44 African nations sign historic continental free trade deal

More than 40 African governments signed a continent-wide free trade agreement on Wednesday under which they committed to cut tariffs on 90 per cent of goods to bolster intra-African trade and boost growth. 

But Nigeria, Africa’s largest economy and most populous nation, was among 11 countries that refused to join the African Continental Free Trade Area (AfCFTA), underlining the challenges the initiative faces. 

Echoing many of the holdouts, Muhammadu Buhari, the Nigerian president, tweeted on Wednesday: “Our continental aspirations must complement our national interests”.

In recent days the influential Nigeria Labour Congress has come out strongly against the plan, reportedly warning that it would devastate the country’s economy.

President Cyril Ramaphosa of South Africa signs the Kigali Declaration on the establishment of the African Continental Free Trade Area. Picture: Kopano Tlape/GCIS

The aim of the free trade area, which 44 nations signed up to, is to cut tariffs from their current average of 6.1 per cent to eventually zero and address myriad non-tariff barriers such as poor infrastructure and inefficient border posts. Twenty-seven countries also signed a separate agreement to allow the free movement of people across borders. 

The Chairperson of the African Union Commission Moussa Faki Mahamat holds the instruments after they were signed by the heads of state and representatives from various African countries.

Paul Kagame, the Rwandan president and chair of the African Union, described the AfCFTA as a “new chapter in African unity”. 

“The Africa we want is clearly visible on the horizon. And today, more than ever before, so too is the road we will travel together to get there,” he said on the eve of the signing ceremony at a summit in Kigali, the Rwandan capital. “As we trade more among ourselves, African firms will become bigger, more specialised, and more competitive internationally.” 

President Emmerson Mnangagwa of Zimbabwe signs the Kigali Declaration on the establishment of the African Continental Free Trade Area.

Free trade advocates argue that lower barriers to trade will make it easier for African countries to develop regional supply chains and export more finished goods rather than raw materials, as is the case at present. The UN’s economic commission on Africa forecasts that if the largest African economies joined the free trade area, intra-African trade would grow 50 per cent in the following five years. 

Intra-African trade, which was about $170bn in 2017, accounts for about 15 per cent of the continent’s trade, according to the African Export-Import Bank (Afrexim). This compares with 67 per cent in the EU and 58 per cent in Asia. More than 60 per cent of African exports to the EU are primary products while about 70 per cent of goods imported to the continent from the EU are manufactured. 

“It is hoped that the African Free Trade Agreement will help boost trade between African countries . . . but making that a reality will not be an easy task — it is a visionary project with several hurdles to overcome,” said Andrew Jones, head of Africa at Linklaters, the law firm. “There is scepticism about whether some countries are ready for this and whether the expected economic benefits will be enough to offset traditionally strong protectionist tendencies on the continent.”

Benedict Oramah, the Afrexim president, said Africa had little choice but to integrate because most economies on the continent were too small to compete globally, particularly in a climate of rising isolationism. 

“Africa is in a very, very strong position to buck the anti-globalisation trend, to grow its market even as others protect themselves,” he said. “If we don’t do that and others protect themselves what you’re going to see is Africa descend into poverty and penury.” 

Twenty-two nations have to ratify the agreement for the trade deal to come into effect. AU officials hope this will happen by the end of the year. 

Issues such as how the new free trade area’s provisions will mesh with those of the existing regional economic blocs are still being debated. 

President Kagame said the full benefits will take time to materialise because “the creation of one African market necessarily entails a metamorphosis in how we think and act”. 

“The full involvement of the private sector is needed more than ever before,” he added, a reference to many African businesspeople’s complaint that governments have hitherto rarely consulted businesses on trade and development policy.

Note:

Fifty countries signed at least one of the three proposed legal instruments which are set to open the borders to make the continent the largest trading bloc in the world.

44 African countries signed the AfCFTA, 43 signed the Kigali declaration and 27 countries agreed to ease mobility of people across the continent by signing the protocol on movement of people across Africa.

Some countries signed all three legal instruments at once but 50 countries signed at least one of the three documents which, according to Moussa Faki Mahamat, the Chairperson of the African Union Commission, was way beyond what they expected.

*Nigeria, South Africa, Burundi, Lesotho, Namibia, Eritrea, Benin, Sierra Leone and Guinea Bissau abstained from the free trade area agreement.

*South Africa however signed the Kigali Declaration for the launch of the AfCFTA.

According to Ambassador Albert Muchanga, AU Commissioner for Trade and Industry countries that have not yet signed will do so by July, when the next continental meeting convenes.

"They are still in consultations and when they finish they will come on board." he said.

Sources: FT | AU | JIC Media