African free trade area gets real
By Seth Onyango, bird story agency
Trade deals under the African Continental Free Trade Area (AfCFTA) agreement are getting underway after a false start due to the economic fallout from Covid-19 – which also highlighted its importance to the continent.
Kenya’s recent twin shipment of batteries and tea to Ghana – the first from an East African economy under AfCTFA – has injected fresh impetus into the fledgling free trade initiative. They also underscore the importance of the trade area to export receipts amid biting global supply chain disruptions.
The shipments are a part of a trial phase to ramp up trade under AfCFTA involving Kenya, Ghana and six other states: Cameroon, Egypt, Mauritius, Rwanda, Tanzania and Tunisia.
Last week, AfCFTA secretary general Wamkele Mene revealed that at least 96 different products from the eight countries could be freely traded under the rules of the trade pact. The approved products that will enjoy duty-free and quota-free trading include horticultural products, pharmaceuticals, rubber, aluminium kitchenware, sugar, steel, and wooden products.
“Next year we will have a chance to double or perhaps triple that number but never underestimate the determination that we have to make sure that the founding mothers’ and fathers’ sacrifice was not in vain,” he said at the launch of the AfCFTA Guided Trade Initiative in Accra last week.
Kenya’s exports to Ghana come a year after Equatorial Guinea made an inaugural shipment of 2,000 tonnes of methanol to Gabon under the AfCFTA, with the Africa Energy Chamber soon afterwards promising to build on the momentum to showcase the value of regional trade and cooperation in driving the continent’s economic growth.
“The shipment marks an important step in the move to create a viable regional natural gas trade network, whereby reserves can be effectively monetised – through the conversion into LNG, power and petrochemicals – and used to drive regional economic growth and industrialisation,” it stated at the time.
Earlier in 2021, Ghanaian alcoholic products maker Kasapreko airfreighted a container load of goods to South Africa, while Ghandour Cosmetics shipped by sea items to Guinea.
Ghana’s High Commissioner to Kenya, Damptey Bediako Asare, told VOA that the trial phase is a significant step in the implementation of AfCFTA. “Most of the time we have African countries coming out with a lot of flagship programmes and projects, but they remain on the shelves because we are waiting for everyone to get ready before we roll it out,” he said. “Some of us believe right from the beginning, ‘Why don’t we put together countries that are ready to start trading under the CFTA so that they form a nucleus family of countries that … are ready to implement the CFTA?’ And I think that’s exactly what happened.”
The free trade agreement is seen as critical to turbocharging Africa’s post-Covid recovery and tapering supply chain disruptions from the war in Ukraine.
The pandemic had a two-edged impact on AfCTFA implementation; while it slowed down the rollout, it also showed how it can serve as a shock absorber for geopolitical turbulence and other economic disruptions.
Olanrewaju Olaniyan, an economics professor at the University of Ibadan noted that the pandemic highlighted the need for self-sufficiency among African countries and the urgent need for a market for goods and services produced within the continent. “This will reduce the continent’s reliance on its non-African trading partners. Individual countries, therefore, need a boosting package in a time of crisis and instruments of trade such as the AfCFTA to speed up the recovery of the economy,” he explained.
The United Nations Economic Commission for Africa (UNECA) estimates that AfCFTA will boost intra-African trade by 52.3% once import duties and non-tariff barriers are eliminated.
Currently, exports within the continent amount to only 16.6% of total trade, according to the African Development Bank.
Historically, more than 75% of African exports outside the continent consisted of extractive commodities, whereas only 40% of intra-African trade was extractive.
The AfCFTA was established to position Africa as the largest free trade area in the world, enabling tariff reductions and market liberalisation while significantly reducing barriers to trade.
/bird story agency