How Africa is fighting global protectionism through AfCFTA

President William Ruto and other African Heads of State and Government during the 37th ordinary session of the Assembly of the Heads of State at the AU headquarters in Addis Ababa, Ethiopia, on February 17, 2024. [File, Standard] With global protectionism surging, Kenya and other African countries are increasingly looking towards intra-continental trade as a bulwark against this tide. The vital cog in the wheel that drives this agenda is the African Continental Free Trade Area (AfCFTA). The swift implementation and deepening of the pan-African trade pact, encompassing 54 of the 55 African Union (AU) member states, is seen by proponents as the continent's essential path towards economic resilience. AfCTA is being seen as a solution for escalating tariffs and disrupted global supply chains. The AfCFTA aims to eliminate tariffs on products traded among African countries. It covers policy areas such as trade facilitation and services, as well as regulatory measures like sanitary standards. The AU estimates the agreement will boost revenue and lift 30 million of Africa's extremely poor from poverty once fully implemented. While progress has been made, including a pilot programme where countries like Kenya and Rwanda have shipped goods under AfCFTA with lower customs fees, full implementation faces hurdles. Speaking in an interview with the Financial Standard, Wamkele Mene, Secretary General of the AfCFTA, said some three events have created what he termed a "perfect storm" for African states to leverage the pact. They include the supply chain collapse during the Covid-19 pandemic, the Russia-Ukraine war which halted grain shipments to Africa (a net food importer), and increased global protectionism. "The weaponisation of trade policy is compelling us to reflect deeply on how we can accelerate self-sufficiency as a continent," Mene said. He emphasised the urgent need for continental self-sufficiency in critical areas like pharmaceuticals and food security. The urgency to leverage on AfCTA has gained consensus among prominent African leaders and business figures. Tony Elumelu, a prominent advocate of pan-African economic integration, emphasises the critical importance of swiftly implementing AfCFTA. He believes the pact's aspirations must translate into "tangible progress" for Africa's economic growth. Mr Elumelu believes for Africa to truly develop, the continent must look inward and begin producing what it needs while tapping into its own vast internal market. "Africa is the future. Our continent has immense potential from our growing young population to the vast natural resources and untapped markets," he says. "If we can harness this potential, we will not only transform Africa but also redefine the global economic landscape." Such initiatives, he reckons, aim to foster economic growth and address persistent development challenges through increased intra-African trade, a crucial step towards reducing reliance on external value chains. Prof Benedict Oramah, president of the African Export-Import Bank (Afreximbank) , agrees, with this assertion. He says the trade pact offers Africa a path out of the challenges it faces today. "Globalisation, as we know it, is regrettably under life support," Oramah said, adding that the AfCFTA offers Africa a vital pathway to foster self-reliance and unlock its substantial internal market potential. With a combined Gross Domestic Product (GDP) exceeding $3.1 trillion (ShSh399 trillion) and a market of 1.4 billion people, intra-African trade currently accounts for a mere 15 per cent of the continent's total trade, indicating significant untapped potential. "The time to act is now," Oramah says. Kenya is moving to take advantage of the regional trade bloc by diversifying its trade relations to cushion the economy from challenges such as the recent 10 per cent US baseline tariff on its exports. Kenya's manufacturing sector has been betting big on the Africa-wide trade pact that will provide access to what has been described as the biggest market in the world. According to the Oxford Business Group, Kenya's exports are projected to increase by over Sh10.2 billion ($100 million) following full implementation of the free trade pact. The group notes that with 41.2 per cent of Kenya's exports destined for free trade pact member states in 2011, compared with the 13.4 per cent share of imports from the same zone, Kenya enters the bloc from a position of relative strength. Only 12 per cent of Africa's trade is between African countries, with global markets becoming thinner, AfCTA has the potential to help African countries trade more with each other. Kenyan manufacturers are banking on the agreement to take the lead in producing competitive products in terms of quality and prices. Kenya is a gateway to Africa due to its strategic location, strong regional influence, and significant infrastructure. The World Bank's analysis further highlights the transformative potential of the AfCFTA, estimating it could boost Africa's income by $450 billion (Sh58 trillion) by 2035 and increase Africa's exports by $560 billion (Sh72 trillion), mostly in manufacturing. The pact is projected to spur larger wage gains for women (10.5 percent) than for men (9.9 percent), and benefit both skilled (9.8 percent) and unskilled (10.3 percent) workers, leading to a significant decline in extreme poverty across the continent. West Africa would see the biggest decline in extreme poverty (12 million people), followed by Central Africa (9.3 million), Eastern Africa (4.8 million), and Southern Africa (3.9 million). The World Bank underscores that while tariff liberalisation is important, contributing a modest 0.2 percent to the continent's income, the bulk of the income gains ($292 billion) would come from stronger trade facilitation measures that cut red tape and simplify customs procedures. "Creating a single, continent-wide market for goods and services, business and investment would reshape African economies," said Caroline Freund, Global Director of Trade, Investment and Competitiveness at the World Bank. Albert Zeufack added that the AfCFTA has the potential to "increase employment opportunities and incomes, helping to expand opportunities for all Africans." Intra-continental trade tariffs make it 6.1 per cent more expensive to import goods from within Africa than from outside the continent, studies show.

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