The Strategist

Africa to create the world's largest trade union

05/13/2019 - 13:14

Just a few days are left before transformation of a large part of Africa into a trade zone free from barriers and duties. This momentous event will occur on Thursday, May 30th. It will be the world’s largest free trade zone by the number of its member countries. The population of AfCFTA exceeds 1.2 billion people, and the total GDP of its member countries is about 2.5 trillion dollars.

It is difficult to overestimate significance of this event for the poorest and least developed continent of the planet. Most African states AfCFTA are confident that the agreement will allow them to make an economic breakthrough and more successfully fight poverty and other consequences of the colonial past.

Economists consider weak trade between the countries of the continent as one of the main causes of Africa’s poverty and its lack of a strong industrial base. Miriem Bensaleh-Chaqroun, who heads the Moroccan Association of Businessmen, says that it is now more profitable for the African business to buy goods outside the continent, most often in Asia, than to produce their own, because of trade barriers. These include the colonial past, high domestic tariffs, and bad roads, both automobile and rail; and very strong bureaucracy, and corruption at customs and border posts. The relatively small size of domestic markets also hinders the economic development of Africa: the population of only two countries, Nigeria and Ethiopia, exceeds 100 million people.

The Africans are sure that the AfCFTA will positively manifest itself not only in the economy. It is already noticeable in many areas of life, including politics. Political scientists, for example, believe that the imminent entry into force of the agreement means a very important turning point in the history of the continent. Recall, that socialist tendencies have dominated its political life in the last half century after the majority of African countries gained independence. Many leaders of the new states have adopted a socialist model of development, following the example of the USSR and the countries of the socialist camp. The African experiment in building socialism began in 1957, when Kwame Nkrumah, the leader of Ghana, the first African country to gain independence after the Second World War, announced the construction of socialism. In most cases, the model, which did not take into account the national characteristics of African countries and peoples, gave the continent dictatorial regimes and wars. The African experiment, says George Ayittey, president of the Free Africa Foundation, was born due to an error in identification: Africans mistakenly identified capitalism with colonialism.

Many of Nkrumah’s colleagues followed him. The list of countries that began to build socialism is large. The first, except for Ghana, were Mali, Guinea and Senegal. All of these four are now among the first to ratify AfCFTA.

The “father” of AfCFTA, besides AU, is considered to be the former president of Rwanda, Paul Kagame, who proposed to create a free trade zone on the continent in Kigali in March 2018.

Experts believe that economic liberalization will benefit Africa. They calculated, for example, that by 2020 the volume of trade in AfCFTA will increase by 52%. These figures may double after the cancellation of the last 10% of the tariffs on “important and sensitive goods”. Naturally, such a jump in trade will bring billions of dollars to the African economy.

A big plus of AfCFTA is the unification of dozens of African states into a single market. This will make it easier for them to trade with the rest of the planet. To trade with other regions, AfCFTA will need one set of trade agreements. For comparison, each African country trading now alone needs about 55 such trade agreements.

Now there are 22 African countries in the free trade zone, but supporters of free trade hope that their number will now grow rapidly. However, the entire African continent will need a long time in order for to become a free trade zone. Of course, it is difficult to avoid without problems when there are so many states (62, including 54 independent). One of the big problems of AfCFTA is Nigeria showing a firm reluctance to join it.