African continental trading bloc in offing, but can we pull it off?

Monday July 22 2019



Gilbert Musinguzi

Gilbert Musinguzi  

By Gilbert Musinguzi

African Continental Free Trade Agreement (AfCFTA) was signed during the African Union Summit in Kigali, Rwanda on March 21, 2018. Uganda is part of this bloc. Focusing on the bloc’s modus operandi, the operational phase for AfCFTA was launched on Sunday, July 7 during the African Union summit in Niamey, Niger where Ghana was announced as the host of the trade zone’s headquarters.

Countries were required to ratify before bringing into force the trade framework, that is designed to free the continent of tariff barriers, bolster trade among African countries, drive industrialisation and create jobs. At present, 24 countries have submitted their instruments of AfCFTA ratification, including Uganda. Five others have also started the ratification process.

How Uganda stands to benefit from the world’s largest trading bloc
According to UNCTAD’s December 2018 report, more than 90 per cent of African countries are on the List of Least Developed Countries. AfCTA could be a silver lining for possible relief from predators that have continued to blackmail African economies unfairly through conditional debts, sanctions and other forms of exploitation.

Uganda’s commitment to be part of AfCFTA, which is a continentwide economic integration presents enormous opportunities for Ugandans as ensuing benefits for Africa will be immense. If all 55 African countries join a free trade area, it will be the world’s largest (going by the number of countries); covering more than 1.2 billion people and with a combined GDP of 52.5 trillion. It will be the world’s largest free trade area since the establishment of the World Trade Organisation (WTO) in 1994.

Tariff-free access to a huge and unified market will encourage manufacturers and service providers to leverage economies of scale; an increase in demand will instigate an increase in production, which in turn will lower unit costs. Consumers will pay less for products and services as businesses expand operations and create more jobs.

Immediate Issues to Address
Integration of such magnitude inevitably comes along with multiple issues to resolve. The basics the instruments of ratification include rules of origin, schedules for tariff concessions on trade in goods, online non-tariff barriers monitoring and elimination mechanism, digital payments and settlement platform, as well as African trade observatory portal.

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But beyond that, issues that immediately need critical thought include the following: Arbitration measures, certifying the origins of goods, tackling corruption and improving infrastructure; national ICT maturity, including limited information technology infrastructure, inconsistent electricity delivery, great disparities in accessing the internet and mobile services, lack of appropriate legislation and excessive data costs; intense competition, globalisation amidst increased importance of knowledge as an economic driver.

Diversity across member economies could throw up barriers to this envisioned integration.
From a legal perspective, one of the biggest challenges will be to develop continental legislation that governs trade and transport in a way that takes into account the differing common law and civil law systems that have developed to varying degrees since independence.

It will require considerable political will; member countries and existing regional groupings will be required to relinquish a degree of their regulatory authority to a central power, for the greater good.

A uniform approach to all these barriers will yield significant economic benefits for the continent. The AfCFTA will essentially provide a single rule book for doing business and trading in Africa.
Uganda should strategise to take advantage of the huge market opportunities and Africa’s demographic dividend to boost intra-Africa trade.

It remains to be seen as to whether countries that have hitherto been plagued by parochial issues like xenophobia, reneged on internal governance and impunity and selfish interests of both individual leaders and the countries they lead, will rise up to the task and live up to what it takes to create and sustain such a beneficial yet fragile trading bloc.

Mr Musinguzi is the quality assurance manager,
Uganda Debt Network - UDN. gmusinguzi@udn.or.ug

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