New free trade area: great opportunity for Africa

The inner-African free trade zone starts on January 1st – with 54 countries the largest in the world. 90 percent of all tariffs should be eliminated. But the internal market still has many hurdles to overcome.

By Caroline Hoffmann, ARD Studio Nairobi

The fresh yellow-green mangoes are stacked in one corner of the hall, in the next they rattle over a conveyor belt into a giant juicer. 200 tons of fruit are processed here every day to make juice or soft drinks. Every child in Kenya knows the brands – and also in neighboring countries.

Entrepreneur Kimano Rugendo is proud of his success. “We export to Zambia, Rwanda, Burundi, Tanzania, Uganda and the Congo,” he says. “But we have some challenges to overcome, there are tariffs, sometimes trade barriers. That makes exporting difficult.”

So far difficult trade in Africa

Simply bringing goods across the border has often been difficult between many African countries. Intra-African transport: It’s time-consuming, expensive and there is a patchwork of trade rules and tariffs on the continent. This leads to long waiting times at the borders, endless paperwork for imports, and bribes are repeatedly requested.

The official restrictions between the African countries are generally higher than those between Africa and the rest of the world. According to statistics from the World Trade Organization from 2017, intra-African trade only accounts for around 17 percent. For comparison: within Europe it was 69 percent in the same year.

Development into the largest domestic market

But now everything should get better. The African Free Trade Area (AfCFTA) starts on January 1st. 54 countries with 1.2 billion people are to form a single market at the end of the process. Then it would be the largest free trade area in the world.

The juice manufacturer from Kenya can hardly wait. “We’re looking forward to it,” says entrepreneur Rugendo. “We would have wished that much earlier. We then have uniform conditions. That opens up many new markets for us.” The goal: Customs duties are to be abolished on 90 percent of all goods and services.

But there is still a long way to go: the project is only just getting started. The member states still have to negotiate about customs duties, uniform border controls and standards or the rules of origin. The process will not be easy.

Aly Khan Satchu, Kenyan economic analyst, knows that too. He told the Al Jazeera broadcaster: “The problem is that there are many reactionary forces benefiting from the current asymmetrical information and economic space of the continent. This agreement will turn the whole African economy inside out. But there are a lot of people who are very powerful and they don’t want to, because they benefited from the old system for many years. ” A single market like the one that exists in the EU is still a long way off.

Free trade zone creates a huge market

But the chances are huge. “This free trade zone creates a huge market and offers the opportunity for new jobs,” says Lyndia Chinenye Iroulo, political scientist at the GIGA Institute in Hamburg. “This will enable Africa to catch up economically and reduce its dependence on the rest of the world.” So far, Africa has been dependent on imports from Europe, China and the USA in many areas. The industrial processing of many products – such as cocoa, cotton or tomatoes – hardly takes place on the continent itself, and thus creates no additional value, but rather outside.

In the corona pandemic, urgently needed protective equipment was in short supply; it had to be imported, but was hardly available. The hurdles were high to help each other on the continent. “This event definitely opened our eyes to the importance of growing together,” says Iroulo. “Covid is another impetus to push the free trade area forward.”

Protecting micro-entrepreneurs is an important issue

The World Bank estimates that Africa’s economic output could increase by 335 billion euros in 15 years. Free trade could lift 30 million Africans out of poverty. The question of how the many small African traders and micro-entrepreneurs in particular can be strengthened and protected will play a decisive role. But that is still a long way off.

There is still a lot of construction to be done for the agreement to be a success. The continent lacks a good and comprehensive infrastructure. Some countries are already investing in this. Kenya is building a huge container port on Lamu, in the northeast of the country. So far they have lived from fishing and tourism here, but that is about to change. The project is not undisputed, but the island is to become an international logistics hub.

New port central component

In the port of Lamu the dhows, the wooden fishing boats are still sailing, one arm of the sea already big dredgers are shoveling out the channel, bulldozers are working on the freshly paved surface. Thousands of containers are to be handled here soon, with the port, a new railway line and new roads, a transport axis for East Africa will be created. “This project is very important in order to integrate the African continent into global world trade,” says project manager Silvester Kasuku, praising the port. “It is also a central building block for the African free trade area.”

To inspect the progress of the construction, the heads of government of Kenya, Uhuru Kenyatta, and Ethiopia, Abiy Ahmed, took the opportunity to fly in personally in mid-December. They committed themselves to increased trade, also between the two countries. The African construction workers and the Chinese engineers of the project met specifically for this purpose. Because here the Middle Kingdom is building another major project for Africa. China has long known how important the African market already is – and how much more important it will become in the future.

The daily topics reported on this topic on December 27, 2020 at 11:15 p.m.

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