You’ve heard the war cry through the decades calling for “less aid, more trade” to deliver the promise of economic growth that has eluded African countries for far too long.
Originally published in the ESI Africa weekly newsletter on 05/08/2020
Now the African Continental Free Trade Area (AfCFTA) Agreement brings hope for future generations of entrepreneurs from all sectors.
Why would the AfCFTA succeed, when the billions of dollars in foreign aid that has found its way to African countries to aid the attainment of ‘self-sustainment’, has not?
It reminds me of the argument put forward by former New Zealand Prime Minister Mike Moore regarding the positive impact of trade. To make his point, Moore quoted US President John F. Kennedy, who when introducing the Tokyo Round, said: ‘This will lift all boats and help developing countries like Japan.’ Case made, I would have thought.”
Given Japan’s economic rise, which through the years changed from trading agricultural products to manufactured goods, it is indeed a fitting case in point. However, Africa is home to diverse nations and is geographically immense, and for the Agreement to transform the continent, clear policy and governance must be demonstrated.
As a continent, we already agree that the solution to poverty lies in the increased economic capacity that trade can bring rather than in aid handouts. It’s this view that has led to the Agreement, but the implementation could still be our downfall.
The AfCFTA Agreement is set to boost $450 billion in income gains.
Since the AfCFTA will be governed by five operational instruments—namely the Rules of Origin; the online negotiating forum; the monitoring and elimination of non-tariff barriers; a digital payments system; and the African Trade Observatory—the political will is there.
According to the World Bank, the AfCFTA Agreement is set to boost $450 billion in income gains, of which $292 billion would come from more robust trade facilitation. However, the Bank warns that failure to implement measures to reduce red tape and simplify customs procedures will hinder achieving such gains.
It’s not just about Africa, as the Bank points out that such an income boost will also add $76 billion to the income of the rest of the world. Such a clear benefit should motivate aid-giving countries to instead focus their resources into supporting the countries that have ratified the Agreement.
Sadly, trading under AfCFTA has been postponed from its 1 July date as a result of the COVID-19 global pandemic with no new date announced. Let’s use this time for governments to prepare through the training of officials and streamlining of procedures, which trade reforms will deliver.
As an entrepreneur or corporate professional, how do you intend taking advantage of the AfCFTA Agreement?
Until next week.