As African leaders gather virtually for an extra-ordinary Summit of the African Union (AU) to discuss commencement of the African Continental Free Trade Area (AfCFTA), China has offered to assist the continent.
The Summit opened with a plea for a new treaty to aid women and small-scale enterprises to trade across borders ahead of the treaty’s entry into force in January 2021.
South African President Cyril Ramaphosa, the AU Chairman, said the entry into force of the AfCFTA marked the successful fulfillment of an African dream of a more united, prosperous and an integrated continent, trading with itself and harnessing its economic prowess.
“The treaty would improve Africa as an investment destination and a market of more than one billion people. This treaty (AfCFTA) is more critical than ever. It will expand the productive capacity of countries. To support this treaty, we must strengthen the place of women in the economy. We should consider an African Union protocol on women. This kind of protocol would be a catalyst to private enterprise in Africa,” President Ramaphosa said in his opening remarks.
Trading under the new terms across the 55 African Union member-states is expected to start in January 2021 following the move by some 34 African countries to notify the AU Commission of their passing of national laws recognizing the AfCFTA treaty, which allows cross-border trading.
“At its core is a developmental approach,” President Ramaphosa said in reference to the AfCFTA.
“It goes to the building of an infrastructure and a value chain for Africa. The AfCTA brings the promise of a new beginning. We reaffirm our optimism. The AfCFTA would help realize these opportunities by attracting more trade and more investment into Africa,” he stated.
At least 41 out of the 55 countries or customs territories have submitted their tariff offers, which include the common taxation arrangement covering incoming goods, raw materials, semi-processed and finished or industrial products.
The tariff offers have been submitted to the AU and the AfCFTA Secretariat, according to Wamkelle Mene, secretary-general of the Accra-based AfCFTA Secretariat.
Mene said the tariff offers allowing trading under the AfCFTA treaty had been received from members of the East African Community (EAC) and the West African Economic Community (ECOWAS).
Previously, it was impossible for different countries in different corners of Africa to trade with one another because of the inability to harmonize the various external taxation arrangements.
In East Africa, the Common External Tariff (CET) remains at zero, 10 and 25 per cent, which means raw materials required for processing of goods are allowed to move tax-free, but semi-processed goods are charged at 10 per cent while finished industrial products such as auto-spares are charged at 25 per cent.
“The treaty holds our collective aspirations for an integrated Africa. The countries of Africa laboured and toiled to lay the cornerstone. There is no doubt this will endure because it is built upon a foundation of unity of all nations,” President Ramaphosa said.
Addressing the Summit, Mene said the AfCFTA offered a tool for putting African economies on the right path to an economic system which did not rely on the colonial-era trade models, where African countries remained as exporters of raw materials and importers of finished industrialized goods.
Mene said the AfCFTA offered African countries an opportunity to redefine external trade by being able to rebuild a trading arrangement which was truly based on local economic relationships.
He said the local trading arrangements would benefit the local business enterprises.
Meanwhile, China is prepared to assist countries in Africa launch a continental free trade and investment platform, drawing on its international trade experience, a senior Chinese official said in Nairobi on Sunday.
Chang Hao, deputy director-general at the International Cooperation Centre of China’s National Development and Reform Commission (ICC-NDRC), said that China will enhance trade in Africa through its implementation of the Belt and Road Initiative (BRI), which aims to connect 70 countries through infrastructure.
“We are prepared to assist African countries through the promotion of trade facilities, building Africa’s industrial capacity to develop its value chain and building complete proposals for China and African countries to implement the various partnerships which exist between them,” Chang said.
Addressing a virtual meeting of top economic policy think tanks during the seventh Africa Think Tanks Summit, Chang said building the trade relationship between China and Africa is currently focused on how China can facilitate the implementation of the Africa Continental Free Trade Area (AfCFTA).
China has signed agreements with 39 countries in Africa to establish cooperation in building industrial capacity to promote the local manufacturing of goods in Africa, Chang said.
He said the cooperation with African countries is focused on how to make the BRI beneficial to the African continental trader under the AfCFTA and how the Chinese experience in trade could be shared with African countries to facilitate trade at all levels.
China is working with African countries at three levels to implement broader goals aiming to fight poverty.
They include working with African countries under the 2030 UN Sustainable Development Goals (SDG) frameworks and cooperation under the AU Agenda 2063.
Agenda 2063 prioritises the launching of the AfCFTA to accelerate trade among African countries to improve Africa’s economic well-being, Chang said.
He said his think-tank will help to support African countries to implement their national strategic goals, including increasing industrial production, agriculture and infrastructure development.
He said ICC-NDRC is among the major backers of the Harare-based African Capacity Building Foundation (ACBF), the African Union Specialised technical agency tasked with managing the capacity constraints.
The Think Tank Summit is an annual event that aims to propose strategies and actionable recommendations for think tanks to enable them to contribute meaningfully to tackling policy implementation challenges facing Africa within the context of Africa’s Agenda 2063 and the SDGs.
The ACBF is currently working with other nations to accelerate efforts to ensure that countries are ready to trade continent-wide.
“We can further explore cooperation and the connectivity between trade and investment which is very important. China is one of the biggest trading partners to Africa and Africa is China’s biggest trading partner. This AfCFTA will form a big trading partnership between China and Africa,” Chang said.
Upon entry into force and with the deposit of 22 instruments of ratification and membership, AfCFTA will become the largest Free Trade Area (FTA) in the global economy, covering a market of 1.2 billion Africans with a combined wealth of 2.5 trillion US dollars, expected to reach 29 trillion dollars by 2050, according to Professor Kevin Urama, Senior Director at the African Development Institute at the African Development Bank (AfDB).
According to Urama, the AfCFTA could deepen and expand intra-Africa trade from its very low base of 15 to 52 per cent. At the national level, the estimated welfare gains of around 2.64 per cent of continental GDP will be shared among all participating countries.
On an individual level, the AfCTA will increase real wages for both skilled and unskilled workers in diverse sectors as employment shifts from agricultural to non-agricultural sectors like manufacturing and services.
It is estimated that implementing the AfCFTA could boost Africa’s income by 450 billion dollars, bring 30 million people out of extreme poverty, and raise the incomes of 68 million others.