A looming economic recession is going to last in Africa as a result of COVID-19. However, some experts believe that promoting the construction of the African Continental Free Trade Area (AfCFTA), which covers 1.2 billion people in 54 countries, will help Africa overcome the pandemic-induced economic recession and turn this crisis into an opportunity, paving the way for future economic revitalization.
Hopes in the crisis
AfCFTA was officially launched on July 7, 2019. However, due to the outbreak of COVID-19 and other factors, the Agreement Establishing the African Continental Free Trade Area failed to be formally implemented as planned on July 1 this year.
In the face of the pandemic, African countries have the limited policy space to stimulate economic recovery. Therefore, the effective solution for Africa to tide over the economic crisis caused by the pandemic is to boost AfCFTA, according to experts. Africa should make use of AfCFTA to turn this crisis into an opportunity to spur industrialization, achieve the localization of some industries, vigorously develop the digital economy and expand the private sector.
AfroChampions is a comprehensive platform and a partner of the African Union (AU) that is aimed at promoting the development of African homegrown companies. According to the AfCFTA Year Zero Report issued by this advisory alliance, COVID-19 may cause a shift of Africa from over-reliance on external suppliers to more dispersed and diversified regional and local manufacturing hubs; Africa is also expected to catch up with the chance of accelerating the development of e-commerce, digital economy and the Fourth Industrial Revolution as well as the green economy.
Vera Songwe, executive secretary of the United Nations Economic Commission for Africa (UNECA), said recently that Africa can leverage AfCFTA to shake off the economic slowdown caused by the pandemic. AfCFTA can play a more important role in accelerating African economic integration, promoting economic recovery and fostering sustainable development.
Starts in the challenges
Until now, among 55 AU members, 54 members have signed the Framework Agreement Establishing the African Continental Free Trade Area, except Eritrea, and 30 members including South Africa and Egypt have ratified it in accordance with relevant national legal procedures.
Breakthroughs have also been made in some specific operational procedures of AfCFTA. On January 13, 2020, the online reporting platform for monitoring and eliminating non-tariff barriers, a key auxiliary tool for the operation of AfCFTA, was officially launched. On July 7, the AU and African Electronic Trade Group launched Sokokuu, an e-commerce platform, to promote the e-commerce development in Africa.
It is said that negotiation will be conducted in three phases under this framework agreement. The first phase mainly focuses on commodity trade, service trade and dispute settlement mechanisms; the second phase focuses on the issues regarding investment, competition policies and intellectual property rights; the third phase includes e-commerce. Currently, negotiation is being conducted online. In the first phase of negotiation, all parties have not reached a consensus on the rules of origin, tariff concession list, and other key issues.
African countries have a strong political will to establish AfCFTA and hold a positive attitude towards the prospect of AfCFTA boosting Africa's economic growth, said Piao Yingji, an associate researcher at the Institute of West-Asian and African Studies, Chinese Academy of Social Sciences.
Piao believes that there are three major obstacles in the regional trade growth of AfCFTA: 1. Weak productivity and low degree of economic diversity; 2. The tariff-related trade cost and the slow implementation of tariff liberalization time to affect the efficacy of AfCFTA agreement; 3. Inefficient trade logistics, weak infrastructure, rather high credit cost and other non-tariff constraints.
Africa's cooperation opportunity
The AU hopes to draw on AfCFTA to create a single large market for commodity and service trade and realize the free flow of capital and personnel in the region, paving the way for the establishment of African Continental Customs Alliance, African Common Market and African Economic Community in the future.
Analysts assert that AfCFTA will greatly expand the capacity of the market, facilitate trade and investment and lift the productivity and competitiveness of all countries in this region. As the important basis for China-Africa industrial capacity cooperation and China's investment in Africa, China-Africa economic and trade cooperation zones and industrial parks will usher in significant growth opportunities under the framework of AfCFTA.
Since the official launch of Zambia-China Economic and Trade Cooperation Zone, China's first overseas economic and trade cooperation zone in Africa, in 2007, the Chinese investment entities have built various sectors of economic and trade cooperation zones of a certain scale, boosting the gradual emergence of industrial agglomeration effects and establishment of manufacturing equipment, light industry and textiles, household appliances and other industries.
According to Jeremy Stevens, an economist at the Standard Bank of South Africa, the more open the African market is, the more and greater the opportunities will be. New investment opportunities will emerge in retail, telecommunications, infrastructure, agriculture, energy and other sectors.
Bright Simmons, president of a technology company in Ghana, said that Chinese investors can consider establishing industrial clusters in Africa and using industrial parks as important platforms to transform intermediate products into final ones for sales in the market of the African continent.
Source: Source: Xinhuanet