It is common to hear importers from various parts of the country uttering about plethora of goods even the smallest ones such as toothpicks, toilet papers and matchboxes traded and imported from far away countries. The most amazing thing, however, is that many of the goods, with similar product types and qualities with cheaper prices, are manufactured and supplied to international markets by companies of neighboring countries, in Africa.
The reasons behind this associated with Africa’s intra-African trade relations being below its potential, having varied trading regulations and customs- and others are mentioned as the main bottlenecks. However, for Africa to create ways to better integrate its fragmented markets as well as to enable the continent employ its full potential, the implementation of Africa Free Trade Agreement is considered as a remedy to materialize intra-African trade among the countries. As many agreed, the implementation of the CFTA could be the catalyst that moves the region toward high levels of intra-regional trade.
The UN Economic Commission for Africa also thinks AfCFTA has the potential to raise intra-African trade by 15 percent to 25 percent, or 50 billion USD to 70 billion USD, by 2040.The Ethiopian Investment Commission Commissioner Abebe Abebayehu said that, the agreement is phenomenal and could change the game of business as usual practices that Africa has been practicing for so long. The move apart from bringing various returns to the Africa’s market, it can expand investment and trade, transfer technology and generate skilled human power that could improve the business aspect as well the manufacturing sector.
The African business community is the most beneficiary of the agreement. Potential advantages to the private sector include increasing economies of scale and access to cheaper raw materials and intermediate inputs. Furthermore, it would create better conditions for regional integration and value chains; catalyze the transformation of African economies towards greater utilization of technology and knowledge; facilitate both intra-African and external direct capital flows to African countries, and create a labor market and a demand pull throughout the continent, he added.
Mentioning that tariff and non tariff barriers how have been harming Africa’s trade trends Abebe said that if the barriers eliminated eventually, Africa could be the center of trade and investment. To realize this potential and ensure the success of the effort, pertinent stakes should work jointly in terms of creating informed business community and supply provisions of finance in a manner letting the business flourish.
According to him, the Agreement would create a single continental market for goods and services as well as a customs union with free movement of capital and business travelers. Countries joining AfCFTA must commit to removing tariffs on at least 90 percent of the goods they produce.
Ethiopia with high population and connectivity, easily trainable human power coupled with clear policy directions on the subject could benefit much. The agreement is instrumental in bringing the resources and market linkage in manufacturing and agriculture products as well other services.
He further noted that the agreement is meant a lot to Africa because, it signifies a single market of goods and services for 1.2 billion people with an aggregate GDP of over 2 trillion USD. The United Nations Conference on Trade and Development (UNCTAD), the UN’s trade body, predicts reducing intra-African tariffs under AfCFTA could bring 3.6 billion USD in welfare gains to the continent through a boost in production and cheaper goods.
Although some Regional Economic Communities (RECs) have achieved improvements in trade integration through tariff reductions, the African market remains fragmented. Non-tariff barriers such as uncoordinated bureaucratic procedures, long waiting times at the border or lengthy and cumbersome export requirements raise trade costs on the continent. As a result, Africa has integrated with the rest of the world faster than with itself.
Consolidating this continent into one trade area provides great opportunities for trading enterprises, businesses and consumers across Africa and the chance to support sustainable development in the world’s least developed region the Commissioner remarked.
According to documents, although growth in Africa is forecasted at an average of 3.6 percent for 2019–20, with the world’s fastest growing economies, there is still much to be done. Africa is still heavily reliant on commodity and agricultural exports while importing capital goods or food products predominantly from outside the continent. With a global trade share of less than three percent, export diversification has yet to be achieved, as many African countries still rely on rents from extractive exports, whilst falling behind on industrialization efforts, the Commissioner remarked.
Abrham Hailemariam, Trade and Investment Promotion Director with the Addis Ababa Chamber of Commerce and Sectorial Association also said that the Agreement could bring substantial advantages in boosting trade and investment.
According to him, it could instill peace and stability among African nations because many of youths get jobs and engage in generating wealth that impact their life, and distance them from the involvement of violent activities around them.
“To ensure lasting and well established Africa free trade, countries should work in equipping the youths with the required knowledge, skills and trainings and create informed manufacturers and agro-industry runners that are producing items of products fitting quality standards,” he noted.
Abraham also stressed that without comprehensive policy-making and preferential treatment for Africa’s most at-risk economies, the AfCFTA could prove to be a force for economic divergence, rather than a force for good.
Therefore, it is important that participating countries to build an efficient and participatory institutional architecture to avoid leaving any economies behind.
The Ethiopian Herald, June 12/2019
BY MENGISTEAB TESHOME
