AFRICA’S $3.4 TRILLION ECONOMIC BLOC
By Paul Ndiho
Africa’s new Continental Free Trade Area is being hailed as the largest free trade area in the world since the World Trade Organization was founded in January 1995. The economic pact aims to boost cross-border trade by reducing or eliminating tariffs and red tape.
After nearly four years of talks, an agreement to form the African Continental Free Trade Agreement was ratified in Niger earlier this month. The new trade initiative brings together 1.2 billion people, creates a $3.4 trillion economic bloc and ushers in a new era of development.
Shaka Ssali, while appearing on VOA’s Shaka Extra Time internet broadcast, says the timing of this trade pact could not have come at a better time. He also says credit should go to Rwandan President Paul Kagame, who started this initiative and was one of the first people to sign it in March 2018.
“Frankly we should give credit to the man who can up with the idea and pushed it through Despite a lot of NAY Sayers and that is the Rwandan President Major Gen. Paul Kagame. There are a lot of people who thought that this idea was not possible, especially because two African giants, South Africa, and Nigeria were reluctant to embrace the concept.”
After months of reluctance over competition concerns, Nigerian President, Muhammadu Buhari, at the African Union Summit in Niger launched the African Continental Free Trade Area agreement by signing Africa’s largest economy into the deal. But, while there is much hope that pan-African trade will grow, structural weaknesses are expected to make it a slow process.
“I am very interested because I think I will get one of the countries around and open my office, even if it’s a showroom for me to move my products directly.”
Inter-regional trade in Africa currently accounts for only 17 percent of the continent’s total exports, compared to 69 percent in Europe and 59 percent in Asia. Pat Utomi, a Nigerian professor of political economy and management expert, says this trade deal could drive Africa’s numbers up to 52 percent.
“African countries stand to profit also from Nigeria being engaged. It will not only lead to Nigeria’s economy to becoming bigger but lead to those other African economies to becoming stronger and much bigger. So together, the mutual benefit of trade will lead to elevating the African status away from the poverty of today.”
African exporters want the free trade area to eliminate barriers and create free movement between states.
“African trade today is conducted on the U.S. dollar, Euro and including the Renminbi, (the official currency of China). What this is doing is to reduce the use of three currencies in the bilateral trade settlement in Africa. Because we estimate that that cost Africa between five to seven billion dollars. Beyond that, it also reduces the trade, because Africa has a scarcity of foreign exchange.”
Brook Hailu Besha, a journalism professor at the E.W. Scripps School of Journalism at Ohio University, says Eritrea, Africa’s only non-signatory to the trade pact, says it will seriously consider signing the agreement.
“It is said that the Eritrean government did not believe in the merits and the goodness of this new Africa trade association and to line up with fellow African sisters and brothers. No country has succeeded in the world by isolating itself.”
Once fully operational, the free trade accord is projected to boost the level of intra-Africa trade by more than 52 percent, by the year 2022, according to the UN Economic Commission for Africa.