When the African Continental Free Trade Area (AfCFTA) agreement—which has created the world’s largest free trade zone—was first expressed a couple of years ago, I admit I wondered if African leaders were fully committed to achieving this historical milestone. But the progress and enthusiasm around the agreement, as well as its potential to be transformational for all Africans, have eased my reservations.
As noted by many experts, including Dr Landry Signé in a recent report on this subject, the AfCFTA has great potential: By 2030, Africa will have a combined consumer and business spending of $6.7 trillion, offering some of the world’s biggest opportunities for international investors.
There are, however, significant obstacles: Africa is still heavily reliant on commodity and agricultural exports. Industrialisation has been slow and, in some places, stagnant. With a global trade share of less than 3 percent, export diversification is yet to be achieved. Current intra-African trade accounts for a mere 16 percent of the continent’s total trade volume. Indeed, the continent remains plagued by a number of unpredictable tariff and non-tariff barriers, poor infrastructure, few supportive policies and legal framework, a lack of a transportation network, heavy layers of government bureaucracy, and still-high levels of corruption.
In order to be successful and deliver on the AfCFTA’s promises, a labyrinth of regulatory hurdles need to be addressed and a number of enabling intertwined actions need to be considered by all stakeholders.
As much as the idea of building an African single market is very popular on the continent, some countries remain very protectionist: For example, some small countries like Equatorial Guinea and Gabon are still reluctant to open their borders. In fact, Equatorial Guinea announced earlier this month that it intends to build a border wall to prevent Cameroonian and West African illegal immigration, citing security threats. There have even been some cases of xenophobia-inspired attacks in South Africa.
Therefore, before it become fully implemented, the African Union must bring awareness of the AfCFTA to the general public–especially youth, women, and informal sector actors–by educating them about what it entails and how it might affect them.
Perhaps one of the most pressing issues facing the region is the lack of supportive infrastructure. Without enhanced infrastructure, businesses cannot affordably transform products or move people, goods, and services in a cost-effective way. According to the African Development Bank, Africa’s infrastructure financing needs come down to an estimated $130 billion to $170 billion per year. The African Union must encourage international partners to invest in regional infrastructure projects as well as national infrastructure development.
The AfCFTA is host to the greatest level of income disparity of any continental trade agreement. It is more than double the levels witnessed in ASEAN (Association of Southeast Asian Nations) and CARICOM (Caribbean Community) countries. These economic disparities could be addressed by putting in place special and differential treatment (SDT) provisions, especially for least developed countries, coupled with technical assistance programs.
Despite the continent’s growth, economists still predict a shortfall of 68 million jobs by 2022, not including the tens of millions of currently underemployed. Even within the context of AfCFTA, the African Union should encourage member states and other institutions to strategically prioritize their private sectors, encouraging investment in infrastructure, technology and power development, and agribusiness. Local and national governments should focus on creating an enabling environment for businesses to prosper and ensuring that the wealth they create is inclusive, sustained, and reinvested in African communities, in youth, and in women. The informal sector merits special attention in this regard. (