While the world has been focused on the tensions within its best-known continental free trade area, the European Union, countries across Africa have come together to create their own economic union, the African Continental Free Trade Area.
Harvard’s Belfer Center for Science and International Affairs estimated in 2015 that only 12 percent of Africa’s trade takes place between nations on the continent, compared with 70 percent within the European Union. The AfCFTA aims to close that gap, and the United Nations Economic Commission for Africa projects that, if fully implemented, the plan can increase intracontinental trade by over 52 percent.
Under development since 2015, the AfCFTA was signed by 44 of the 55 African Union countries at a summit in March 2018. Since then, another six have signed on. On April 2, the agreement was officially approved when Gambia became the 22nd country to ratify it. Signatory countries have pledged to remove 90 percent of tariffs and other trade barriers on goods traded with other African nations.
Full implementation of the AfCFTA will be key to leveraging Africa’s growth potential over the coming decades, and will allow the continent to gain a footing on the global economic stage.
Untapped Potential
Africa’s economy has the potential to grow much more rapidly than it has in recent years; in fact, the continent could ultimately match the economic clout of current global powers. However, this growth will require consolidation and cooperation between nations, and the common market created by the AfCFTA is an important launching point.
“Africans are starting to wake up to the importance of regional economic integration as a step towards unlocking much more rapid rates of economic growth,” said Jakkie Cilliers, cofounder of the Institute for Security Studies and a professor at the University of Pretoria, in an interview with the HPR.
The AfCFTA is expected to boost employment, especially for young people across the continent whose economic potential is currently being wasted.
“There is a growing gap in most indicators of human wellbeing between the averages for Africa and the rest of the world,” Cilliers said. He added that trade integration is “probably the most important single factor” for closing that gap. Overall, he said, the plan is “ambitious” — it remains to be seen whether the AfCFTA will be a success, but it can at least begin to unlock some of the continent’s wasted potential.
A more integrated African economy is the only way for the continent to “create large enough markets … to be part of global value chains,” Cilliers added. “At the moment, Africa, with the limited exception of South Africa, is not part of global value chains,” he said. “Eventually, towards the second half of the century, if it manages political and economic integration, it can emerge as globally significant.”
Ibrahim Mayaki, who served as prime minister of Niger from 1997 to 2000 and is now CEO of the development agency of the African Union, the New Partnership for Africa’s Development, told the HPR that Africa must follow the lead of other regions focused on integrating their economies. He cited efforts at integration in South America, Southeast Asia, and even India — a country that can sometimes seem to function as a region, given the diversity within its borders.
“In that global context, Africa needs to also look internally, and my thinking is that we have been used to looking at solutions to our challenges from an external perspective,” he said.
Exporting Goods, Not Jobs
Much of the growth that stems from the AfCFTA will come in the manufacturing sector. Landry Signé, a fellow in the Global Economy and Development Program at the Brookings Institution, argued in the Washington Post that by boosting African economies through trade, the AfCFTA will give countries the capital they need to “accelerate their industrial development.”
“By 2030, Africa may emerge as a $2.5 trillion potential market for household consumption and [a] $4.2 trillion [market] for business-to-business consumption,” he predicted.
With this growth will come jobs, and as Vera Songwe, executive secretary of the United Nations Economic Commission for Africa, told the HPR, one of the goals of the AfCFTA will be to avoid “exporting” those jobs.
“We’re hoping that with the AfCFTA, we will create regional value chains that will create more jobs,” Songwe, who was involved in crafting the agreement, said. She noted that today, African cotton goes to China for processing before being reimported to African nations, where it is produced into textiles and then sent to be sold in the United States. “What we would like to do is produce the cotton on the continent, process the cotton on the continent, produce the textiles on the continent, and then export it,” she said. “That means that we keep all the jobs on the continent.”
Songwe said this will boost business opportunities for women in particular, who are the “the largest cross-border traders on the continent.”
“Because of weak governance, it is always very difficult to take goods across borders on the continent,” she said. “With the continental CFTA, we believe that there will be more women empowered to run their businesses, because the cost of doing business will drop.”
Songwe also believes that the AfCFTA will help get poverty rates — which she said have been “stubborn and sticky” in recent years — falling again.
“We’ve been able to bring down Africa’s poverty numbers to below 50 [percent], but we haven’t done much more since then,” she said. “When you bring 1.2 billion people together in a $2.3 trillion market, we believe that the leveraging insights can be quite substantial and that that will create its own dynamic.”
A Long History
The current state of economic integration in Africa is tied to the continent’s political history. Lack of trade between African nations is largely rooted in colonialism, David Luke, coordinator of the African Trade Policy Centre at the United Nations Economic Commission for Africa, told Al Jazeera.
“Colonialism created a situation where neighbours stopped trading with each other,” Luke said. “The main trading route was between African countries and European countries and between African countries and the [United States].” The AfCFTA is one way to correct this “historical anomaly,” according to Luke.
Songwe added that this lack of trade also stems from the fact that African nations are “producing more or less the same commodities,” which means there is no benefit to trading amongst themselves. “We need to diversify our output, we need to go into manufacturing and services, and then we start trading more,” Songwe said.
In recent years, the economies of some parts of Africa have become increasingly integrated, but limited expansions in trade tend to be limited to those regions and may have actually contributed to inequalities across the continent.
Both Cilliers and Mayaki cited major differences in growth between regions across the continent as a challenge Africa must face in the coming decades. “Some regions are doing much better than others,” Mayaki said. “East Africa is doing much better than Central Africa, which is lagging behind, and West Africa is trying to catch up.”
In his Post article, Signé claimed that the AfCFTA would help resolve those inequalities. “One of its central goals is to boost African economies by harmonizing trade liberalization across subregions and at the continental level,” he explained.
The Larger Vision
While experts are excited about the AfCFTA’s potential impact, it is just one piece of a larger vision for the future of the continent.
“When the [Organisation of African Unity, the precursor to the African Union] was formed, Haile Selassie himself did say that they would like to work towards an integrated continent,” Songwe said. “But then we went through a period on the continent when we had conflicts, when we had to get macroeconomic stability, and maybe the idea of economic integration was sort of put on the side.”
Mayaki said that the agency he heads, NEPAD, was founded by the African Union in 2001 with the vision of improving economic cooperation. In 2013, the African Union nations crafted Agenda 2063, a 50-year framework for African socioeconomic development, which NEPAD — now an agency — is in charge of implementing.
“The commonality between the two, Agenda 2063 and NEPAD, is that you will find that Africa will grow if it gives priority to regional solutions, which means if it gives priority to regional integration,” Mayaki said. He called Agenda 2063 “more a vision than a plan.”
The AfCFTA is just one of the early continental integration programs reflecting that vision. Eventually, African leaders hope to grow the Single African Air Transport Market, an initiative launched in 2015 to reduce barriers to intra-African air transport, and implement freedom of movement across Africa’s internal borders, following the model of the European Union’s passport-free Schengen Area.
In fact, in the “Call to Action” section of Agenda 2063, unification of the continent features prominently. “The speeding up of the regional integration process is a critical success factor for shared prosperity and peace,” it reads. “Political unity of Africa will be the culmination of the integration process, including the free movement of people, the establishment of the continental institutions, and full economic integration.”
Mayaki noted that the framework set down by Agenda 2063 aims to create “coherence between what you’ve done continentally, what you’ve done regionally, and what you’ve done nationally.”
“The potential effects if it is well-managed and well-monitored will be to increase indicators like intra-Africa trade, like regional industrialization, like diversification of the rural economy, like exploitation of a new economy,” Mayaki said.
Still, the treaty faces ongoing barriers to implementation. Nigeria’s president, Muhammadu Buhari, backed out of signing at the last minute, citing concerns that joining the free trade area would result in lost jobs for Nigerian manufacturing workers. The Nigerian government is still considering whether to ratify it.
In the meantime, experts have called on Nigeria — the continent’s most populous nation — as well as other countries to support the agreement.
“Africa needs an engaged and proactive Nigeria,” Aloysius Uche Ordu, who served formerly as a vice president at the African Development Bank, wrote for Brookings. “To turn inward and be on the sidelines of history is clearly not a viable option for the continent’s largest economy. The time for action on [the] AfCFTA is now. Africa’s destiny depends on it.”
The primary challenge for the AfCFTA is to mobilize the sort of cross-continental support and cooperation that it also ultimately hopes to create. Its potential is clear; the question now is whether African countries will embrace this vision for an integrated, unified trade system. If they do, the AfCFTA could very well begin to transform the continent.
Image Credit: African Union Conference Center