Monday, 26 March 2018

Businesses to take advantage of the continental free trade agreement

Image result for Africa Continental Free Trade Area


Adnan Adams Mohammed 

Businesses in Ghana are to benefit immensely from the free trade arrangement among countries within the African continent as Ghana sign unto the Africa Continental Free Trade Area (AfCFTA).

President Nana Akuffo Addo signed the AfCFTA agreement at an Extraordinary Meeting of the African Union (AU) Heads of State and Government held at the Rwandan capital, Kigali, last week.
The AfCFTA, according to the United Nations Economic Commission for Africa (ECA), will help increase intra-African trade by 52 percent by 2022.

It would also ensure greater trade flows among countries on the continent with the potential to boost economic growth, scale up industrialisation, build businesses and lift millions of citizens from poverty.

The AfCFTA will, in this respect, energise intra-regional trade for the prosperity of all and greater bargaining power for Africa on matters of global economic and commercial diplomacy.
Image result for Africa Continental Free Trade Area

However, the President of the Ghana National Chamber of Commerce (GNCC), Nana Appiagyei Dankawoso (I) has pledged the support of the private sector in Ghana to help implement the agreement.

“I can assure you that Africa’s business community fully supports the AfCFTA and will continue to champion this meaningful cause to benefit our economies and businesses,” Nana Dankawoso said.
The meeting, which has since ended, was attended by heads of state, government officials, private sector leaders, civil society organisations, the academia, parliamentarians and development partners to deliberate on the continent’s economic transformation through the AfCFTA.

Nana Dankawoso noted, the introduction of a free trade area on the continent would help eliminate or reduce tariffs and remove trade and non-tariff barriers.

It would bring about enhanced market opportunities, legal certainty and predictability for service suppliers to enter and operate in another party’s market.

According to him, the free trade area was to help boost trade and promote economic prosperity.

“The free trade area is to help open up new areas to competition and promote innovation. Again, it will create better jobs, new markets and increase investments with greater diversification and risk sharing. Once in place, it will support rule of law and construct shared trade, investment approaches and foster economic integration of the continent,” he stated.

Meanwhile, the Chief Executive Officer (CEO) of the GNCCI, Mr Mark Badu-Aboagye reiterated that, the chamber would partner with relevant stakeholders to help implement the AfCFTA.

He noted that, the GNCCI had already begun engaging with its members who were into export and import trade to build their capacities in order to take advantage of the continental free trade area.

“We do not want to create a situation where foreigners will rather benefit from the AfCFTA while people from the continent continue to languish in poverty, so we have started building the capacities of these businesses to take advantage of the free trade area,” he added.

Under a free trade area agreement, all the African signatory countries would have to agree to reduce the trade tariffs and import quotas between each other and boost intra-African trade.

The vision is a free trade deal encompassing 1.2 billion people stretching from Cape Town to Cairo. Goods, services and perhaps labour, flowing freely in and out of more than 50 African countries.

It could create tens of thousands of jobs and significantly reduce unemployment among the continent’s youthful population.

This will boost trade between African countries and would be instrumental in moving the whole continent away from the narrative of simply being a place where the powerhouse economies of the West and East come to get their raw materials.

Many African governments, naturally, are keen. So, expect lots of fanfare when African leaders gather in the Rwandan capital, Kigali to sign the agreement.

The South African department of trade and industry says it’s “committed to a co-ordinated strategy to boost intra-Africa trade and to build an integrated market in Africa that will see a market of over a billion people with a GDP of approximately $2.6 trillion (£1.85tn) “.

And Kenya’s trade ministry says it’ll not only create a massive liberalised market, but will also “enhance competitiveness at the industry and enterprise level, enhance value addition of products and exploit economies of scale and optimum utilization of resource”.

But the deal has already hit its first hurdle, before it’s even been signed.

In a statement, the Nigerian government said that “certain key stakeholders in Nigeria have indicated they had not been consulted, for which reasons they had some concerns on the provisions of the treaty”.

Those key stakeholders are both Nigeria’s business community and its trade unions. The trade unions are thought to be particularly concerned about a free trade area, given that it could develop into a much more integrated body, which would see the free movement of workers across borders, providing a possible threat to Nigerian jobs.

The fact that the West Africa’s largest economy won’t be at the launch has placed a dampener on proceedings and a question mark over the entire project’s viability.

Generally speaking, it’s the first stage of closer economic co-operation with a view to possible integration. The next stage would be a customs union, where each country would have the same tariffs with the outside world and low or no tariffs between each other.

Then comes a common market, where goods, services and labour move tariff and quota-free between the countries and the bloc has a common trade relationship with the rest of the globe. Further integration involves political union and a unifying single currency.

All of these took the European Union more than 50 years to establish following the Second World War. Some integration already exists in Africa – the East African Community and the Southern Africa Customs Union are examples.

But for a continent-wide free trade area to really work there has to be significantly more cross-border trade within Africa. This is currently a challenge, as most African countries tend to trade more with the outside world than they do with their fellow African states. Indeed, intra-African trade accounts for about 16% of the total – in Asia that figure is 51% and in Europe it rises to 70%.

Another challenge is the sheer size of Africa – not just geographically, but also in terms of the number of countries that need to sign up and ratify the free trade area agreement. When the European integration process started in the early 1950s, just six countries were involved.

More than 60 years later, the European Union has 28 members. Africa has 54 countries. So, implementation and co-ordination are key. For a start, the parliaments of the all the countries need to ratify it. 

0 comments: