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Monday 21 January 2019
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African Continental Free Trade Agreement: Unleashing Tailwinds For African Economies To Take Off.

On July 1, 2018, President Hage G Geingob signed the African Continental Free Trade Agreement in Nouakchott, Mauritania.  A total of 49 African countries out of 55 have thus far signed the Agreement.
To implement the Africa Continental Free Trade Agreement(AfCFTA), 22 countries must ratify it. AfCFTA was agreed during the Extraordinary Summit of African Heads of State and Government which took place in Kigali, Ruanda on March 21, 2018.
The Kigali Summit issued the Declaration and the Protocol to the Treaty Establishing the African Economic Community. Negotiations to establish the AfCFTA started after the 18th Ordinary Session of Assembly of Heads of State and Government meeting in Addis Ababa, Ethiopia decided to establish a Continental Free Trade Area and the Action Plan to Boosting Intra-African Trade
The African Continental Free Trade Agreement aims at creating a single economic space on the African Continent by cutting tariffs on 90 percent of goods and services as well as eliminating non-tariff barriers. By reducing import duties and eliminating non-tariff barriers between African countries Africa hopes to create a single market of 1.2billion people and a Gross Domestic Product(GDP) of USA $3 trillion. If properly implemented, AfCFTA shall boost intra-African trade significantly. Currently intra-African trade is a mere 10.2 percent of total African trade.
The objective of AfCFTA is to create a single African market for goods and services; to enhance a free movement of business persons; to promote a free movement of investments; to harmonize and coordinate trade liberalization and facilitation; enhancing competitiveness; the creation of opportunities for economies of scale through Continental market access; enhancing better resource allocation; providing Right of Residence and Establishment and eventually establishing a Common Customs Union and a Common Currency.
When these goals are achieved Africa shall be able to create decent jobs for its unemployed youth; reduce its economic vulnerability and risks associated with commodity economies; spread prosperity through economic diversification; leverage technologies for intermediate product development and manufacturing of goods; create economies of scale through larger markets; trade in services; reducing cost of doing business and stimulating cross border infrastructure development.
However, there are significant challenges to be addressed in order to achieve the above laudable objectives. In the first place, the African Union must establish a Secretariat to provide an efficient and inclusive institutional architecture for policing the intra-African trade.
The Secretariat must create a robust monitoring and evaluation framework as well as a mechanism for dispute resolution. It is doubtful whether the African Union has the capacity and resources to create a robust Secretariat.
At the national level, African countries must develop a skilled work force; create mechanisms for innovative financing; enhance domestic productive capacity; develop policies to assist businesses and workers to be competitive; and create social policies to cater for those who might loose jobs because of stiff competition, among others.
It must be accepted that eliminating trade barriers would result in significant losses to fiscus especially in the short term. Governments should therefore put contingency plans in place in order to mitigate such eventualities.
This will be challenging to commodity- based economies which may be experiencing economic head winds due to depressed commodity prices. When countries develop their lists of sensitive products they should take into consideration their specific circumstances. Moreover, over the short term there will be uneven distribution of benefits because of varying production capacities. Countries with advanced productive capacities are likely to benefit more than those without. It is important therefore to establish mechanism to assist countries which might be negatively affected by AfCFTA. Perhaps the lessons from the Southern Africa Customs Union(SACU) might be instructive.
Another challenge is how to determine the source of origin of goods. Africa must avoid trading among each other in imported goods. Otherwise Africa shall become a dumping ground of cheap imported goods. As negotiation start on Investment and Competition Protocols and the Intellectual Property Rules, Countries are advised to pay attention to fine details for the purpose of protecting their vital economic interest without undermining the noble ideals of the Africa Continental Free Trade Agreement.
The Africa Continental Free Trade Agreement has been received in Namibia with mix feelings. First, Namibia hesitated to sign it in Kigali. Secondly, Dr Mike Akuupa of the Labour Resource and Research Institute was reported to have expressed misgivings about the way AfCFTA was negotiated. So was Ms Charity Mwiya of the Namibia Chamber of Commerce and Industry(NCCI). Namibia, with its small population needs markets. However, its small economy is vulnerable to uncontrolled competition. Namibia must therefore strike a balance. Namibia must learn from South Africa. South Africa established a Trade and Investment Fund. The Fund is aimed at boosting intra-African Trade. It facilitates credit financing and credit insurance.
Namibia should establish a similar facility to underpin the intra-Africa trade. In addition, Namibia must develop a list of its sensitive products, which should be shielded from competition. More importantly, Namibia should develop its productive capacity in critical areas of comparative advantage.
Already Namibia is feeding many West African populations with fish. Namibia must therefore increase its productive capacity in fishing, beef production, tourism, financial intermediaries, transport, beer and beverages, cement, salt, just to mention a few.
There is also a potential in the development of poultry industry, at least to provide for domestic market.
There is also an urgent need to develop local businesses capacity to enter into meaningful joint ventures. Human resource development is critical if Namibia was going to be productive and competitive. Capacity building in strategic areas is critical if Namibia was going to benefit from intra-African trade. For example, trade facilitation is a specialized field. The Namibia Institute for Public Administration should develop courses on trade facilitation and continental economic integration.
In this way Namibia shall generate economic tai winds for economic take off. Kwame Nkrumah taught us: “… to learn to be a Continental free trade area is to be a Continental free trade area”.
Namibia must hit the ground running to take advantage of the Africa Continental Free Trade Agreement.




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