The delayed implementation of an African free-trade agreement is a missed opportunity as the pact offers “probably the best form of stimulus” for the continent to overcome the impact of the coronavirus pandemic, according to an enterprise that liaises between business and the African Union.
“We unfortunately don’t have the ability to play with quantitative easing and the exercise of printing money,” Paulo Gomes, the vice president of the AfroChampions Initiative, said in an interview. “Our stimulus is really to enhance trade among the countries and create the conditions to create jobs, develop small and medium enterprises and make sure that we create liquidity in the market.”
Gomes, a former executive director of the World Bank, is one of 25 African business leaders, including Gervais Djondo, the co-founder of Ecobank Transnational Inc., and Ichor Coal NV Chief Executive Officer Nonkululeko Nyembezi-Heita, who wrote an open letter to the continent’s political leaders. In it, they warn that the postponement of trade under the African Continental Free Area would be a mistake.
First trade under the agreement, which was due to take place on July 1, has been delayed due to the coronavirus pandemic. While the agreement entered into force legally last year, protocols for trade in goods and services need to be agreed to make the July deadline.
Instead of a full-blown postponement, countries should work to facilitate the transport of medical and personal protective equipment as an immediate response to the virus, while concluding outstanding negotiations via virtual meetings, Gomes said.
The health and economic consequences of the virus will result in sub-Saharan Africa’s first recession in 25 years, according to World Bank estimates. African finance ministers have called for emergency economic stimulus of US$100B, including debt-service waivers to combat the effects of the pandemic.
The trade pact would cover a market of 1.2 billion people with a combined gross domestic product of US$2.5T, making it the world’s largest free-trade zone. It aims to lower or eliminate cross-border tariffs on 90% of goods, facilitate the movement of capital and people, promote investment and pave the way for the establishment of a continent-wide customs union. The agreement is meant to be fully operational by 2030.