In a continent with high unemployment, where most of the 705 million economically active people are employed in the informal sector, do claims that the African Continental Free Trade Agreement (ACFTA) will create decent jobs stand up to scrutiny?
Dictatorship and rampant corruption thrive in the post-colonial vastness of Africa. Countries are economically underdeveloped and heavily burdened by debt. Economies have not transformed since independence. Most African economies remain primary producers of agricultural goods, oil, gas and minerals and create very little, if any, value added. They are heavily dependent on foreign humanitarian aid. Unemployment is high, especially among young people, and most people earn a living in the informal sector. Poverty remains widespread.
The ACFTA is an African Union (AU) project designed to facilitate trade within the African continent. It was originally launched in 2012; its instruments are not yet fully operational. When it does, many argue that the project has the potential to transform the continent’s economy.
Support for the ACFTA by African countries since its launch, and especially since negotiations began in 2015, has been overwhelming – so far, only Eritrea has not signed it. Nigeria, Africa’s largest economy, initially had its doubts, fearing that the country would be flooded by cheap imports, but eventually signed the agreement.
African countries compete for the same international markets and duplicate each other’s efforts instead of specializing, pooling expertise and trading with each other.
The ACFTA is a multidimensional agreement covering trade in goods and services, investment, intellectual property rights, and competition policy. The ACFTA aims to “support and achieve sustainable and inclusive social and economic development, gender equality and the transformation of the signatory states.
Moreover, the agreement intends to “promote industrial development through diversification and development of the regional value chain, agricultural development and food security. According to the United Nations Conference on Trade and Development (UNCTAD), inter-African trade accounted for only 16 percent of total exports in 2017. The largest trader is South Africa, which imports refined petroleum products and exports corn and other goods. It is followed by Nigeria and Egypt, which exports crude oil and associated gas as well as clothing and textiles, and imports other products.
Globally, African trade accounts for only 2.6 percent, and trade is mainly with Europe.
Trade with India and China is also growing. The ACFTA aims to achieve transformation through various continental initiatives, including the Industrial Development of Africa, the Africa Infrastructure Development Program, the Action Plan for Boosting Inter-African Trade, and the Comprehensive African Agriculture Development Program. Other projects include the African Single Market for Air Transport and the free movement of people.
With the support of the AU and the UN Economic Commission for Africa (ECA), the ACFTA is promoted by ministers and heads of state and government. The agreement has its own secretariat located in Ghana.
By becoming fully functional, the ACFTA plans to increase inter-African trade by 50 percent by developing and promoting regional and continental value chains. The agreement is one element of the AU’s Agenda 2063 strategy for transformation and development, which will lead to the achievement of some of the Sustainable Development Goals of the 2030 Agenda.
The benefits of the Agreement include the growth of manufacturing and diversification in transition economies, including Ethiopia, Morocco and Rwanda, which have implemented policies of industrialization and manufacturing development. This means that small countries will be able to benefit from economies of scale and the huge market that the ACFTA will provide.
The agreement also contains provisions that allowed the struggling economies of Djibouti, Ethiopia, Madagascar, Malawi, Sudan, Zambia and Zimbabwe to benefit from reduced tariffs. According to the Global Manufacturing Competitiveness Index, South Africa, Egypt, and Nigeria now have the largest manufacturing industries on the continent.