The AfCFTA Offers Africa Many Opportunities

Published on 25th August 2020

The AfCFTA offers Africa an opportunity to confront the significant trade and economic development challenges of our time: market fragmentation; smallness of national economies; over reliance on the export of primary commodities; narrow export base, caused by shallow manufacturing capacity; lack of export specialisation; under-developed industrial regional value chains; and high regulatory and tariff barriers to intra-Africa trade amongst others.

The result of all of this, is a very low percentage of intra-Africa trade of 18%, and as noted, an over reliance on the export of primary commodities to traditional markets of the North. In other words, Africa continues to be trapped in a colonial economic model, which requires that we aggressively implement the AfCFTA as one of the tools for effecting a fundamental structural transformation of Africa’s economy. We have to take action now, to dismantle this colonial economic model.

The AfCFTA is therefore a critical response to Africa’s developmental challenges. It has the potential to enable Africa to significantly boost intraAfrica trade and to improve economies of scale through an integrated market. It has the potential to be a catalyst for industrial development, placing Africa on a path to exporting value-added products and improving Africa’s competitiveness both in its own markets and globally. It also sends a strong signal to the international investor community that Africa is open for business, based on a single rule-book for trade and investment.

The AfCFTA signals that Africa is open for business and mutually beneficial investment thereby creating decent jobs and improving livelihoods. we have a market of 1.2 billion people; we have a combined GDP of US$3.4 trillion; Africa boasts over 400 African companies that earn annual revenues of US$1 billion or more;  according Prof Landry Signé and Acha Leke, writing in 2019 in Foresight Africa, a Brookings Institute publication, African industries have the opportunity to double production to nearly $1 trillion within a decade, with three-quarters of that growth coming from manufacturing to substitute third country imports and meet increasing local demand; and through at least the first half of the decade, seven of the world’s 10 fastest-growing economies were in Africa. According to the International Monetary Fund’s World Economic Outlook Database, October 2019,

This is a period of unprecedented challenge to the global economy and the multilateral trading system, on which the global economy is anchored.

The multilateral trading system is under severe strain, largely due to what appears to be an abandonment of the rules that underpin it. This strain on the multilateral trading system has the risk of reversing the modest gains that we have made in placing development at the centre of the multilateral trading system, since we launched the Doha Development Agenda in 2001. Africa’s response against this strain on the multilateral trading system must be to consolidate and advance our continental market integration objectives, through the AfCFTA.

Under the leadership of President Issoufou as the AU Champion of the AfCFTA, our collective priority should be to rapidly conclude Phase I and II of the negotiations of the AfCFTA, in order to unlock Africa’s full productive capacity.

The ongoing Covid-19 crisis has ravaged global economic activity, has severely disrupted trade and global supply chains, and of course, has had a negative effect on global public health. Africa should not despair and fall into despondency – from a trade perspective, we should see this crisis as an opportunity – through the AfCFTA we have an opportunity to reconfigure our supply chains, to reduce reliance on others and to expedite the establishment of regional value chains that will boost intra-Africa trade and secure Africa’s productive capacity for generations to come.

In the four months that I have been in office, I have already initiated and had very promising engagements with three of the world’s largest automobile-manufacturers, with a view to the establishment of automobiles value chains across Africa. I intend to extend this type of an engagement to include other labour intensive sectors such as Agro-processing. In this endeavor, the AfCFTA Secretariat shall work with our sister department of Trade & Industry of the AUC, as well as with our partners such as UNECA and Afreximbank, to advance Africa’s industrial development objectives.

We should be in no doubt, as much progress as we have made, there will be implementation related challenges ahead. Substantial domestic policy reforms and alignment of national legislation with the AfCFTA shall be required in order to reduce barriers to intra-Africa trade. Transshipment of goods from third countries that are outside of the AfCFTA zone will be a significant risk.

The AfCFTA Secretariat will work closely with customs authorities to ensure that through robust implementation of the AfCFTA rules of origin regime, the prevention of transshipment is an absolute priority. The AfCFTA must create jobs, it must not create job losses through transshipment of third country goods into the AfCFTA market.

I am committed to ensuring that the AfCFTA is effectively implemented such that there is shared and inclusive economic growth.

The backlash against free trade and trade liberalisation that we have witnessed in recent years is not because trade liberalisation is intrinsically beneficial exclusively to a certain elite or to certain countries. Rather, the backlash is, in part, attributable to the unequal distribution of the benefits of international trade and a lack of shared and inclusive growth.

The lesson for the AfCFTA from this backlash against trade liberalisation and the pursuit for freer international trade through the multilateral trading system (i.e. the World Trade Organisation) and through FTAs is that, beyond boosting trade flows, the question of equitable distribution of the gains of the AfCFTA must be at the centre of its implementation. If the AfCFTA is perceived to be benefiting only a handful of relatively industrialised countries in Africa such as my country South Africa, and a handful of African Multinational Corporations, it shall be rejected by Africans, and deservedly so.

In this regard, we should recall that the empowerment of women, young Africans and other disadvantaged segments of our society, is a central objective of Agenda 2063: The Africa We Want. We know from empirical evidence that women, young Africans and SMEs, confront significant challenges when attempting to benefit from trade agreements. I therefore intend to take concrete steps to ensure that women and young Africans are at the heart of implementation of the AfCFTA. The AfCFTA must create opportunities for women in trade; amongst others, by lowering the gender wage gap.

Young Africans are at the cutting edge of technological innovation for digital trade and e-commerce. The AfCFTA has an obligation to establish a conducive environment to include young Africans in the implementation of the AfCFTA. In due course, I will announce specific measures that can be put in place to enable women, young Africans and SMEs, to benefit from the AfCFTA to achieve the objective of inclusive benefits of the AfCFTA and shared growth across the continent.

The global economy is on the brink of a new industrial revolution, driven by new-generation information technologies such as the Internet of Things, cloud computing, big data and data analytics, robotics and additive manufacturing. All of this presents challenges and opportunities for the AfCFTA.

The 4th Industrial Revolution is likely to impact on the AfCFTA in a manner that we have not fully contemplated. How is Africa preparing herself for the 4th Industrial Revolution, in the context of the AfCFTA? With the advent of additive manufacturing, what is the impact on industrialisation and job creation in Africa? How will the e-commerce and digital trade chapter of the AfCFTA position Africa to be a global player in cloud computing services, data processing and data storage?

All of these are questions that require forward looking intellectual rigour, including analysing how the future of trade and investment flows might change as a result of technological factors and the 4th Industrial Revolution. Such forward looking intellectual rigour is critical in shedding light on the complex policy issues and strategic choices that will shape Africa’s trade and investment prospects over the next 10-30 years.

The implementation phase of the AfCFTA coincides with the year of Silencing the Guns, providing an opportunity to focus on fast-tracking Africa’s economic development objectives. Successful implementation of the AfCFTA shall further consolidate the gains that are foreseen in Agenda 2063: The Africa We Want and indeed shall take us a step closer to the Africa we want. A recent study by the World Bank estimates that where implemented properly, by 2035 the AfCFTA is set to lift 30 million Africans out of extreme poverty and 68 million from moderate poverty.

The same study observes that the AfCFTA has the potential to increase intraAfrica trade by 81%, by the year 2035. As promising and hopeful as these projections are, as Africans and the AfCFTA Secretariat we shall have to take concrete steps to ensure that these promising projections do become a reality: amongst other actions, we shall have to expedite the implementation of trade facilitation measures that are foreseen in the AfCFTA Agreement in areas such as soft infrastructure at our borders. We shall have to support state parties who may experience short-term revenue losses due to implementation of the AfCFTA.

In this regard, I am pleased to report to you that Afreximbank has committed to providing liquidity for an adjustment facility, which will be aimed at supporting countries that experience short-term revenue losses. I am grateful to Prof Oramah, the President of Afreximbank, for mobilising resources of the bank for this adjustment facility and for being a strong supporter of the AfCFTA Secretariat.

During this time of Covid-19, whilst many developed countries are able to provide billions of dollars’ worth of stimulus packages to re-inject growth and economic activity, very few countries in Africa have the fiscal policy and monetary policy space to provide similar stimulus packages. Therefore, aggressively implementing the AfCFTA has the potential to be Africa’s economic recovery tool, boosting intra-Africa trade has the potential to contribute to Africa’s economic recovery year on year, from 2021.

Africa has confounded critiques, standing on the shoulders of the great liberation struggle heroes of our continent, we dare not fail in this historic mission to integrate Africa.

By His Excellency Moussa Faki Mahamat

Chairperson of the African Union Commission.

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