“Free trade in Africa has never been closer”, optimists say. “It will take more time to sort out the last pieces of red tape”, others insist. For sure, government representatives have made major steps forward in 2017 in the implementation of the Continental Free Trade Area (CFTA). Discussions are no longer held about the ‘why’ and ‘what’ question. The negotiations are now about ‘how’ and ‘when’. 2018 will be a decisive year for free trade in Africa.
According to Stephen Karingi, Acting Director of the Regional Integration and Trade Division (RITD) at the Economic Commission for Africa (ECA), 2017 was a breakthrough year for the free trade agreement. “CFTA adoption and implementation is certainly a right step at the right time towards advancing Africa's development agenda”, Karingi said at the start of important talks in Addis Ababa, earlier this month.
What are the benefits of free trade by CFTA?
The promise: free trade on the continent could lead to a 52 percent ($35 billion) increase in intra-African trade within the next 5 years, according to the United Nations Economic Commission for Africa (UNECA). CFTA represents a huge step forward, as it creates a single continental market for goods and services. It also brings closer free movement of business persons; it is an incentive for investments on the continent and most of all: it will bring a boost to intra-African trade. In other words, establishing the CFTA is vital to countries in which one billion people live that have a combined gross domestic product of more than US $3.4 trillion.
How and where did it start?
The formal decision to form a free trade area was made in 2012 (negotiations started in 2015), at a meeting of the Assembly of Heads of State and Government of the African Union, held in Addis Ababa. Here, African leaders also agreed on forming an Action Plan on Boosting Intra-Africa Trade (BIAT). They defined seven priority areas: trade policy, trade facilitation, productive capacity, trade related infrastructure, trade finance, trade information, and factor market integration.
What does CFTA do?
CFTA will unite all 54 African countries, creating a single continental market for goods and services, with free movement of business persons and investments. Free intra-African trade will offer African countries a broader market for their manufactured goods. It is a vital step, but not the last one. Next, the countries will establish the all-important Continental Customs Union and the African customs union. That will truly be a step forward to intra-African trade as it will harmonise and coordinate trade liberalization and facilitation of regimes and instruments across Africa.
Why does it take so much effort?
It is not the first time that African countries have tried to open their borders and break down trade barriers. The lack of success was often a result of distrust and of small countries feeling vulnerable to economic powers of larger countries with well-developed economies. Therefore, CFTA will succeed only if there is buy-in from all countries in the African Union, including its smaller economies. Smaller countries will need to feel that harmonisation, coordination and trade liberalisation ownership works for them too.
What needs to be done?
Opening borders is not enough. African countries will have to work on diversification of their export base, reducing reliance on raw commodities and enhancing regional integration that would facilitate greater movements of goods, services, people and investment.
They will also need to work on infrastructure that support free movement of people and goods. According to a report on Africa.com, a number of countries have developed major infrastructure projects that will support free trade. The report lists important ail, road, and port projects, such as: the Ethiopia-Djibouti Rail Link; the Trans-African Highway, an extensive network of highways intended to connect all corners of Africa;, the new 690-hectare Doraleh Multipurpose Port in Djibouti; the West Africa Regional Rail Integration (connecting Niger, Benin, Burkina Faso, Côte d’Ivoire, Ghana, Nigeria and Togo); the $11 billion development of Bagamoyo Port in Dar es Salaam; the East African Rail Masterplan, connecting Nairobi with the port city of Mombasa.