The start of the African Continental Free Trade Area (AfCFTA) was postponed due to the coronavirus. Experts believe that the pandemic could help give the ambitious free trade project a boost.
Measured by the number of countries, the African Continental Free Trade Area (AfCFTA), is to become the largest free-trade zone in the world: 55 states, 1.3 billion people, a gross domestic product of $3.4 trillion (€2.8 trillion) — these are the basic statistics for the AfCFTA — once it is officially launched. But the coronavirus has thwarted the plans.
A summit that was scheduled to take place in May in Johannesburg would have clarified some of the pending questions, Prudence Sebahizi said during an online event of the World Bank at the end of July. Sebahizi is Chief Technical Advisor to the AfCFTA at the African Union and heads the team supporting the negotiations.
The first stage of the trade negotiations should have started at the beginning of July. According to Sebahizi, the summit has been postponed to December and the start of free trade has been postponed to early 2021.
If life gives you lemons, make lemonade
Could COVID-19 be a first nail in the coffin of the African Free Trade Area? Experts assume the opposite: The pandemic could even help the project gain momentum.
"The states have realized that they need the AfCFTA more than ever," Sebahizi said. He mentioned countries that have no direct access to the sea and were virtually cut off from world trade, during the coronavirus lockdown in the first half of the year due to border closures. Sebahizi believes the situation will create "the spirit for more cooperation".
Lynda Chinenye Iroulo also believes that the pandemic offers opportunities for regional integration in Africa. The Nigerian political scientist, at the GIGA Institute in Hamburg, used a proverbial phrase to paint the picture: "This is a situation where Africa can make lemonade from lemons," Chinenya Iroulo told DW.
Until now, Africa has been heavily dependent on imports from other parts of the world such as Europe, China, and the US. Since the supply chain was disrupted by the pandemic and the market dried up, especially in the field of medical protective equipment, African states had to figure out how to help themselves. Iroulo referred to innovations such as the production of protective clothing in Kenya or ventilators in South Africa.
This is where, in her opinion, the free trade zone comes into play. For the whole of Africa to benefit from these innovations, she said, fewer trade barriers are needed. "That's what regional integration is all about: paving the way to harnessing African resources for the benefit of the entire continent." The pandemic formally calls for the free trade area to "make a big step forward in organizing cooperation between African states".
There is another reason why the pandemic is an opportunity for the free trade area: it has shown the partners — sometimes painfully — what they have so far forgotten or neglected in the negotiations, for example, in the services sector. "We have become aware that we have omitted a very important sector, namely the health sector," says Chief Adviser Sebahizi. He is sure that health will play a major role in future talks.
According to Sebahizi, the area of e-commerce was also neglected. Only in February did negotiators agree to include the topic. Here too, Sebahizi believes negotiations will devote much more time.
"The COVID-19 pandemic has shown us that digital solutions are possible," said Trudi Hartzenberg at the World Bank event at the end of July. Some African countries have introduced digital versions of the papers that confirm the origin of a product, Hartzenberg, the managing director of TRALAC, a non-profit organization for commercial law in South Africa, said.
Electronic payments are also working better and better. This contributes to the efficiency and thus the competitiveness of trade in Africa.
But Hartzenberg also sees gaps: For example, there are no simplified rules for informal cross-border trade. "Millions of people lost their livelihoods due to border closures." According to Hartzenberg, making cross-border trade easier, especially for small traders — often women — could make an important contribution to increasing prosperity on the continent.
More work to be done
But the African Free Trade Area will not be a foregone conclusion. Corruption and poor infrastructure remain a challenge. For AfCFTA to have its full impact, African states must agree on common standards in the core area of transport, for example.
"If there is no unification of rules, for example, for foreign transport service providers, standards for containers or limits for truck axle loads, efficiency and competitiveness will only run on the lowest common denominator," TRALAC director Hartzenberg said. This would allow potential to be squandered.
African Innovators in the COVID-19 Era
The outlook, on the other hand, sounds promising: if the free trade area is fully implemented, it will offer the possibility of lifting 30 million people out of extreme poverty, according to a new World Bank report. By 2035, income on the continent should be able to grow by $450 billion.
According to Maryla Maliszewska, an economist at the World Bank and lead author of the report, African countries should have an interest in driving the free trade area forward. "Trade is important to build up sufficient resilience against future shocks," the economist said. Thinking about trade should not be put off until later. "It's a crucial factor in recovering from the pandemic."