Three years after AfCFTA ratification: should Africans still rely on it?
Three years after AfCFTA ratification: should Africans still rely on it?
Modern Diplomacy | 25th January 2024
By Ezra Nnko
The concept of African Continental Free Trade Agreement (AfCFTA) was formed during the 18th Ordinary Session of the Assembly of the Head of the States and Government of African Union (AU) in January 2012, on the theme “Boosting Intra-African trade”, which adopted the decision to establish a free trade area.
This resolution was planned to be implemented by 2017 although it was not executed in that planned year. In March 2018 in Rwanda, another meeting was held that approved the implementation of the AfCFTA agreement. At the same time, the Rwanda Declaration was also signed along with the agreement for the establishment of the African Economic Community. At the meeting, 44 out of 55 countries signed the AfCFTA agreement, 47 signed the Kigali agreement and 30 signed the agreement establishing the African Economic Community and on 01 January 2021, the official implementation of the AfCFTA Agreement began.
The main objective of the AfCFTA was to bring all African countries to the common market by eliminating customs duties and taxes on goods, allowing free movement to stimulate trade between member countries, building a free market economy, stimulating competition in the production through industries as well as the establishment of a customs community.
The World Economic Forum (WEF) mentions Africa, as the community with the lowest contribution to world trade, contributing only 2% where at the moment the total income of the continent is USD 3.4 Trillion, so the implementation of the agreement was expected to increase the income by 7% every year. According to the recommendations from the Economic Commission for Africa (ECA), agricultural production could be the main catalyst in stimulating the industrial sector hence boosting the African economy.
The production is expected to boost trade between partner countries from 18% (currently) to 52.3% by 2025 after removing customs duties and reducing non-tariff barriers for more than 60,000 approved products. This move is expected to grow the African economy to USD 29 trillion by 2050 and the growth is expected to lift more than 30 million people out of extreme poverty.
What has happened so far and what should be done?
The World Economic Outlook: Friends of African Continental Free Trade Area (2023) report explained that in 2023, Africa spent USD 50 billion to import food from foreign countries compared to the year 2021 where more than USD 68 billion was spent, this situation was caused by different reasons, with many governments failing to manage and implement the agriculture policies but also the violation of the Maputo Declaration that required all African countries to allocate 10% of their budget to agriculture were majority of the countries have been allocating between 2-3%, thus making the agricultural sector stagnating.
The success of reducing the amount spent on the importation of food encourages Africa to succeed in reaching the goal of being able to feed itself if it decides to commit itself to the plan. It should be noted that agriculture is the main sector mentioned in the AfCFTA as the main strategic sector that may attract investors but also facilitate the economic growth of the people; given that the sector employs more than 230 million people in Africa. So the growth of food production in Africa stimulates the industrial sector and hence boosts the economy of the people.
WEF Chief Economist Forum Report-2024: provided the preliminary assessment of the state of the world economy and it has predicted one of the factors that may hit the African economy will be the inflation rate of approximately 36%, and the most affected area will be Sub-Saharan Africa. The main reason for this inflation will be due to the tighter monetary and fiscal conditions, the issue of debt sustainability and climate crisis, and the ongoing Ukraine-Russia war.
One of the biggest challenges that continue to befall Africa, and has been an indicator of the poor performance of the AfCFTA agreement, is the weak growth of GDP of the member as the World Economic Situation and Prospects 2024 reported that the African economy dropped from 3.5% (2022) to 3.3% (2023) while it is expected to grow to 3.5% in 2024.
AfCFTA has not yet succeeded in treating the economic crisis in Africa, and this is because many partner countries still depend on trade, aid, loans, and investments from foreign countries, so any shake-up of the foreign countries, shakes the African economy too. For the year 2024, a major economic impact has been predicted in the North African region due to the ongoing war between Israel and Hamas, although it is expected that there will be inflation in Africa and the economy of the Sahara Desert region will rise.
Regional integration through trade has been mentioned in the AfCFTA agreement as a step towards a common market, although the pace of implementation of this step is still not satisfactory. As of now only 8 among 55 countries (Cameroon, Egypt, Ghana, Tanzania, Rwanda, and Tunisia) have signed the preliminary inter-trade cooperation agreement known as the AfCFTA Guided Trade Initiative (GTI). It should be noted that the AfCFTA was initially launched in 2012, so it could be expected that important areas such as inter-trade cooperation would be implemented soon after the AfCFTA agreement was ratified.
The United Nations Economic Commission for Africa (UNECA) stated that inter-trade cooperation between AfCFTA member states would be 33.5% by the year 2045, though so far the cooperation is 14.4% as for now we may conclude that the inter-trade agreement and implementation are going at a very slow pace.
The African Continental Free Trade Area (AfCFTA) report: Overview and Issues of the Congress (2023): has explained in detail how the building of the American economy needs Africa as a trade market and through the African Growth Opportunity Act (AGOA) which is expected to sunset in 2025 although there are possibilities to be renewed, It should be noted that the effectiveness of the implementation of the agreement (AGOA) requires more of a liberal African market, but also the Africa that his market has not been occupied either by fellow Africans or Chinese. So if the AfCFTA needs to be seen as the tool for a sustainable African economy, then agreements like AGOA and the Economic Partnership Agreement (EPA) need to come to an end so that these African countries can be free to do trade with whatever they wish for.
Yet Africa has also continued to experience conflicts between AfCFTA member states, these conflicts have led to diplomatic tensions and even closing borders between countries, some of the conflicts are between Kenya-Uganda, Rwanda-Burundi, Rwanda-Congo DRC, Burkina Faso-ECOWAS, Mali-ECOWAS and recently conflict between Somalia and Ethiopia on Somaliland Ports. These disagreements set back the efforts and goals of the AfCFTA and create an image that this agreement has not been considered and given the required value between the member states. Suffice it to say that the AfCFTA agreement has a long way to go to answer the questions of Africans, but those answers will not be found if Africa is not economically independent.
