The African Continental Free Trade Area (AfCFTA) Secretariat has vowed to extend the recently promulgated free-trade regime to 31 countries this year after a successful pilot project in seven countries last year.
The AfCFTA is the world’s largest free trade area bringing together the 55 countries of the African Union and eight Regional Economic Communities to create a single continental market with a population of about 1.3 billion people and a combined gross domestic product of approximately $3.4 trillion (R64trl).
AfCFTA secretary general Wamkele Mene yesterday said that they had seen the start of trading in earnest, with goods moving across borders, even though it was not to the anticipated volumes as yet because the agreement was still in its early stages.
Speaking at the World Economic Forum (WEF) Annual Meetings, Mene said they had developed the routes and the legal construct that enabled a single market to be effective, through the private sector participation.
He mentioned the launch of the Pan-African Payments and Settlements System (PAPSS) last year, which aims to enable payments to overcome currency convertibility that constraints growth in Africa.
PAPSS is a centralised payment and settlement system for intra-African trade in goods and services using local currencies to bypass the need for a third currency such as the US dollar or the euro in a continent that currently has approximately 42 individual currencies.
“So this year, our intention is to accelerate the implementation of the AfCFTA. Last year we had seven countries that took part in a pilot of trading under the rules of the AfCFTA. This year there will be 31 who will be participating in the guided trading initiative, applying the preferential rules of the AfCFTA for trade,” Mene said.
“The products that were traded ranged from processed agricultural products, to manufactured goods, to services also. The lessons that we learnt were that, actually, the private sector across the continent is ready to take advantage of the AfCFTA, governments have to move much faster.”
Last year, AfCFTA Secretariat has selected Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda and Tanzania to participate in the Initiative on Guided Trade trial, which enabled the selected countries to access certain markets at preferential rates for certain products.
For example, Kenya was able to trade milk, cheeses, textiles and horticulture products in west and central Africa, and Rwanda was able to trade telephones, textiles, insecticides, pesticides, processed food and horticulture products.
“This year, the intensified efforts will be on the services sector: tourism sector, banking sector, within the framework of this pilot guided trading initiative that we are implementing,” Mene said.
“Soon, the ministers of trade will conclude the protocol on digital trade, which will further enhance the competitiveness of Africa’s economy.”
Mene was speaking during a panel discussion on “African Economy of Scale”, vice-president of Nigeria Kashim Shettima, Yara International’s executive vice president for Africa and Asia, Fernanda Lopes Larsen, and with FirstRand CEO-designate Mary Vilakazi.
Vilakazi said the private sector was encouraged by structural reforms that were being implemented in major African economies over the last decade, including in Nigeria and South Africa, though more still needed to be done.
Vilakazi said that business was looking to have an “enabling environment, regulatory and policy certainty, access to skills, and confidence”.
“One way to lift the growth of any economy is trade, and barriers to trade have been well captured and the opportunity that sits behind countries where we take away all those barriers. When we look at the numbers of how much the frictional cost trade is on the continent, it’s about $5 billion a year, which could go back to economies,” Vilakazi said.
“Some of the challenges we see and where we as banks would like to leverage more of our balance sheet for productive capital formation, what we need to do with the deposits our depositors trust us with is to make sure that money is going into lending businesses that are going to create jobs and make sure that we have the infrastructure required to generate economic capital.
“But when policies and regulations are not enabling, that really becomes a very big constraint.”
Meanwhile, Minister of Trade, Industry and Competition Ebrahim Patel was upbeat about Africa’s future prospects when speaking at the WEF's Bloomberg Panel, which focused on developing a globally competitive African continent by accelerating the AfCTA and digitisation of the African economy.
Patel said Africa had a lot that was going for it, including a growing population, opportunities to use its commodities for mineral processing, and boundless possibilities to build regional value chains in auto and pharmaceuticals.
“Despite the global fractures and volatility, on several metrics, the African continent has been performing well,” Patel said.
“We have a window to shift Africa’s development path and ramp up the industrialisation drive. It will be critical for the African continent to build capabilities, expand infrastructure, sustain an innovation drive, and create new demand.”