Africa’s Continental Free Trade Area (CFTA) Adds Value to Regional Blocks

Published on 17th April 2018

The birth of the Africa’s CFTA has breathed new life on the continent with great promise of accelerated socio-economic transformation for Africa. Possibly the biggest step Africa has taken this year, the signing of the CFTA is a bold statement by Africa that we are moving forward full throttle. Whilst in a broader context, one might liken it to the laggard coming late to the party in view of age old groupings like the European Union, for Africa, it is a strong step in the right direction.

The 2017 African Economic Outlook affirms that trade between African countries has the greatest potential for building sustainable economic development and integration. The CFTA is without a doubt central to driving such aspirations. It signals that Africa is open for business for Africa, a narrative that has for long eluded this resource-rich continent.

The World Trade Organisation’s (WTO) optimistic outlook for global trade lends credence to this invaluable move by Africa, projecting 2018 trade (merchandise) growth at 4.4% and 4.0% for 2019, firmly above the post-crisis average of about 3.0%. The ratio of trade growth to GDP in 2018 is projected at 1.4 down from 2017’s 1.5. Potential escalation of trade restrictive policies is cited as a serious threat to trade growth and this has already been manifested in the retaliatory trade relationship between the US and China. Tightening monetary policy by Central banks, worsening geopolitics and technological changes also cast a shadow on trade growth prospects.

Not to get lost in the numbers, fundamentally good numbers and the above optimism  about trade should tie into economic growth and reduced unemployment, which is a picture most of us and any economy easily identifies with. Many African economies including diamond rich Botswana acknowledge the challenge of not creating jobs fast enough and with high population growth rates, it is imperative that economies grow fast enough and create opportunities for their young populations. And this is essentially what a progressive trade regime strives to deliver. It is no wonder that WTO attributes faster trade expansion to stronger economic growth across regions driven by increased investment and fiscal expansion.

What CFTA seeks to deliver for one is stronger intra-Africa trade which according to the African Development Bank stood at only 16.0% in 2014 implying that 84.0% was with the rest of the world. According to the Trade Law Centre (2015), the share of intra-African trade in Africa’s total trade compares unfavourably with other regions of the world, at 14.0% of total exports. Only Western Asia had a lower share of intraregional trade as a percentage of total exports (9.0%). In comparison, the shares of intraregional trade in South and Central America, North America, European Union and Asia stood at 17.0%, 49.0%, 61.0% and 62.0% respectively. On the upside, the CFTA is projected to nearly double intra-africa trade by early next decade (Makhubela, 2018)

Why are regional blocks vital for the success of Africa’s CFTA? The economic integration and harmonisation of some states under; The Economic Community of West African States (ECOWAS), Economic Community of Central African States (ECCAS), Southern Africa Development Community (SADC), East African Community (EAC), Common Market for Eastern and Southern Africa (COMESA) is part of the journey already taken towards the realisation of the CFTA. These groupings have already harmonised their aspirations, tenets, policies and regulations on trade and other mutually benefitting areas.

In the trade space, what has already been achieved is addressing trade barriers through harmonising customs and tariffs laws and rules, curtailing non-tariff barriers and improving the trade environment through improved mutual-cooperation, information and systems sharing. That notwithstanding, much remains to be accomplished and the CFTA is envisioned to climax these aspirations. Dr Francis Mangeni (2018) contends that a critical success factor to negotiations under the CFTA is fewer negotiators and that can only mean negotiating under these already existing groupings. This is underpinned by consensus building being more achievable with fewer actors. Imagine the challenge of conversations involving representatives of all 54 African states. It would be nothing short of a nightmare. This underscores the value of states engaging under these umbrella blocks that represent and negotiate interests collectively on the back of already established mutual agreements, protocols and arrangements. In principle and practice, this approach is bound to deliver real tangible results faster.

While I am no expert on trade matters and negotiations at that, my casual observations have not missed the complexities characteristic of trade negotiations, the Doha Development Round and WTO’s dispute settlement mechanism attest to this, let alone the current US-China tariff war. There is no country that does not look out for its own interests and certainly this makes negotiations onerous. It is no wonder that blocks are a first step to cushioning this challenge and I use cushion deliberately because even under such groupings, it doesn’t make it a walk in the park. It is for this reason that I support the view that Africa’s CFTA journey needs to be undertaken under a framework that allows negotiations under existing blocks that assuage the bottlenecks that come with individualism.

By Edgar Azairwe Rutaagi

Trade Finance Professional working with the Central Bank of Uganda. 

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