Opinion leaders see AfCFTA as game changer for Africa

Kigali, Rwanda (PANA) – In their bold pursuit of continental integration, African Heads of State and Government will on Wednesday converge on the Rwandan capital, Kigali, to launch the regional Free Trade Area as a new strategy for acceleration of development of their nations through commerce.

The African Continental Free Trade Area (AfCFTA), whose negotiations were launched in 2015, is widely seen as a crucial driver for economic growth, industrialisation and sustainable development in Africa,” said two leading African policymakers in a joint comment published here on Tuesday.

In the view of Sindiso Ngwenya, Secretary General of the Common Market for East and Southern Africa (COMESA) and Dr. Richard Sezibera, a Rwandan Senator and former Secretary General of the East African Community (EAC), “the AfCFTA will be a game changer for Africa and its people”.

Observing that intra-African trade is currently 15 percent of the continent’s total trade, compared with 19 percent intra-regional trade in Latin America, 51 percent in Asia, 54 percent in North America and 70 percent in Europe, they said the continental trading bloc “will bring tremendous economic impact to African people and the continent at large.

Creation of a single continental market for goods and services, with free movement of business people and investments, will help bring closer the continental customs union and African common market, envisioned in the proposed African Economic Community (AEC).

According to Ngwenya and Sezibera, the currently low level of intra-African trade can change if Africa effectively addresses supply side constraints and weak productive capacities, infrastructural bottlenecks, trade information networks, access to finance for traders and other economic operators, trade facilitation and trade in services and free movement of people for cross border trade.

A free trade area, they argued, will help turn the 55 single African economies into a more coherent large market. Making use of complementarities and collectively exploiting Africa’s rich reservoir of land and natural endowments, creating larger and more viable internal economic spaces will allow Africa’s markets to work more efficiently

Under the African Union umbrella, African leaders aim to achieve the AEC as the last of six successive stages that involve the strengthening of sectoral cooperation and establishment a continental customs union, a common market, and a monetary and economic union.

The single market will also help expand intra-African trade through better harmonizing and coordinating trade liberalization and facilitation regimes among regional economic communities (RECs).

“It will help to resolve the challenges of multiple and overlapping REC memberships and to address the disconnect between contiguous RECs, thus unlocking the inter-REC trade potential across the continent,” said Ngwenya and Sezibera in their joint paper.

“Elimination of tariffs will help African countries boost economic growth, transform their economies and achieve the SDGs. Furthermore, the positive impact of the AfCFTA is expected to be even greater if non-tariff measures are addressed, informal trade is integrated into formal channels and the agreement includes trade in services as well.”

Despite the opportunities, they pointed out that there are challenges to be addressed. “Fears of significant tariff revenue losses and an uneven distribution of costs and benefits are among the main obstacles to the continent’s integration,” they said.

Countries with large productive capacities in manufacturing may experience significant economic growth and welfare gains while small economies and least developed countries (LDCs) may face substantial fiscal revenue losses and threats to local industries.

To deal with these potential challenges, Ngwenya and Sezibera suggested that the AU member States need to consider different tariff reduction modalities and other mitigating mechanisms. In the long-run, trade liberalization in the AfCFTA will lower trade costs and allow consumers to access a greater variety of products at lower prices.

Market consolidation may arise when smaller firms are exposed to stiffer competition. While most of the potential benefits of trade liberalization accrue in the long run, short-run structural change through the relocation of labour, capital and other factors of production entails costs of adjustment.

The AfCFTA is a crucial step towards integrating economies of African countries, boosting intra-African trade and attaining sustainable development in the continent that is consistent with African Union Agenda 2063 and global goals on sustainable development.

Liberalization of trade in goods and services may entail adjustment costs for the African Union member States that are, however, typically outweighed by significantly higher long-term gains.

“The AfCFTA will provide a new unique institutional framework for engaging the rest of the world and with an autonomous secretariat, there can be a facility in which African Union Member States vest the mandate to speak with one voice to advance agreed positions.

“As Africa prepares for the post-Cotonou era with the European Unia, and the post-AGOA era with the United States, in 2020 and 2025 respectively, it is a priority that Africa has a common position, but also advances it vigorously under a coherent institutional framework provided by the AfCFTA,” they added.
-0- PANA AR/MA 20March2018

20 march 2018 08:35:09

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