A United Nations agency suggests that the African Continental Free Trade Area (AfCFTA) Agreement has the potential both to boost intra-African trade by 52.3 per cent – by 2020 – by eliminating import duties, and to double this trade if non-tariff barriers are also reduced.
The African Union has unveiled the first steps of a nearly continent-wide trade accord, outlining how tariffs within Africa will be phased out to provide a boost to continental economies.
“It’s a remarkable achievement, and one that can even be described as historic,” said AU Commission chief Moussa Faki Mahamat at a summit in Niamey, Niger, on Thursday.
The agreement is hailed as a way to promote intra-African growth by encouraging trade within the continent. It is touted as creating a previously a non-existent space for jobs for youth that cut across borders.
This pact has been a long time coming. Talks began back in 2002 in an effort to find African solutions to African problems.
Phase 1, tariffs
The AfCTA zone will eliminate customs duties on 90 percent of goods. Seven per cent of goods are considered “sensitive”, and not part of the deal, though their tariffs will be eventually phased out. The remaining three percent of tariffs will remain.
Backers of the deal are estimate that it will lead to a 52.3 per cent increase in trade by 2022, an calculation that is not set in stone, according to Archie Matheson, head of policy for the Botho Emerging Markets Group.
“Continent-wide trade facilitation measures have not been introduced; there is not a common external tariff; and full liberalisation – the removal of tariffs on all goods – will not take place under current plans,” he writes in African Arguments.
“The allocation of goods to these different categories has yet to be negotiated; countries and customs unions are currently preparing offers for their continental counterparts to consider.”
The AU has not yet set up a way to settle trade disputes, nor has it hammered out the rules for “Made in Africa” products.
Other issues remain, including lack of infrastructure to carry goods across borders and backlogged border stations that cause delays for perishable goods, such as fruit and vegetables.
Some critics say that many African economies are not diverse enough and rely primarily on climate-dependent agriculture or natural resources, making it difficult to grow trade.
On average, trade done within African nations is only 16 per cent.
The ultimate signatory holdouts to the deal are Benin and Eritrea, but the rest of the 55-member-state AU have signed, including Nigeria, Africa’s largest economy, at the last minute. Some 22 countries have already ratified it into law.
At the summit, the AU is slated to determine where the trade secretariat would be based, with eSwatini and Ghana as the top picks.