Africa free-trade vision clouded
The African Continental Free Trade Agreement (AfCFTA) was supposed to take operational effect yesterday.
01 July 2020 | Economics
African countries themselves being highly indebted means integration is going to take much longer to really be achieved. - Lumkile Mondi, Senior lecturer: Wits
David Esnault and Robbie Corey-Boulet - A historic deal to smash down tariff barriers within Africa is being braked by the coronavirus pandemic and a thicket of negotiating problems.
The African Continental Free Trade Agreement (AfCFTA) was formally launched just over a year ago in a blaze of optimism.
The accord - styled as the biggest free-trade accord in the world in terms of population - gathers 54 out of 55 African countries, with Eritrea the only holdout.
It aims to phase out all tariffs on commerce on the continent of 1.2 billion people, a goal that backers say could give trade a mega-jolt as only 15% of trade by African nations is with continental neighbours compared to 70% with Europe.
It was supposed to take operational effect yesterday, July 1, but the timeline has slipped, under the complications caused by the Covid-19 outbreak but also the slow pace of negotiations themselves.
"Everybody can see, objectively, nothing can be done on the 1st of July," AfCFTA's brand-new secretary general, Wamkele Mene of South Africa, told AFP.
"Forty-two countries out of 55 in Africa are either in full or partial lockdown."
New date
A new date for January 2021 has been proposed by ambassadors at the Africa Union's headquarters in Addis Ababa. The recommendation has yet to be adopted by heads of state.
Mene cautioned that the proposed date is itself subject to change.
"It really all depends on the pandemic," he said.
Mene, who was sworn in in March, himself works in Addis, as AfCTA's headquarters in Accra, Ghana, have yet to open because of the pandemic.
Talks on the AfCFTA got underway in 2002 and inched towards an agreement that officially began life on May 30, 2019 after it crossed a threshold of ratification by at least 22 countries.
That number has edged up to 28, and includes economic heavyweights such as South Africa and Egypt, and middleweights including Morocco, Kenya and Ivory Coast.
But Nigeria - the most populous country in Africa, with around 200 million people - still has not ratified, nor have Algeria or energy exporter Angola.
"I know that Nigeria is committed to the agreement that we signed for the AfCFTA but of course Covid-19 has caused a delay in almost everything," Nigerian finance minister Zainab Ahmed said.
"So, we may have to revisit the effective period for which this will start."
In a shock move last August, Nigeria dramatically closed off its borders with neighbours, a move that it said aimed at preventing smuggling.
But the step was carried out unilaterally and breached free-trade agreements among members of the 15-member Economic Community of West African States (ECOWAS).
In addition to this worrying mood music from a country that was an enthusiastic backer at the dawn of the AfCFTA process, the effort to breathe life into the pact is a huge negotiation task.
Big questions remain
Among the big questions that have to be thrashed out are the rules of origin - the identification of the contents of a product that are the nuts and bolts of any free-trade accord - and detailed timetables for scaling back tariffs.
Then there is the task of figuring out how AfCFTA should dovetail with eight existing regional organisations in Africa, such as ECOWAS and the six-nation East African Community (EAC).
"The regional economic communities remain, including the customs unions in Africa such as the EAC, ECOWAS and so on," said Mene.
"They remain with their intra-regional obligations that they have to one another. We build on the liberalisation and the progress that those regional economic communities have achieved already."
He said negotiations aim to scrap customs duties on 97% of products within 15 years.
According to the International Monetary Fund (IMF), this would encourage intra-African trade to rise by around 16% - an additional US$16 billion - annually.
AfCFTA has raised fears of a destructive impact on small manufacturers and family farms if borders are fully opened to imports.
Progressive phase-out
With such concerns in mind, a more progressive phase-out is being envisaged for less developed economies.
Tariffs on intra-African trade average 6.1% more than on exports to non-African countries.
But Lumkile Mondi, a senior lecturer at the University of the Witwatersrand in South Africa, said duty elimination is only one piece of Africa's coveted single market.
Non-tariff bottlenecks to trade include poor infrastructure.
Europe's internal market, constructed painfully over decades, has been knitted together by motorways, railways, flight routes, energy pipelines, telecom networks and so on.
In Africa, debt levels will be a handicap to creating these crucial links, said Mondi.
"African countries themselves being highly indebted means integration is going to take much longer to really be achieved," he said. – Nampa/AFP
The African Continental Free Trade Agreement (AfCFTA) was formally launched just over a year ago in a blaze of optimism.
The accord - styled as the biggest free-trade accord in the world in terms of population - gathers 54 out of 55 African countries, with Eritrea the only holdout.
It aims to phase out all tariffs on commerce on the continent of 1.2 billion people, a goal that backers say could give trade a mega-jolt as only 15% of trade by African nations is with continental neighbours compared to 70% with Europe.
It was supposed to take operational effect yesterday, July 1, but the timeline has slipped, under the complications caused by the Covid-19 outbreak but also the slow pace of negotiations themselves.
"Everybody can see, objectively, nothing can be done on the 1st of July," AfCFTA's brand-new secretary general, Wamkele Mene of South Africa, told AFP.
"Forty-two countries out of 55 in Africa are either in full or partial lockdown."
New date
A new date for January 2021 has been proposed by ambassadors at the Africa Union's headquarters in Addis Ababa. The recommendation has yet to be adopted by heads of state.
Mene cautioned that the proposed date is itself subject to change.
"It really all depends on the pandemic," he said.
Mene, who was sworn in in March, himself works in Addis, as AfCTA's headquarters in Accra, Ghana, have yet to open because of the pandemic.
Talks on the AfCFTA got underway in 2002 and inched towards an agreement that officially began life on May 30, 2019 after it crossed a threshold of ratification by at least 22 countries.
That number has edged up to 28, and includes economic heavyweights such as South Africa and Egypt, and middleweights including Morocco, Kenya and Ivory Coast.
But Nigeria - the most populous country in Africa, with around 200 million people - still has not ratified, nor have Algeria or energy exporter Angola.
"I know that Nigeria is committed to the agreement that we signed for the AfCFTA but of course Covid-19 has caused a delay in almost everything," Nigerian finance minister Zainab Ahmed said.
"So, we may have to revisit the effective period for which this will start."
In a shock move last August, Nigeria dramatically closed off its borders with neighbours, a move that it said aimed at preventing smuggling.
But the step was carried out unilaterally and breached free-trade agreements among members of the 15-member Economic Community of West African States (ECOWAS).
In addition to this worrying mood music from a country that was an enthusiastic backer at the dawn of the AfCFTA process, the effort to breathe life into the pact is a huge negotiation task.
Big questions remain
Among the big questions that have to be thrashed out are the rules of origin - the identification of the contents of a product that are the nuts and bolts of any free-trade accord - and detailed timetables for scaling back tariffs.
Then there is the task of figuring out how AfCFTA should dovetail with eight existing regional organisations in Africa, such as ECOWAS and the six-nation East African Community (EAC).
"The regional economic communities remain, including the customs unions in Africa such as the EAC, ECOWAS and so on," said Mene.
"They remain with their intra-regional obligations that they have to one another. We build on the liberalisation and the progress that those regional economic communities have achieved already."
He said negotiations aim to scrap customs duties on 97% of products within 15 years.
According to the International Monetary Fund (IMF), this would encourage intra-African trade to rise by around 16% - an additional US$16 billion - annually.
AfCFTA has raised fears of a destructive impact on small manufacturers and family farms if borders are fully opened to imports.
Progressive phase-out
With such concerns in mind, a more progressive phase-out is being envisaged for less developed economies.
Tariffs on intra-African trade average 6.1% more than on exports to non-African countries.
But Lumkile Mondi, a senior lecturer at the University of the Witwatersrand in South Africa, said duty elimination is only one piece of Africa's coveted single market.
Non-tariff bottlenecks to trade include poor infrastructure.
Europe's internal market, constructed painfully over decades, has been knitted together by motorways, railways, flight routes, energy pipelines, telecom networks and so on.
In Africa, debt levels will be a handicap to creating these crucial links, said Mondi.
"African countries themselves being highly indebted means integration is going to take much longer to really be achieved," he said. – Nampa/AFP
Classifieds