AfCFTA’s implementation deserves acceleration

The most recent World Bank and International Monetary Fund (IMF) meetings indicate traditional aid to fight such issues as poverty in Africa is likely to dry up unless such funding addresses climate change, but the Africa Continental Free Trade Area (AfCFTA) is a tool to lift the economic resilience of the continent.

This was according to AfCTFA secretary general Wamkele Mene, who spoke at a briefing on Saturday ahead of the three-day 2023 AfCTFA Business Forum, which started at the International Conference Centre in Cape Town yesterday.

The AfCTFA was launched in July 2019 and this is the first such forum to be held in person.

The AfCFTA aims to progressively eliminate tariffs and make it easier for African businesses to trade within the continent, to benefit from the growing African market which currently stands at some 1,3 billion consumers.

The aim of the forum, to be attended by some 1 200 private and public sector delegates and organisations, is to create awareness of the trade and investment opportunities in the AfCFTA among Africa’s business community; connect businesses to funding opportunities for AfCFTA value chains; establish a private sector engagement platform for consultations on private sector needs in the implementation of the AfCFTA; and to promote a private sector-friendly environment, especially for small, micro and medium enterprises.

The aim will also be to unlock more affordable trade finance opportunities.

Mene said a recent World Bank research report found that by 2035, the AfCFTA had the potential to lift between 50 million and 100 million people out of poverty, and there was the potential for it to facilitate the injection of an additional US$450 billion in investment into the continent’s economy.

He said the challenges to trade in Africa were well known, and included massive deficits in infrastructure, a lack of air transport corridors and the high cost of trade finance, particularly for small businesses, who would, for example, have to pay third party financial institutions in the United Kingdom or United States to act as intermediaries between the banks of two separate African countries that may be acting on behalf of small and medium enterprises and their clients.

He said the African Development Bank had made a US$40 billion trade infrastructure financing facility available, while the AfCFTA was working on an app-based Pan African Payment Settlement System to help resolve the issues of having to trade in 42 currencies on the continent, and to eliminate third party costs.

The aim, however, was not to replace the existing payment systems in the different countries, he said.

Mene said a McKinsey report had found that initially, trade in four priority sectors was being addressed by the AfCTFA, in the pharmaceuticals sector, agricultural business and industries, in the automotive sector and in the transport and logistics sector.
A digital trade protocol was also being developed.

He said the AfCFTA was still a work in progress.

Some 47 African countries had ratified the agreement, and it was up to the private sector to begin assessing and taking advantage of the agreement, which would speed up its implementation.

Mene said the AfCFTA needed to be accelerated for the private sector and the economies of member countries to begin to realise the benefits of the agreement, and because intra-regional trade was still low at about 18% in Africa, while for instance the figure stood at 70% for Europe, and 30% for South East Asia.

– IOL News

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