African traders to start enjoying benefits under continental free trade this week

Adnan Adams Mohammed
African traders are expected to enjoy some trade tariff
exemptions, easy entry and access to other African countries market, as the
African Continental Free Trade Area (AfCFTA)
commences this week.
Already, almost all African countries have signed a free trade
agreement with exception of Eritrea. During a virtual summit in early December,
last year, African leaders held that trading under the agreement starts on
January 1, 2021, as scheduled on the AfCFTA agreement and requested
institutions to provide technical and financial support for its implementation.
The agreement was signed in May 2019 and as at December 5,
2020, 34 countries have ratified and deposited their instruments, including
Ghana, Nigeria, Egypt, Kenya, Tunisia, South Africa, Rwanda, Cote D’Ivoire
which are among the major economies on the continent.
According to a new report by the African Export-Import Bank
(Afreximbank), the agreement is expected to bring together an estimated US$3
trillion market which could yield more than US$84 billion in untapped
intra-African exports. Countries now have to harmonise custom and tariff
regimes. There are currently eight regional economic blocs in Africa.
"It naturally presents, as with any new agreement, some
challenges; in our opinion of air link of movement of people in the region
itself, but, I believe that they are challenges that as we move forward in the
process we will be able to resolve”, Sao Tome's minister for foreign affairs,
Edite Tenjua has said.“There is of course also the issue of customs tariffs,
although we are talking about free movement. But on the list and on the
products that we are going to consider as priority products for the country, so
there is a whole organisation that has to be done."
According to the Ghana government, the AfCFTA will enhance
government's current Industrial Development Agenda and contribute to the
diversification of the Ghanaian economy and open up new market access
opportunities under preferential terms for Ghanaian producers particularly
Small and Medium-scale Industries.
As the largest trade agreement seeks to increase
intra-African trade through better harmonisation and coordination of trade
within the African continent, address the challenge of small fragmented markets
in Africa by creating a single continental market which will lead to economies
of scale. It will also develop regional value chains and facilitate cross
border movements, enhance access to an expanded market for SMEs in Africa on
preferential trade terms, facilitate the integration of African economies into
global markets, enhance the benefits to consumers in Africa through lower
prices of goods imported from within Africa and significantly enhance
employment opportunities in Africa particularly for the youth.
According to the UN Economic Commission for Africa (ECA),
the Eastern Africa region is anticipated to generate US$1.8 billion in welfare
gains and benefit from over 2 million jobs from the successful implementation
of AfCFTA.
Trading was originally planned to start on July 1, 2020 but
the pandemic struck leading to the suspension of negotiations.
For Intra-African trade, 90 percent of all goods will become
tariff free from January 1 for all the countries that have deposited their
instruments of AfCFTA ratification with the chairperson of the African Union
Commission (AUC). A total of 36 countries have already completed this
procedure.
With all the African countries, except Eritrea,
participating, the AfCFTA would have the largest number of member countries in
any trade deal since the formation of the World Trade Organization.
By giving a boost to intra-regional trade in manufacturing,
AfCFTA is expected to increase employment opportunities, and help women get
into the workforce. It can result in gradual altering of global supply chains,
especially for products that require relatively lesser skills.
Holistically, the AfCFTA agreement has the potential to
become a game changer and bring some great opportunities for entrepreneurs,
such as: Improving the intra-African trade landscape and export structure;
Creating a sound global economic impact; Developing better policy frameworks;
Fostering specialisation and boosting industrialisation; and Strengthening
regional and inter-state cooperation.
Also, increasing employment and investment opportunities, as
well as technological development; and Providing the opportunity to harness
Africa’s population dividend.
However, for young people to benefit equitably, these
aspects must be addressed and improved across the content: access to
information, access to education, and access to capital. Without these three
elements, youth will be inactive in the AfCFTA and Africa will not achieve
population dividend, where a country's working-age population grows larger
relative to the young dependent population.
Similar to any other trade block, AfCFTA is likely to
encounter some challenges. For example, the implementation is complex and poses
significant adjustments costs for member countries; it is also hard to ensure
broad-based gains for all Member States. Moreover, in some countries, weak
infrastructures, low technological uptake and conflicts will threaten the
implementation of the agreement. Finally, there’s a general fear of losing
control and sense loss of identity across segments of the population.
These challenges will require the African Union’s
Chairperson to work closely with other political heads and the secretariat to
negotiate best terms for a single market.
Despite these possible challenges, it’s important to note
that the benefits for the continent will surpass the risks if the trade
agreement is successful: Africa will be more self-sustainable if it increases
trade with itself and creates value addition systems for its products. There is
no doubt that AfCFTA is the biggest trade area since the inception of WTO and
if it works out will spring immerse development on the African continent.
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