonial model of economic trajectory,” says Mene.

Tomorrow, when investors can see a common market for goods in Central Africa, those raw materials can be processed on site to target consumers – a structural economic change that can benefit farmers and small businesses, not just capital-­intensive mining companies.

“Everybody wants [to see] Africa industrialising. Everybody wants to see a digital economy on the continent. Everybody wants to see the continent leapfrogging into the Fourth Industrial Revolution,” Mene says.

An oil for many cogs

If Nigeria’s trading relationships were better mapped out, perhaps the beef value chain would aid the emancipation of herding communities, instead of being a cause of conflict. If Djibouti and Ethiopia had better common frameworks for trade, perhaps logistics would not be the stumbling block it currently is to a booming Ethiopian textile sector.

Traditionally, trading activities have created the initial capital needed for companies to tool up. Growing trade flows will only accelerate this process. Trade has also often been a strong employer of youth, especially in logistics. The knock-on economic impacts on agriculture will also be profound. Malaysia’s fresh produce sector bloomed when Singapore made it simpler to transport fruit and vegetables across the border.

There are also huge obstacles to overcome. Big countries are not keen to sign up for the principle of the free movement of people, for instance.

There is a certain irony in having the AfCFTA secretariat in Ghana, which is itself in a trade tussle with Nigeria, whose closed-border policy hardly augurs well for a new continental era of openness. But what better place to start fixing the problem?

Understand Africa's tomorrow... today

We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.

View subscription options