The narrative that see Africa as a dark continent though not a direct reference to the colour of its inhabitants, but a direct consequence of its poor human development index, appears to be the worst when juxtaposed with other developing continents of the world.
Africa despite its numerous challenges has come a long way at rediscovering itself for global competitiveness in all facets of human endeavours. However, these attempts have always been hampered by bad governance and corrupt leadership which pervade the entire landscape of the continent.
Needless to emphasis the fact that Africa is indeed the most endowed continent on the surface of the earth and thus accounts for the largest chunk of resources and raw materials needed to drive global economic growth and development. However, lots of these resources are usually not exploited into finished products in Africa due to poor technological knowhow, but are often times exported to other continents of the world where they are converted into finished products and are imported into the continent. This in a way affects the local currencies of Africa countries and their economies in general. Simply put, what remains untapped is the ability for Africa to get value for money through exploitation of its resources and exporting them inorder to earn foreign exchange, boost and stabilise its economies.
While it is essential for Africa to trade with the rest of the world, the need to remove every form of trade barriers amongst countries in Africa is so essential in the quest for Africa to improve its trade relations.
The African Union sometimes ago launched the operational phase of the Africa Continental Free Trade Area presently considered as the largest global free trade area which is aimed at propelling Africa’s economic growth and prosperity.
The objective is to ensure cross-border cooperation and trade in a world characterized by growing isolationism and to ensure a single market for goods and services by participating 54 African countries aimed at allowing the free movement of business, travelers and investments and create a continental customs union to streamline trade-and attract long term investment. However, for the objective to be realized, it is imperative that the Agreement must overcome implementation challenges inorder to serve the benefit of all.
The advent of Covid 19, no doubt has affected and reshaped global communities and countries have often adopted various measures for economic survival.
The response to the pandemic has no doubt changed the Global socio-politico dynamics, thereby creating new social norms. This is in addition to the plethora of challenges including climate change, inequality, migration and displacement, with its ever growing complexities, which requires urgent and collective action. The ideal of AfCFTA Africa Continental Free Trade Area is to uphold trade relations in the continent by ensuring that no barrier or obstacle serves as impediments.
According to an IMF report, it projected a historic global GDP contraction of 4.4% in 2020 and a partial and uneven recovery in 2021, with growth at 2.5%.
Despite the Covid 19 threat and challenges global leadership and cooperation seems lacking.
WHAT THE AFRICA CONTINENTAL FREE TRADE AREA (AfCFTA) is all about:
The Intra-Africa trade has been historically low, as Intra-African exports was reported to be 16.6% of total exports in 2017, compared with 68% in Europe and 59% in Asia, pointing to untapped potential. The agreement is seen as critical for growth and job creation for Africa and its 1.27 Billion people. Clinching Nigeria’s agreement and moving to its operational phase this July was a significant step.
Already launched on 1st January, 2021, the AfCTA agreement will be critical at ensuring opportunity for countries and companies to help each other grow as they have done in other regions. Although trade liberalization has the ability to destroy the potentials of the poorest within those countries and that is why it is so important to have supportive policies. Several challenges and solutions were laid out.
HOW THE AFRICA CONTINENTAL FREE TRADE AREA (AfCFTA) WILL BOOST AFRICA’S ECONOMY:
Citing the Insurance and Manufacturing Sectors of Africa’s Economy, AfCFTA will help boost the INSURANCE SECTOR as follows:-
a) Stimulate and Enhance Growth through Structural Reforms:-
According to report, Africa’s Insurance sector is said to be primarily driven by economic growth rather than market penetration.
Asides Morocco where there has been a big Agent networks and in Ghana where Insurance growth is catching up to GDP growth, AfCFTA will boost and enhance market liberation and will ensure increases access through wider distribution of Insurance policies across the continent which will in turn boost Insurance growth in the Continent.
b) Increased Partnership and Regulation:-
AfCFTA will also ensure increased partnership and regulation, support innovation and access which will eventually build consumer trust and develop a more robust and resilient industries with better-protected African populations in comparable markets.
c) Long term Growth Prospects in the Continent:-
Over the years and across the African continent, established Insurers have always had to the tendencies to diversify across the continent.
With the right implementation of the AfCFTA, there is likely going to be the expansion in insurance investments across the African Continent. This will definitely benefit the regional players and will lead to expansion in the Insurance Sector.
So many examples of these expansions across the African continent abounds. Allianz is reported to have made acquisitions in Morocco, Nigeria and more recently in Kenya. French Multinational AXA is reported to have its presence in Nine African countries, while Old Mutual is also reported as having its presence in 13 Africa markets.
This expansion will certainly help in the achievement of the aims and objectives of AfCFTA as it will integrate and help to realize a common Africa Insurance Market and deepen its growth in Africa.
The AfCFTA will help boost Africa’s manufacturing Sector as follows:-
a) Enhance its Market for Manufacturers:
Given an integrated African Market, there will exist in Africa, a larger supply Market, decreased Trade restrictions and free movement of people.
b. Ensures Global competitiveness of Africa’s Manufacturing sector:
This means, Africa’s manufacturing specialization will be greatly enhanced, thereby preparing it for Global Competitiveness.
c. Ensures competitiveness at the Industry and Enterprise level:
This will be made possible through exploiting opportunities for scale of production, continental access and better reallocation of resources which is conformity with the objectives of AfCFTA.
d. AFCFTA and the realization of Agenda 2063:
This is aimed at reversing Africa’s premature deindustrialization and tapping into the vast number of manufacturing opportunities that persist in areas such as, software, auto component, industrial and business machinery, chemicals, agro-processing and clothing and foot wears subsectors etc
Some countries in Africa have already claimed advantages in certain subsectors. Kenya for example with a relatively strong industrial manufacturing sector accounts for nearly 20% of the country’s economic activities and 12% percent of all form of jobs which has become the primary supplier of motor vehicle for East Africa Markets.
CHALLENGES AND SOLUTIONS:
Infrastructure Challenges and Bureaucracy:
While infrastructural provision has considerably improve in most African countries significantly, there is still a long way to go inorder to facilitate trade amongst countries in Africa. Further to this is bureaucracy which makes it difficult to build value chain across Africa continent when there are countless customs stamps, customs signatures and certificates to simply move a container of goods from one country to another. Infrastructural challenges and bureaucracy must be reduced to facilitate trading activities across the continent.
The need for Harmonization of Regulations:
There is the need to have “one stop border posts and common rules and harmonious regulations aimed at ensuring that the flow of goods happens far more quickly and easily. Standardization of regulations is going to be extremely important, said Patrick Khulekani Dlamini, Chief Executive Officer and Managing Director of the Development Bank of Southern Africa.
The African Union has given its commitments and assurances at implementing policies and programmes that will help enhance trades within the continent.
The Commissioner for Trade and Industry at the African Union Commission, Mr. Albert Mudenda Muchanga has stated that member countries have got a very aggressive programme of Trade facilitation, so that numbers of documents that have to be signed for goods and services across borders will have to be minimized”.
The Need to avoid Protectionism:
As Global trade rules are gradually being flaunted across various regions of the world, with China and United States spiraling into a Trade war and protectionism tightening its grip in many countries, this is an opportunity for Africa to create some sort of trade buffer for itself.
With all countries in the African Continent agreeing with one giant bargaining unit, it will ensure much influence is asserted towards helping the continent to realize a more formidable market.
FACILITATING A MORE FORMIDABLE SINGLE AFRICA MARKETTHROUGH AFRICA CONTINENTAL FREE TRADE AREA (AfCFTA)
“Africa can stride onto the trade negotiation stage as one enormous market. This however could lead to a new engine of growth across the continent”. This is according to a view shared by Ngaire Woods, Dean Blavatnik School of Government of the University of Oxford.
It is important to state further that attaining an integrated and much prosperous economy will greatly be enhanced by learning from the mistakes of other regions and by starting afresh and integration process that will be all encompassing.
Also, monitoring on a month-to-month basis will be important to see how barriers are being dismantled and identifying and breaching any gaps in between.
It is essential for Africa to take several steps in order to boost trade, such as fostering skills for entrepreneurship and providing more access to credit and capital.
Business and political leaders will need to be creative thinkers about continental joint ventures to build strong continental joint ventures to build strong production and manufacturing networks across the continent.
In all, this proposed giant African market to be facilitated through the instrumentalities of Africa Continental Free Trade Area Afcfta has a great potential to propel growth across the continent if carefully and well harnessed for the benefit of all.
