Building capacity to help Africa trade better

Given the right conditions, smaller countries could benefit more from AfCFTA


Given the right conditions, smaller countries could benefit more from AfCFTA

Given the right conditions, smaller countries could benefit more from AfCFTA
Photo credit: EIF Rwanda

ECA’s Executive Secretary Vera Songwe led a High-level Ministerial Dialogue on “The African Continental Free Trade Area: creating fiscal space for jobs and economic diversification” in Addis Ababa today, following the launch of the Ministerial segment of the 51st Conference of African Ministers of Finance, Planning and Economic Development.

The debate took place with the participation of several high-level officials, and covered a variety of topics related to the implementation of the African Continental Free Trade Area (AfCFTA) such as the various stages of its implementation, including internal reforms needed for member countries to fully benefit from the AfCFTA, the strategic decisions needed to maximize countries’ competitiveness, or taxation issues and the importance of international cooperation in this field.

“Free trade is not just a matter of being together, it’s a matter of changing internal structures, having uniform policies, and preparing agendas that are not conflicting with international commitments,” said Aia-Eza Nacilia Gomes Da Silva, Secretary of State for Budget, Republic of Angola.

To ensure countries benefit from a free trade zone, they need to fulfill a number of key requirements including the setting up of a complex governance framework, structural reforms, a homogenous legal framework, stable macro-economic policies, said Eswar Prasad, Tolani Senior Professor of Trade Policy and Professor of Economics at Cornell University and Senior Fellow at the Brookings Institution.

“We, as a nation, agree we cannot indefinitely depend on oil, but we believe that we are now on the right path thanks to diversification. Diversification is a process that needs important, structured and strong financial systems, which we certainly still don’t have at this point.

“The burden is on the government to make this happen,” said Minister of Finance Ken Ofori-Atta of Ghana, who also urged African countries to ratify the AfCFTA instruments to enable Africa to start implementing the agreement for the benefit of its people. “Ghana always felt that a much more united Africa will benefit all of us,” he said.

“Greater trade is certainly beneficial, as long as implementers get the conditions right,” said Ireland Central Bank Governor Philip Lane. “Trade is only possible if you know you'll get paid when you export. Central Banks need to cooperate with one another. Everyone then benefits, but small countries benefit more”, he said, also adding that while economic crises can happen anywhere, “areas of the world that are open to trade recover faster."

“The challenge we face is that not all of us in Africa believe the AfCFTA can be made to deliver. We need to ensure that all of us change our mindsets and believe we can do it,” said AU Commissioner for Trade and Industry Albert Muchanga, who mentioned that the feedback given by the 11 countries who haven’t signed the AfCFTA is promising.

The AfCFTA was launched in Kigali, Rwanda, on 21 March 2018 with the hope of opening the way to free trade throughout Africa, facilitate member countries’ industrialisation and economic diversification and ensure sustainable, employment generating growth for the whole region.

At this stage, the agreement is yet to be ratified by at least 22 member countries.

Mobilize African citizens for a successful continental free trade area, says Kaberuka

The people of Africa need to be mobilized for the success of the AfCFTA and the ongoing African Union (AU) reforms, former African Development Bank (AfDB) President, Donald Kaberuka, said on Monday.

Speaking during the high-level roundtable, Mr. Kaberuka said the continental free trade area and AU reforms were both critical for Africa’s future, adding, nothing should be taken for granted.

“For the AfCFTA we need to get it out of the high level conference halls to the people at all levels.  This is critical to the success of this historic enterprise,” the former AfDB Chief, who gave the lead presentation in the high-level panel said.

“Part of the problem is that we do not mobilize the African citizenry enough. We can’t afford to slide back. It is sincerely my hope that every country in this room should make it a solemn pledge that the AU, the only continental political instrument we have and need, should be a top priority.”

Mr. Kaberuka said the AfCFTA was much more than a tariff elimination exercise, adding it should be “a quantum jump in how our continent repositions in the context of a weak multilateral system and a time of a potential demographic cliff for us, for a lack of a better word”.

But for that to happen, he said, Africa has to deal with fears expressed by countries that are still to sign-up to the AfCFTA, convince doubters, or even cynics who think the agreement is utopia.

Mr. Kaberuka said AfCFTA negotiators should address the fears and come up with a package tackling all matters being raised.

“This package should in principle bring everyone to the zone of comfort.  However, even with all these guarantees, success depends on a shift in the mindset,” he said, adding the continent needs to understand that trade today is not what it was thirty years ago.

“The AfCFTA is a lot more than goods and merchandise; the services sector are probably as important, from logistics, telecommunications, to trade, finance and non-bank financial services,” Mr. Kaberuka said, adding tariffs were only one part of the problem.

“At the end of the day it is by promoting economic growth through trade and investment that fiscal space will emerge - that is the promise of the AfCFTA,” said Mr. Kaberuka, adding through the AfCFTA, “we will boost intra-Africa trade, increase market size, depth and diversity increase opportunities for business, consumers, producers, diversify our economies to complex products thereby expanding fiscal possibilities”.

He said it was only by so doing that the continent can build resilience in the current global systems and avoid the demographic cliffs.


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