Analysis: EDWIN MAKUYA
THE signing of the African Continental Free Trade Agreement (AfCFTA) on March 21, 2018 at the just-ended African Union Extra-Ordinary Summit in Kigali, Rwanda, signified a new era for trade for the bustling African continent with a population of over 1.6 billion people.
It was a memorable day for the people of Africa. AfCFTA implies transforming Africa into a Free Trade Area (FTA) thereby creating a single African Market which allows free movement of goods, services and natural persons. This action drives us towards “the Africa we want” (Agenda 2063).
So then what is the significance of this AfCFTA and how will it benefit ordinary African people?
It is projected that AfCFTA will increase intra-African trade by 52 percent by 2022, and build an integrated market in Africa that will see a market of over 1 billion people with a GDP of approximately US$2.6 trillion.
The AfCFTA is also foreseen to provide an opportunity to create larger economies of scale, a bigger market and improve the prospects of the African continent to attract investment. It will also result in harmonisation of customs documentation and processes thus enhancing trade facilitation.
At the agenda of the AU summit was three important legal instruments that all 55 member states were required to sign and signify the launch of the AfCFTA. These documents were; the AfCFTA, Protocol on the Free Movement of Natural Persons and the Kigali Declaration. At the end of the extraordinary summit 44 of 55 member states signed the AfCFTA.
AU current chairperson and Rwandan President Paul Kagame stated in his speech that “the task going forward is to ratify the African Continental Free Trade Area and the Protocol on the Free Movement of Persons, so that they may come into force as soon as possible”.
Challenges in Africa
Despite this success story, Africa still faces a lot of challenges that need urgent attention.
In 2010, Africa’s GDP was approximately US$1.6 trillion, compared with the US’s US$14.5 trillion.
Despite trade statistics for the past two decades indicating that trade between Africa and the rest of the world increased fourfold, intra-Africa trade is still low, according to the 2017 Economic Outlook Report.
African countries trade less amongst themselves than with the rest of the world, and this low trade is attributed to many factors relating to infrastructure deficits and supply-side constraints.
The European Union still remains the biggest trading partner for Africa. Interestingly, Africa’s goods trade with the rest of the world shot up from US$197 billion in 1995 to US$852 billion in 2015.
The big question then is; will the AfCFTA be the solution to boosting intra Africa trade? Well there are many different opinions with regards to this question.
While experts have different opinions on this matter, in my view, AfCFTA is the way to go for Africa if we are to realise “the Africa we want”. Barriers to trade have impeded trade in Africa and low manufacturing capacity further limits intra-African trade as seen from the rising Africa’s Import Bill.
The benefits of integrating the African market outweighs the cost. The statistics so far show that indeed Africa needs this done urgently and the time is NOW.
Yes, as highlighted by many African leaders, there are many challenges in Africa with regard to establishing AfCFTA but all these can be overcome through political will, cooperation and action-oriented leadership.
Benefits of AfCFTA to Zambia
Zambia has so far only signed the Kigali Declaration 2018 and is yet to sign the AfCFTA (Agreement) and the Protocol on free movement of persons.
In short, Zambia signed the African Free Trade Area Declaration and not the Agreement itself.
Government stated that it needs time to further consult the private sector domestically and also probably seek approval of Parliament and Cabinet before putting ink to paper.
Also negotiations on some of the protocols were still underway. In my view this approach is acceptable but it should not take longer than expected to conclude the process.
Zambia needs to sign the AfCFTA and the Protocol on Free Movement of Natural Persons once wider consultation with private sector and industry players, and negotiations on some protocols are fully concluded.
This will be in line with Zambia’s broad developmental strategy of pursuing an outward-oriented export-led trade strategy based on open markets and international competition.
In the end, this will help Zambia to fast-track the realisation of its Vision 2030 of being “a middle income country”.
As stated by many trade experts there are more benefits to integration (open markets) as opposed to protectionism.
The AfCFTA will offer countless opportunities to Zambia. First, it will provide new export opportunities for Zambian products and services in Africa and specifically West Africa and North Africa.
Opening up of the African market presents many opportunities for economic growth through increased intra-regional trade, but this has to be supported by robust trade policies and framework.
Through diversification of the economy into agriculture through value addition and agro processing, Zambia will be able to export more agro processed products to the African market targeting 1.6 billion people.
More value addition to copper and other minerals to help growing intra-African trade and earn the country much-needed revenue to spur economic growth. The recently established Multi Facility Economic Zones and the setting up of foreign established manufacturing firms in the country will help Zambia boost its export base to the region.
Also news about possible oil reserves and the ongoing exploration is a positive step towards Zambia becoming a net exporter of oil to the region and also boost its industrial base.
For Zambia, with the few opportunities highlighted above all we need is stronger political will and leadership to help harness the opportunities and benefit from the AfCFTA. We need speedy implementation of our 7th National Development Plan and Vision 2030 as well.
In addition, there is need for more capacity building of personnel working in trade and trade-related government ministries and agencies such as Trade Ministry, ZDA, ZRA, ZABS and other relevant institutions.
Government should aim to deliberately train more trade negotiators in the medium to long-term and help boost the country’s trade negotiation capacity. Also appoint only credible and qualified trade negotiators to negotiate the pending protocols and ensure they well and ably represent the interests of Zambians and its people.
In line with our Trade Policy which aims to attain competitive economic growth which is private sector driven, the negotiations should have the interests of private sector at heart. The private sector is a pillar of a strong and prosperous country.
To be able to maximize on the benefits of a wider African market, Zambia needs to revamp its manufacturing sector and invest in human industrial skills development. We need to build a strong manufacturing base in Zambia to boost exports focusing on goods and services were we have stronger comparative advantages. In addition, the services sector is a larger contributor to Zambia’s GDP, contributing over 60 percent. There’s need to open up the services sector to boost tourism, professional services etc.
As recommended by UNCTAD in its Zambian Trade Policy Framework (2016 Report), Zambia, must strongly support increased trade. It must focus on activities that increase regional trade and the negotiations at the multilateral level must support the country’s objective to achieve diversification and value addition in the region.
I end my analysis with a famous quote “we cannot change our past but we can surely change our future”.
Yes, this is the Africa we want.
The author is a business developer, strategic marketer and an international trade policy & trade law analyst.
Analysis: EDWIN MAKUYA