Africa free trade area plan headed for doom, says UN

The Busia one-stop border post. Some regional tariffs stand at more than seven per cent. [Ignatius Odanga, Standard]
The African Continental Free Trade Area (AfCFTA) is doomed to fail, a new report has warned.

The latest United Nations Conference on Trade and Development (UNCTAD) report says going by the current trade patterns among African countries, there is little hope that the continental trade partnership would take off.

AfCFTA, which was signed by 44 African countries in Kigali, Rwanda in March last year, is meant to create a tariff-free continent that can grow local businesses, boost intra-African trade, rev up industrialisation and create jobs.

The agreement was designed to create a single continental market for goods and services as well as a customs union with free movement of capital and business travellers.

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The terms of the agreement dictate that countries joining AfCFTA must commit to removing tariffs on at least 90 per cent of the goods they produce.

But according to the Economic Development in Africa 2019 Report, there are the heightened trade restrictions among nations, where UNCTAD finds that some regional tariffs stand at more than seven per cent.

“On average, applied tariff rates to intra-regional economic community members amount to 7.4 per cent in the Community of Sahel-Saharan States (CEN–SAD), 5.6 per cent in the Economic Community of West African States (ECOWAS), 3.8 per cent in the Southern African Development Community (SADC), and 2.6 per cent in  the Arab Maghreb Union (AMU),” says the report in part.

In the Common Market for Eastern and Southern Africa (COMESA), tariff rates stand at 1.89 per cent, 1.86 per cent in the Economic Community of Central African States (ECCAS), 1.80 per cent in the Intergovernmental Authority on Development (IGAD) and zero in the East African Community (EAC).

As a result, trade between countries and regions has been anything but desirable.

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For instance, between 2015 and 2017, intra-African trade in terms of exports and imports, has been around two per cent annually compared to figures for America, Asia, Europe and Oceania, which were, 47 per cent, 61 per cent, 67 per cent, and seven per cent respectively. This was mainly attributed to the fact that some regional economic hubs were a let-down as they contributed marginally to the continent’s share.

In 2016, for example, intra-regional economic community trade was highest in SADC at Sh34.7 trillion followed by CEN–SAD (Sh18.7 trillion) and  ECOWAS (Sh11.4 trillion).

COMESA’s contribution stood at Sh10.7 trillion, AMU (Sh4.2 trillion), EAC (Sh3.1 trillion), IGAD (Sh2.5 trillion ), and ECCAS (Sh0.8 trillion).

The report also calls into question the unity of the regional blocs, where it found that it is only SADC that has “deeper levels of integration” at 84.9 per cent followed by COMESA at 59.5 per cent.

The state of union among EAC countries and ECCAS stands at 48.3 per cent and 17.7 per cent respectively.

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