[Column] Goodie M. Ibru: What the AfCFTA brings to the table in Africa
The trade and investment layout of the African Continent is a story of both promise and missed opportunities. With a population of over 1.2 billion, Africa promises a huge and promising market. Africa’s advantage is enormous: huge population, vast landscape, natural and mineral resources, the right demographics in terms of youth in the working age bracket, the ingenuity and energy of a rising class of educated work force. But then the challenges facing the continent are enormous as well: poverty and unemployment, slow pace of industrialization, poor infrastructure facilities, poor adherence to the rule of law and inefficient judiciary stern, conflict and insecurity, threats to peace and security, huge capital flight, lack of access to capital, technology deficit for economic transformation and a host of other problems too many to mention here.
All these account for the low pace of industrialization, low level of investment and trade on the continent. For instance, Africa’s contribution to global trade is just 2%. The continent can trade only what it produces, so when production is low, trade will be low. Apart from that, intra-African trade is low both in absolute and relative terms. This is the problem that the African Continental Free Trade Area AfCTFTA is designed to redress.
A change in policy is also in order. Supporting local industries will require some policy mix in some areas: the infrastructure of the area must be well developed – transport, energy, water facilities. African Industrialists will like to take advantage of large scale production, so access to market is key both at domestic level as well as for exports. There should be access to capital, land use act must be such that it allows title deeds to be perfected and be usable as collateral for bank borrowing. Access roads to farms, markets and ports should make doing business easy. In addition, I will assume that each local area has peculiarities and challenges that are specific to each, so the Government will do well in addressing such challenges to encourage the expansion of industries and industrialization at the local levels. You will be amazed about how local industries, if well supported, can play a big role in the international trading system and contributing to the global value chain.
Having said that, it is sad to note that the AfCFTA could not take off on time as scheduled until 2021 due to the covid-19 pandemic. The structures of the AfCFTA are just emerging. The good thing however is that Africans are very optimistic about the turnaround which the AfCFTA will bring to the African economy- both economic practitioners and theoreticians are looking forward to an increase in productivity and trade as a result of a higher market under the new arrangement. It remains to be seen if the AfCFTA will live up to expectation.
About the African Business Roundtable
The African Development Bank Group set up the African Business Roundtable in 1990. Today the ABR is Africa’s foremost and continent-wide association of businesses and business leaders, and is the representative of the African Business Society to the United Nations. An independent, non-partisan, non-profit private sector funded organization, The African Business Roundtable is an NGO in Special Consultative Status with the Economic and Social Council of the United Nations (ECOSOC) and is the only organization representing the African Private Sector within ECOSOC.