Africa’s ambitious trade treaty

The African Continental Free Trade Area (ACFTA) agreement intends to remove non-tariff barriers and other technical barriers to trade, minimize customs procedures and establish a free-flowing structure on transit of goods from Cairo in Egypt to Cape Town and from Mombasa in Kenya to Dakar in Senegal.

Speaking just minutes after the signing ceremony in the afternoon of March 21, President Paul Kagame who also took over the chair of the African Union told the African leaders gathered in Kigali that ACFTA was going to help Africa “leverage its growing strength and unity to secure her rightful interests on the global arena.”

The signing ceremony in Rwanda was a culmination of 27 years of negotiations. It was with the Abuja Treaty in 1991 that a roadmap for a continental free trade area was first mooted. It continued through successive efforts in regional blocs such as the EAC, COMESA, ECOWAS, and the Central African and Monetary Community (CEMAC).

At its full implementation by all African states, trade experts say, the ACFTA could double intra-Africa trade within eight years.

The African Development Bank says the ACFTA will stimulate intra-African trade by up to $35 billion per year, creating a 52% increase in trade by 2022; and a vital $10 billion decrease in imports from outside Africa.

Under the ACFTA, market liberalisation will progressively cover 100% over a five-year period, but with 60 to 85% of the products immediately liberalized at the entry into force of the Agreement.

But Professor Jim de Melo based at the IGC estimates that because of exemptions and faulty implementation, trade within regional integration agreements on average has reached only about 60% of its potential.

He says one of the reasons is that trade costs; delays at the border and in ports, cabotage and licensing policies; and formal and informal stops have kept transport costs higher than they need to be. Road and rail infrastructure also require more investment.

The ACFTA addresses another reason for low trade in the region: high tariff barriers.  Tariffs between regions are still high – much higher in Africa than in fast growing East Asia and other developing regions.  Even within regional agreements, too frequently products are exempt from the import competition of neighbours.

What is it in for Uganda?

President Museveni did not travel to Kigali but Sam Kuteesa, the Minister of Foreign Affairs did and he appended his signature on behalf of Uganda. Frank Tumwebaze, the Minister of ICT and National Guidance had on March 20 told journalists that Uganda would study the key provisions in the agreement.

He said Cabinet would also constitute a committee which would discuss how to improve Uganda’s competitiveness in the regional economic community and the ACFTA following ratification. So how does Uganda benefit from this new continental arrangement?

Isaac Shinyekwa, a research fellow at Makerere University’s Economic Policy Research Centre (EPRC) told The Independent on March 23 that Uganda should benefit from the vast African market.

Gideon Badagawa, the executive director of the Private Sector Foundation Uganda also told The Independent on March 24 that Ugandan manufacturers and producers now have a market platform beyond the EAC and COMESA.

Badagawa said the government now needs to work with its counterparts to invest in a Common Infrastructure Fund to facilitate the building of infrastructure that link countries to enable private sector trade and investment across borders.

“In East Africa where we have gone through the common market and the customs union, it is still difficult to go to Kenya or Tanzania to establish and do business,” he said, “So to imagine that across Africa, you will freely move to Libya or Ethiopia to take advantage of the ACFTA will not happen unless certain fundamentals are out of the way.”

Badagawa said the private sector needs harmonizing fiscal policy, infrastructure, and standards.