Intra-African Trade Is the Continent’s Best Approach To Post-Pandemic Economic Recovery

Intra-African Trade Is the Continent's Best Approach To
Post-Pandemic Economic Recovery

December 11, 2022

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By Oluwatobi Ojo

Covid-19 has caused unprecedented challenges in every region worldwide. However, in Africa, partially due to the continent’s frail health sector and lack of decent infrastructure, the pandemic has presented a unique set of challenges. While the pandemic has tested the resilience of its healthcare system, Africa has experienced a relatively low mortality rate compared to the rest of the world, accounting for just 3% of deaths globally.

Governments responded to Covid-19 by imposing partial and full lockdowns to combat the spread of the virus. However, the lockdown had a devastating effect on the economy and pushed tens of millions of people back into extreme poverty. According to the African Development Bank Group (AfDB), Africa experienced a 2.5% contraction in 2020 signalling its worst economic recession in half a century.

Micro, Small and Medium-scale enterprises (MSMEs), which make up 95% of Africa’s businesses are most affected by the decline in demand for their products and services since the outbreak of the virus and its enforced lockdown.

As countries relax restrictions on the Covid-19 imposed lockdown, governments are on the lookout to regain lost ground on economic activities, which have compounded external debt and reduced the quality of life of their people. African leaders must take initiative and commit to a post-pandemic approach built on resilient and sustained economic recovery with Intra-African free trade at the centre of the agenda. A deviation from this path will crumble all of the economic gains and achievements of the last decade.

Africa Puzzle. Credit: Fahamu

Despite the gloomy outlook of 2020, the future looks promising in terms of economic recovery. According to the World Bank, Sub-Saharan Africa is expected to recover from a 3.3% growth in 2022 to 3.9% and 4.2% in 2023 and 2024 respectively.

The AfCFTA agreement in the long term is expected to increase intra-African trade by 81% and lift 30 million Africans out of extreme poverty with a further 68 million from moderate poverty by 2035. The economic realities resulting from the Covid-19 pandemic mean short-term measures must be put in place to facilitate intra-continental trade in the meanwhile.

FREE MOVEMENT OF PEOPLE

Availability of labour is a crucial factor in the success of the free trade agreement. Governments must commit to ratifying and implementing the Protocol on Free Movement of Persons, which is also a key part of the AfCFTA agreement to create a visa-free zone for nationals of member states. As the pandemic slowly eases off, and economic activities return to normal, the free movement of skilled and unskilled workers will determine the rate of economic recovery on the continent as industries look to increase their output and replace workers who were laid off during the peak of the pandemic.

A visa-free Intra-Africa will create a unique opportunity for labour to be adequately supplied where needed, which will boost local production and overall productivity. However, caution must not be thrown to the wind. As the number of Covid-19 cases is decreasing (which can be attributed to low testing), adequate testing and vaccination roll-out must be maintained continent-wide.

REDUCTION OF TARIFFS

The ultimate aim of the AfCFTA agreement is a 90% reduction of tariffs on goods and services. Through the sole removal of tariffs on goods and services, intra-African trade export value is projected to increase between 15% (or $50 billion) and 25% ($70 billion) depending on liberalization efforts by 2040. This will definitely be a game changer, welcoming an era of economic prosperity across Africa.

While smaller economies depend on customs and import duties as a key source of revenue, adequate compensation plans must be ensured to make up for the lost revenue in order to facilitate a robust intra-Africa free trade: thus creating new economic opportunities within the framework of the agreement.

Free trade illustration by Henry Wong

INDUSTRIALIZATION AND TECHNOLOGY

The AfCFTA has industrial and technological development of Africa as one of its core objectives through an integrated regional market. As the economy slowly picks up pace, demand for goods and services will be on the rise, creating a large market for producers and manufacturers.

Similarly, the Right to Residence and Right to Establishment of the protocol to the Treaty Establishing the African Economic Community promotes the industrialization agenda across the continent, offering investors free access to the establishment of industries within regions captured in the agreement.

While 32 member states have signed the protocol which was adopted in 2018, only Rwanda has ratified the protocol (which requires at least 15 signatories to be effective). Among other reasons for the stumbling block in the ratification of the protocol is the desire of member states to maintain sovereignty over their borders.

Member states must commit to a compromise by providing innovative solutions that suit all parties and fast rack the implementation of the protocol. With at least 60% of the African population below the age of 24 and an ever-rising unemployment index, young people will greatly benefit from this agreement through gainful employment and contributing to the development of the economy. Africa , despite its relative growth over the years, has not created sufficient jobs for its increasing working-class working class population.

Getting young people involved at the core of the industrial revolution will create unlimited opportunities in digital trade, e-commerce, and technological inventions.

While developed nations can offer monetary stimulus packages to their citizens because of their robust economic policies, most African economies cannot sustain offering similar packages. An aggressive and swift implementation of the AfCFTA, which will boost intra-African trade, reduce reliance on the global value chain, and set a new direction for the regional value chain, is the best stimulus package and economic recovery tool for the continent.

Oluwatobi Ojo is a Nigerian writer. You can reach him via email, oluwatobimojo@gmail.com