The African Continental Free Trade Area (AfCFTA) agreement is set to officially be launched when African leaders gather in Niger in July.
Already, the agreement has received 52 signatories with only three countries (Benin, Nigeria and Eritrea) yet to sign, while 24 have ratified it. The agreement came into force on May 30.
The AfCFTA operalisation will make the bloc the largest free trade area since the creation of the World Trade Organisation (WTO) in 1995.
Experts attending the Eisenhower Fellowships Africa Regional Conference in Kigali on Friday said the agreement is a big deal for the continent but warned there was a lot to be done to fully leverage it.
According to Fatima Kyari Mohammed, the African Union Ambassador at the United Nations, when the AU was being established as the Organisation of the African Unity (OAU) over 50 years ago, the focus was different from what it is today.
“It was more about independence and liberation to ensure that our countries are able to move away from the colonial era. After that, in 2002 when the organisation was reformed to become the African Union the focus became more about regional integration and developing Africa from within,” she said.
That, she added, informed the beginning of the Agenda 2063, Africa’s ambitious development agenda, and the establishment of the African Continental Free Trade Area.
The AfCFTA is expected to create an integrated and competitive market of 1.2 billion people on the continent with an aggregated GDP of 3.4 trillion dollars. This is through liberalisation of trade in goods and services.
“It will help us create policy space for industrialisation, economic structural transformation, regional integration, and of course allow informal cross border trade to thrive,” Mohammed said.
Nkosana Moyo, a former Minister of Industry and International Trade in Zimbabwe, however argued that it will take more work for Africa to fully leverage the agreement, emphasising the need for leaders to deliver on the AfCFTA promise.
“More often than not we don’t have honest conversations when we are discussing African situations. We have plenty of policy actions in Africa that drawers are overrunning, but the question is always delivery,” he observed.
Moyo added that there is a necessitate to have leaders who don’t just talk but leapfrog from the front, saying that will make Africans benefit more from the desired integration that the AfCFTA seeks to create.
What else should be done?
Samaila Zubairu, the Chief Executive Officer of Africa Finance Corporation, reckons that until the continent addresses the existing infrastructure deficit it will not be able to drive free trade.
“The (infrastructure) deficit in Africa is $93 billion annually. That happens because we are not able to mobilise capital into the continent,” he noted, highlighting that the continent needs billions of dollars in water and sanitation, energy and transport and logistics.
Zubairu indicated that the lack of infrastructure doesn’t allow the continent to trade.
“It is cheaper to import from Taiwan and China into Cameron and Benin than it is to move (goods) from Nigeria into Cameron and Benin – neighbouring countries. This is a practical reality we have to change before we can have a free trade area,” he noted.
Recently, the African Development Bank (AfDB) estimated that the continent’s infrastructure needs amount to $130–$170 billion a year, with a financing gap in the range $67.6-$107.5 billion.
Zubairu suggests setting up predictive regulatory frameworks that motivate people to invest in these infrastructure as well as enable capital to flow into the continent. That, he added, will facilitate African integration.
Kimball Chen, the Chairman of Energy Transportation Group, believes that investing in infrastructure is critical to drive the agenda, highlighting that currently 600 million people in Africa need access to energy – a prerequisite for trade, industrial development and growth..
However, he also thinks slow enforcement of regulations – compliance and safety standards, among others – could be a major hindrance to progress.
But Geetha Tharmaratnam, a Partner at LGT Impact, an impact investment firm, emphasised that mobilising investment for small and medium-sized enterprises will be critical moving forward.
“Capital is currently flowing where risk is least – in already established businesses. We need to mobilise capital for small and medium-sized businesses if we want to move forward as a continent,” she argued.