A successful implementation of the African Continental Free Trade Area (AfCFTA) agreement would be crucial in helping the continent address challenges posed by the ongoing Covid-19 pandemic, a new World Bank report states.
Among others, the report, "The African Continental Free Trade Area: Economic and Distributional Effects," acknowledges that the Covid-19 pandemic has taken a toll on human life and brought major disruption to economic activity across the world.
Economic growth in Sub-Saharan Africa is projected to decline from 2.4 percent in 2019 to -2.1 percent to -5.1 percent in 2020, the first recession in the past quarter century, according to the World Bank.
As noted, it will cost the region between $37 and $79 billion in terms of output losses for 2020.
"In this context, a successful implementation of AfCFTA would be crucial. In the short term, the agreement would help cushion the negative effects of Covid-19 on economic growth by supporting regional trade and value chains through the reduction of trade costs," reads the report.
In the longer term, it is noted, AfCFTA would allow countries to anchor expectations by providing a path for integration and growth-enhancing reforms.
"Furthermore, the pandemic has demonstrated the need for increased cooperation among trading partners. By replacing the patchwork of regional agreements, streamlining border procedures, and prioritizing trade reforms, AfCFTA could help countries increase their resilience in the face of future economic shocks."
The downward growth revision in 2020, as noted, reflects the macroeconomic risks arising from the sharp decline in output growth among Sub-Saharan Africa’s key trading partners, the fall in commodity prices, the reduced tourism, as well as the effects of measures to contain the pandemic.
The Covid-19 crisis is contributing to increased food insecurity as currencies are weakening and prices of staple foods are rising in many parts of the region.
The pandemic has laid bare the deficiencies in trade facilitation and border management procedures, as many countries have struggled with efforts to keep trade moving while increasing imports of essential supplies and mitigating the spread of the disease.
Assurance trading within AfCFTA is projected to start in January 2021
Prudence Sebahizi, Chief Technical Advisor on AfCFTA at the AU Commission, told The New Times that they got assurances that trading within the AfCFTA can start on January 1, 2021.
The ongoing pandemic with the resultant responses of social distancing, lockdowns and quarantines made it impossible to proceed with outstanding negotiations, he noted.
He added: "The momentum for ratification of the AfCFTA Agreement has slowed down. The national level preparedness for implementation has also been equally affected. As a result, the date for start of trading has been postponed to 1st January 2021."
On June 17, the AU decided to postpone to December 5, 2020 and January 1, 2021, respectively, the Extraordinary Session of the Assembly initially scheduled to be held in South Africa on May 30 this year and the start of trading under the AfCFTA which was initially scheduled to start on July 1.
During these challenging times of Covid-19, Prudence said, a number of initiatives, which have a strong digital dimension, have been put in place in collaboration with African private sector, and other stakeholders to support intra-African trade.
"These initiatives give us the assurance that trading within the AfCFTA can start on 01 January 2021, whilst Africa and the rest of the world gradually recover from the pandemic and physical trade goes back to the pre-Covid-19 levels," Sebahizi said.
"The world has embraced e-commerce and e-government has become part of our lives. The AfCFTA cannot be an exception to that. These tools and initiatives include Africa-driven technology and logistical solutions to the limitations of traditional diplomacy and the concerns of virtual meetings, as well as platforms that will contribute to facilitating trading."
Sebahizi stressed that to help Africa rebuild in the midst of Covid-19 and in its aftermath, the AfCFTA’s supporters must redouble their efforts to negotiate a fully implementable deal by December 2020 not merely in spite of the pandemic but because of it.
The AfCFTA agreement will create the largest free trade area in the world measured by the number of countries participating. The pact connects 1.3 billion people across 55 countries with a combined gross domestic product valued at US$3.4 trillion.