The delay in the implementation of the African Continental Free Trade Agreement (AfCFTA), which was scheduled to launch in July this year, could provide much-needed breathing room for Africa’s manufacturing and construction sectors.
This is according to Duncan Bonnett, Director Market Access & Research at Africa House. Bonnett says several sectors now have an opportunity to better prepare for the implementation of the AfCFTA.
The implementation pushed out until 2021 because of the impact of Covid-19, could have the potential to increase growth, raise welfare and stimulate industrial development, according to studies by the likes of the International Monetary Fund (IMF), the UN Economic Commission for Africa (UNECA). However, there have also been concerns that some countries could suffer revenue losses and other negative effects from premature liberalisation.
Bonnett says: “This gives companies and countries a bit of breathing space, even though changes brought about by the agreement would not have been immediate, and certain duties are already zero or near zero.
“The delay in implementing the agreement, along with the pandemic downtime, allows companies to reinforce what they have been doing to get systems in place, and better prepare to take advantage of emerging opportunities. At a strategic level, it allows them time to assess the impact of the Covid-19 pandemic on the sector, and on companies in the global north. In countries badly affected by the pandemic, a lot of the industrial capacity is in small to medium-sized companies which have been incredibly badly impacted, so this may present new opportunities for African companies to look at where they can take space in that market.”
Bonnett notes that the pandemic highlighted supply chain issues, which continental free trade could help to mitigate. Across Africa, there were disruptions in the supply of goods and services out of Europe and elsewhere in the global north. “There were impacts on the cost of building materials, for example. When China shut down, the cost of building materials in Kenya rose by 5 – 10%. This may not have a major impact on a residential project, but it becomes prohibitive in a billion-dollar infrastructure project. This reinforces need for better intra-regional trade linkages.”
African companies – particularly in key east and west African markets – now have a real opportunity to position themselves to compete globally and build resilience into the pan-African supply chain, he says.