There is general consensus among economists and politicians on the African continental that the African Continental Free Trade Area (AfCFTA) will have enormous economic benefits if it’s ratified and operationalized.
The consensus was expressed at the 5th EPRN Annual Economic Research Conference held at Kigali Convention Center yesterday organized under the theme: Africa continental free trade area: challenges and opportunities.
When this African market is fully operationalized, Rwanda’s export will increase by 22% and that of Uganda and Tanzania will increase by 21% while that of Kenya will grow by 10%, according to Dr. Andrew Mold, the officer-in-charge of United Nations Economic Commission for Africa (UNECA) Office for East Africa.
As a result, revenue generated from these exports in the EAC according to this UNECA study will increase by US$1 billion, job creation will increase by between 0.5m and 1.9m and consumer welfare gain will increase by US$1.4 billion.
Citing a study, Dr Mold added that at the moment, the East African Community as a block export 51% of its capacity while individual countries like Rwanda export 63% of its capacity, Tanzania 38%; Uganda 70%; Kenya 53% and Burundi 63%.
This means that currently, none of the EAC member states export at full potential -which will dramatically change when the continental free market comes into force as countries on the continental are expected to freely trade with each other more.
To illustrate the effect of continental free trade on exports of countries, Dr Mold said that when a single market was implemented in Europe, trade among the European Union members increased by 109% on average.
For the agreement to bring sustainable benefits, “winning hearts and minds is important” Mold said, adding that “citizens need to be carried along if integration is to work”.
This, Dr Mold emphasized is a lesson Brexit has given to parts of the world─like Africa, interested in regional integration─that citizens should always be carried along if integration is to be sustained.
The African Continental Free Trade Area (AfCFTA) was agreed in January last at the start of President Paul Kagame’s chairmanship of the African Union. For the agreement to be implemented it needs to be ratified by at least 22 African Union member states.
As of March, 19 countries had ratified the pact and 44 had signed it. It means that in a few months, the so called AfCFTA─which is really an African market might be law and operational on the continent.
Many tariffs are expected to be eliminated
The challenges that the private sector sees and expect the agreement to help overcome include power supply, access to credit, roads, taxes and their harmonization, ports reform; harmonizing standards and ensuring free movements of good and services across the continent.
There is also so a lot of enthusiasm among ordinary Africans toward the AfCFTA. According to the UNECA study, 77% of people sampled said the agreement is important for African development.
Only less than 10% of the respondents found it unnecessary.
Even with this good news however, all is not well on the continent marred in unending conflicts within states and between some states. This state of affairs is likely to affect the agreement’s implementation.
“The biggest challenge the African continent is having that has made it hard to achieve the free trade area is politics,” said Prof. Herman Musahara, Associate professor of economics, and Acting Director of the University of Rwanda’s Consultancy Services Bureau.
He added: That when political interests collide, “trade is affected negatively… politicians sometimes lookout for their interest. [It is only) later that trade is looked into.”
Patience Mutesi, the Rwanda Country Director for Trade Mark East Africa (TMEA) believes that regional blocs need to work closely and focus on the interest of the citizens in general and small and medium traders not heads of states.
“For free trade to be achieved, politicians have at least to give it a chance,” she said.
Mutesi advised that to benefit from this agreements, countries on the continent should start thinking about “the challenges that will come with implementation” as well as “the cost of implementation”.
Political will is key to the implementation of this agreement as well as removing tariffs, ensuring standardization, connecting countries and infrastructure development to ensure access to markets, and investing in the productive capacities of industries, diversification, Mutesi emphasized.
Alice Twizeye, the representative from Rwanda’s Ministry of Trade and Industry asked, “How ready is our private sector? Is the environment ready” to welcome the benefits of AfCFTA?
According to Rugwabiza Minega Leonard, the economic advisor in Rwanda’s Ministry of Finance and Economic Planning, the current standoff between Rwanda and Uganda is a close-to-home example of how free trade can be impacted.
“Whenever politics is not stable, it blocks the free trade,” Rugwabiza said. “You see these days between Rwanda and Uganda, traders have been affected on both sides…[bad] politics destabilizes…trade. We can only achieve free trade when politics is stable”