Step by step, Africa inches toward ‘historic’ free trade zone

The African Union (AU) launches the “operational phase” this weekend of a long-awaited trade accord, but analysts say the continent faces an uphill task to transform the pact into reality.

African leaders are giving the formal push to the African Continental Free Trade Area (AfCFTA) at their meeting in Nigerien capital Niamey on Sunday.

AfCFTA has been signed by 52 of the continent’s 55 states, although only 25 have ratified it. The bloc aims to ultimately remove trade barriers and tariffs between members.

The economy of Africa, with a GDP of 2.5 trillion U.S. dollars today, will reach a take-off point as its 1.2 billion population doubles over the next three decades, supporters of the deal predict.

Nigeria, the continent’s largest and most populous economy said it will formally join the trading bloc after long holding back.

Talks on free trade began back in 2002, culminating in a deal that in late May crossed the threshold of ratification by at least 22 countries.

Major hurdles

“Negotiations on some very important points have not yet been completed,” said Trudi Hartzenberg, director at Tralac, a specialist trade law organization based in South Africa.

A timetable for lowering customs duties, rules for certifying “Made in Africa” products, and arbitration mechanisms to settle trade disputes are among the hurdles not even close to being resolved.

In its first phase, the zone will eliminate customs duties on 90 percent of goods.

Tariffs will be scrapped over a longer period on seven percent of “sensitive” goods – a potential means for a country to protect national sectors from foreign imports, say analysts. Tariffs on the remaining three percent of goods will remain in place.

At the Niamey meet, the AU is expected to decide where the new bloc will be headquartered, with Ghana and eSwatini (formerly Swaziland) among the names submitted bids to host the bloc’s secretariat.

The African Union wants to boost annual intra-continental trade to 25-36 percent of all African commerce within five years, and attract large, long-term investments from firms like global carmakers. The share of trade done by African nations with each other is just 18 percent currently.

No magic bullet

Cilliers said the AfCFTA would take “about a decade to produce its positive effects”.

“This is not a magic bullet,” he said.

The average tariffs on intra-African trade, of 6.1 percent, are higher than on exports to non-African countries.

This discrepancy is cited as a reason why intra-African trade is so low, while poor infrastructure is another obstacle to freer business.

In a report published in April, the International Monetary Fund said, “improving trade logistics, such as customs services, and addressing poor infrastructure could be up to four times more effective in boosting trade than tariff reductions”.