“Increased intra-African trade is what will drive economic development post-COVID-19,” The Secretary General of the Accra-based AfCFTA Secretariat, Wamkele Mene, told Africa Renewal in an earlier interview. The African Continental Free Trade Area (AfCFTA) establishes a single market for made in Africa goods and services, eliminates tariffs by 90 per cent and tackles non-tariff barriers such as customs delays.
A unified market of 1.2 billion people with a combined GDP of 3 trillion USD is potentially a strong foundation for industrialization. Currently intra-African exports stand at about 17 percent of total continental exports. Increasing this share is expected to increase value addition, help create jobs and boost incomes.
Mene has devoted considerable time and energy superintending a successful takeoff of free trading. He has been ubiquitous in Africa’s state capitals, from Niamey in Niger, to Addis Ababa in Ethiopia, Lome in Togo, Khartoum in Sudan and others, meeting with political and business leaders, youth and women traders, touting AfCFTA’s benefits, entreating traders to seize the opportunity, and highlighting solutions to emerging challenges.
Recently, the Addis Ababa Chamber of Commerce and Sectoral Associations made discussion with various stakeholders on study paper entitled “Assessment on pertaining to African Continental Free Trade Agreement / AfCFTA / prepared by AFSEL consultation.
On the opening ceremony, the chamber executive secretary Zekarias Tufa said that his chamber has various responsibilities and duties and among others, making discussion with stake holders on current affairs related with business; making efforts with regard to creating conducive environment for doing trade and conducting discussion on how to provide international service in this regard.
Currently to enhance its activities, the chamber crafted its strategy. Petrose Meaza is a member of AFSEL Consulting who presented the study paper, for his part said that the study made efforts to look the potential of the regional free trade, business competitiveness of the member countries, preparedness, institutional constraints, regional trade integration and existing industrial opportunities and challenges.
As to him, AfCFTA negotiation was began in 2016 and ratified in 2018 after two years detailed discussion by 53 African Countries except Eritrea. Africa is the second populous continent in the world with 1.2 billion and this indicates how the continent has advantageous market, if economic integration is created. Currently, African countries’ Gross Domestic Production has risen to a remarkable amount.
The free trade agreement planned to increase the current free trade which means trading with no tariff from 16 percent to 62 percent within five years. The tariff liberalization modality registered 5387 commodities produced and transacted in the continental trade. The agreement also planned to transact 377 commodities with free tariff in 5 years grace period and 4845 commodities within 10 years.
As to the study, when it is fully realized, it enhances trade competitiveness, enables to contain cross boarder illegal trade, and stimulates investment and boost economic integration. More importantly, making trade with neighboring countries minimizes transaction cost.
According to the Ministry of Trade and Industry of Ethiopia, various measures have been taken to facilitate the continental trade agreement and to enhance the nation’s competitiveness in the regional market and among others, various researches have been conducted. As a result, export commodities are identified in accordance with their demand and competitiveness; liberalizing specific sectors such as Ethio-telecom and others are already undergone. For better effectiveness of the process, training has also been provided to the actors who involve in the continental trade.
According to the study, institutional limitations should be addressed to be competent in the continental market. In the case of Ethiopia, most government institutions which have direct working relation with traders have various limitations in terms of well-qualified human resource and experience particularly in regional trade and utilizing cutting edge technology.
Currently, the Ethiopian government has established training academy in collaboration with stake holders aiming to alleviate shortage of qualified human capital. In addition to these, awareness creation work has been conducted by the chamber to trade actors with regard to types of commodities transacted in the continent.
AfCFTA has got acceptance by the private sector which engaged in trade and production. Firms engaged in manufacturing already prepared to involve in regional trade. Some of the commodities which have comparative advantages and selected for export are leather, coffee, textile, sesame and live animals.
However, most manufacturing industries are unable to produce with their full capacity due to repeated power interruptions. In addition, they are unable to import inputs from abroad because of shortage of hard currency and these all hampers their competitiveness. Therefore, in order to circumvent the problem the government support is essential, the study indicated.
According to the study paper, the state of being landlocked for Ethiopia incurs 30 percent additional transaction cost. Therefore, the implementation of AfCFTA can be taken as a remedy to lessen the cost. The agreement stipulates some of the commodity’s transits by other countries’ ports to be freely transacted.
Some of the shortcomings mentioned by the private sector which hampers the continental trade among others are inefficient public institutions which have the authority to provide trade license; capital flights; the absence of effective credit system; power interruption; the none availability of effective trade policy; lack of simplified working system and lack of harmonious and autonomous import and export procedure helpful to reduce transaction cost.
The study paper further indicated that when compared to other countries, Ethiopia has poor logistic system and among the major short comings are obsolete infrastructure, delayof loading and unloading of goods in port and the absence of sufficient skilled labor.
As to the study, the Ethiopian trade is stagnant characterized by exporting raw materials and agricultural products with no or less value addition. The volume of import and export goods is very small and trade balance is negative. 1/3 of the export is coffee and this indicates that how the export is mono type. The major export items are coffee, edible oil seeds, sesame, fruits, leather and leather products. Products such as live animals and textiles have less comparative advantages in global market.
Creating continental integration through trade is an acceptable endeavor but there is geographical and distance factors which hamper the trade activities. For example, the distance from Addis Ababa to Dakar which is the capital of Senegal is 5996 kilo meter while from Addis Ababa to Kuwait is 2457 km and from Addis Ababa to Saudi Arabia is 1935km. Hence, exporters prefer to provide their commodities to Kuwait or Saudi Arabia than Senegal due to the transaction cost determined by the distance.
Regarding the existing opportunities to the Ethiopian industries, the study paper’s presenter listed some enabling facilities. Among the facilities incorporated in the list: the current economic reform; the introduction of new trade law; privatization of some government owned institutions fully or partially; the expansion of ICT infrastructure; the availability of affordable electric power and labor along with the rail transport stretched from Addis Ababa to Djibouti can be mentioned.
BY ABEBE WOLDEGIORGIS
The Ethiopian Herald June 6/2021
