It’s been just under 20 months since preliminary trading under the African Continental Free Trade Agreement (AfCFTA) began, in January 2021; it represents a record-setting agreement negotiated and implemented in five and a half years, establishing the world’s largest free trade area as determined by the amount of adhering members.
54 of 55 African Union member states have presently signed the agreement and 42 of these states have already ratified the AfCTFA, which Italian thinktank ISPI projects may increase the value of continental trade by up to 25 percent, or approximately US$ 70 billion in the coming decade. Requiring under three years of negotiations, a breakneck pace for such a complex multinational deal, the AfCTFA represents a landmark intent on behalf of African states to integrate their markets and industries to link a population of 1.3 billion with the continent’s combined gross domestic product(GDP) of US$
3.4 trillion. “Phase 2” negotiations on competition, investment, and intellectual property policies are currently underway, to be soon followed by “Phase 3” deliberations on digital commerce. All aspects of the deal must be fully decided upon for trading under its guiding principles to be fully kickstarted.
But what can explain the urgency of realizing this deal? And what could motivate countries in the world’s second-largest continent to overcome diverse policy interests in doing so?
In December 2021, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD) Rebeca Grynspan referred to the ongoing deal in terms of the African continent’s “untapped potential,” and “regional integration” as drivers for socially inclusive economic growth and development. These perceptions of intra-African needs and possibilities stem from longstanding difficulties for countries in Africa to trade amongst themselves.
Key South African parliamentary committees debated this issue in March 2021 by evidencing that trade between African countries represented only up to 18 percent of traded goods; the same metric applied to the Asian and European continents measured at 52 percent and 70 percent respectively, revealing an alarming disparity in regional economic integration between the continents. The AfCTFA deal represents a step towards regional integration which must be accompanied by dynamic entrepreneurial policy, supply-side infrastructural investments to bridge rural and urban divides, and egalitarian access to productive resources advocated for by UNCTAD, in order to be in line with the African Union’s Agenda 2063 objectives of promoting
inclusive development. A great challenge hence arises given that small and medium enterprises, led in large part by women, play a significant role in creating national outputs, but are largely unable to rely on the available infrastructure and incongruent economic legislations to take their business across borders.
Inequality in itself remains a particularly aggravated problem for African countries. Following the most stringent COVID-19-related restrictions, approximately 34 percent of African households were considered to be living under the international poverty line of US$1.9 per day, whereas 40 percent of the continent’s wealth remained concentrated in just0.0001 percent of its population. With around 37 million people falling under the poverty line as a result of the pandemic’s economic shocks, the necessity for bolstering regional trade and transforming such opportunities into concrete improvements to the quality of life became ever the more exacerbated.
From a political and historical perspective, regional integration is also an important agenda item for societies eager to overcome colonial legacies which influence the political economies of formerly colonized countries to this day. European powers relied on natural resources from colonial territories for centuries as means through which their own wealth and trade could be fortified, and also in critical moments of need, such as the First and Second World Wars. Despite the popularity of the Pan-Africanist movement during the mid-20th century’s wave of decolonization as put forth by thinkers and leaders such as Kwame Nkrumah, close economic and political ties between former colonies and former colonizing powers were maintained, and these imbalanced relationships allowed for arguably exploitative trade dynamics to continue. Put in practice, this legacy enables a condition in which African raw materials continue to be exported outside the continent; from 2000 to 2017, 80 to 90 percent of goods produced in Africa were exported.
While these observations certainly have merit, they do not negate the dire need for the production of increasingly sophisticated goods on the continent, as a way to satisfy consumer demands without relying on the inherently unequal dynamic of commodity-exporting and finished-good importing; a June 2022 report sponsored by the World Bank claimed that “deep” integration of policies aimed at dynamism across trade sectors could catalyze this particular effort and realize even the most ambitious goals of the AfCFTA, including the creation of more better-paying jobs for men and women alike, and the upliftment of dozens of millions out of abject poverty.
A May 2021 paper sponsored by the Brookings Institution argued that the continent’s major commodity-driven economies, such as Nigeria, Egypt, and South Africa disproportionately inflected the lopsided nature of cross-continental comparisons with regard to intracontinental trade. Another element they classified as contradictory to the popular belief that intra-African trade is low, is the nature of cross-border trading which occurs outside formal markets and the oversight of domestic and international authorities. Added to the hotly debated rules and tariffs germane to the AfCFTA whose desired forms vary greatly between more or less developed countries participating in the agreement, these issues are considered by the World Bank to be conducive to an irregular manifestation of the AfCFTA’s benefits across the continent in years to come.
Also read: East Africa: The key to AfCFTA success
Nevertheless, the potential that the AfCFTA holds in translating trade into meaningful growth will be vital for African countries of high and low outputs alike. The World Bank’s most recent “Africa’s Pulse” macroeconomic report identified a slowing down of post-pandemic economic growth, brought about in part by the Russo-Ukrainian War’s shocks to fuel prices and crucial foodstuff imports. The disproportionate effect that instability elsewhere can have on untapped and unlinked markets precisely illustrates why promoting regional integration is necessary for the African continent at this stage. A Pan-Africanist vision of the region, if not yet realized, must be appealed to as the end stage of a well-negotiated and well-implemented AfCFTA.
Here lies the crux, and main stake of the agreement to African politics and economies; a Pan-Africanist future, while certainly ambitious, could afford more profound social impacts on the continent than the economic benefits of the AfCFTA. If liberal theories connecting political cohesion and economic stability to trade are to be believed, then coordinating policies across myriad national interests and with special regard to the capabilities of small businesses and their leaders represent a vital avenue towards the establishment of renewed regional ties that could imply a greater degree of unity for the challenges of the future, including population growth and climate-related tensions, and independence from imbalanced global economic relationships.