NAIROBI, Kenya, Jul 6 – The stage is set for the unification of the African market with the coming into force of the African Continental Free Trade Area Agreement (AfCFTA) on Sunday, when African Heads of State converge for the 12th Extra-Ordinary Summit of the African Union (AU) in Niger.
AfCFTA, conceived in March 2018 during an AU Summit in Kigali, Rwanda, passed the 22-nation threshold required for it to become operational after the Gambia ratified it in April.
Nigerian President Muhammadu Buhari on Wednesday announced the West African nation, which is the most populous in the continent, will join the agreement giving fresh impetus to the vision for a 1.2 billion people continental market with a combined Gross Domestic Product (GDP) of $ 3.4 trillion.
Kenya ratified the deal, whose implementation will see up to 90 per cent of trade tariffs removed, in May 2018.
Other countries that have ratified AfCFTA include South Africa, Ethiopia, Egypt, Chad, Côte d’Ivoire, Congo, Djibouti, Gambia, Ghana, Guinea, Mali, Mauritania, Namibia, Niger, Rwanda, Senegal, and eSwatini.
Projections by the United Nations Economic Commission for Africa (UNECA) have shown intra-Africa trade will increase by 52 per cent by 2022 as a result of the implementation of AfCFTA.
Kagure Wamunyu, the Chief Executive Officer for Africa at Kobo360, a leading logistics firm in the continent, says the agreement will enhance the movement of goods within Africa and reduce costs incurred due to delays at border posts.
“The removal of Non-Tariff Barriers (NTBs) which could be paperwork and custom clearance documents needed at the borders is a big deal to us in the sector because if you have cargo delayed for a week at the border that is a huge cost which is then passed to the consumer,” Wamunyu told Capital FM News on Friday.
She said the agreement will also contribute significantly to the growth of markets for agricultural produce enabling farmers to reach markets they would have been unable to mainly due to high tariffs.
Open borders, she said, will also facilitate movement of food to food insecure areas.
“The markets are going to grow bigger which means if you’re a manufacturing company in Kenya and you’re an SME, it is now easy to expand beyond the borders so that if you were only serving a country you can serve five,” Wamunyu, who has also served as the Country Manager for taxi hailing app – Uber – explained.
She however, said the trade deal may encounter a few hurdles before it finally gains momentum, challenges which will be ironed out with time.
“There’s always teething problems especially at the beginning when everybody wants to understand the exact impact the agreement will have on their respective countries. It’ll be baby steps but there’s one thing that’s very clear – the understanding of what AfCFTA means for trade and commerce in the continent,” she stated.
Despite recording an almost double increase between 1995 and 2013, intra-African trade has remained significantly low compared to intra-continental trade in other areas mainly due to harsh tariffs and often drawn-out trade disputes over custom regulations between neighbouring countries.
A UNECA report published in March 2016 for instance showed that Africa trailed behind the Americas, Asia, and Europe, all of whom had remarkable imports levels within respective regions.
“Intra-African imports as a share of the continent’s GDP rose from around 2.7 per cent in 1995 to around 4.5 per cent in 2013, but this is low compared with regions such as the Americas (6.7 per cent), Asia (17.9 per cent) and Europe (21 per cent),” the report titled “Assessing Regional Integration in Africa (VII)” pointed out.
“Only the Southern African Development Community (SADC) (from 3.6 per cent of GDP in 1995 to 5.7 per cent in 2014) and the Common Market for Eastern and Southern Africa (COMESA) (from 0.8 per cent in 1995 to 1.9 per cent in 2014) have seen substantial increases in the share of intra-regional trade in GDP,” the report indicated.
Djibouti-headquartered Intergovernmental Authority on Development (IGAD) which Kenya is part of only recorded 1.8 per cent intra-regional trade behind other Regional Economic Communities (RECs).
“The Southern African Development Community (SADC) is Africa’s only regional economic community among the highest-performing regional trade agreements worldwide in 2013 (sixth out of 32; Africa’s other regional economic communities fall in the bottom half),” the UNECA study showed.