Pandemic highlights importance of AfCFTA

A delay to implementation of the AfCFTA should provide the opportunity for a much-needed  rethink of Africa’s development trajectory, says Dianna Games

Dire warnings about the future of Africa are being issued by economists and analysts as countries tackle the fallout of the Covid-19 pandemic.

But despite these bleak forecasts, the crisis presents an opportunity for Africa to reset its development trajectory and focus on efforts to improve its competitiveness.

With the prospect of having to rebuild after the crisis, policymakers must do more than deliver incremental improvements in a business as usual scenario. The pandemic has exposed longstanding weaknesses, and shone a spotlight on a range of macroeconomic challenges that require more than a quick fix and emergency funding from multilateral organisations.

In short, the current crisis could be a catalyst for building a more sustainable, resilient and self-sufficient continent.

Arguably, the African Continental Free Trade Area (AfCFTA) is just the game-changer the continent needs right now. The agreement is a necessary but not exclusive factor in building economic resilience. Africa still exports raw materials and imports finished goods. Trade figures are largely padded with the intra-continental exports of finished goods from other regions.

Africa, despite having the most arable land in the world, is still a net food importer. It is also a net importer of medicines used by millions of Africans daily. A 2019 McKinsey study says up to 90% of drugs consumed in sub-Saharan Africa are imported. This makes Africa vulnerable in a volatile world, particularly during a pandemic, when its main suppliers are themselves under threat.

Little manufacturing capacity exists in pharmaceutical production despite the fact that the African Union launched a Pharmaceutical Manufacturing Plan for Africa back in 2007.

Another initiative – the Accelerated Industrial Development for Africa Action Plan – was adopted the following year. Both have been gathering dust until recently, when they were revived under the umbrella of the AfCFTA.  

Lack of progress

Despite enormous political appetite for the AfCFTA, the agreement has not moved forward at the expected pace.

Only 30 of the 54 countries that signed up to the agreement have ratified it. The recent AfCFTA Year Zero Report by the AfroChampions Initiative has also revealed a low level of readiness for implementation. The survey found that the continent as a whole scored only 49.15 out of a possible 100 measured in terms of countries’ quality of trade infrastructure, customs efficiency and access to credit for industry.

Moreover, between 2017 and 2018, intra-African exports increased by only 1% while Africa’s exports to the rest of the world increased by 22%. Services exports declined by 1% in 2016-17 while global services exports increased by 7%, according to the Tralac website.

The average score of African Union members on the Trading Across Borders category of the World Bank’s Doing Business Index is 55.54 out of a possible 100. This is based on eight indicators of costs of imports and exports and time taken to cross borders.

These weaknesses highlight the pressing need for countries to roll up their sleeves and get the AfCFTA fully implemented. But the launch of the agreement, originally set for 1 July, has been blown off course by the pandemic. It now looks likely that the launch will take place in early 2021.

Opportunity for a rethink

If anything, the timing may be auspicious. The delay gives countries time to assess the impact of the pandemic and rethink how the AfCFTA could be a catalyst for recovery by taking advantage of new trends emerging from the disruption.

There may be a growing appetite among multinational companies for shorter and more localised supply chains, according to a report by the Economist Intelligence Unit. Companies are adapting their business models out of necessity and opportunity and looking for ways to reduce risk.

Africa has not yet taken advantage of outsourced global supply chains, given its poor logistics and low skills levels, so it has less to lose than many other regions.

David Luke, coordinator of the African Trade Policy Centre, says Covid-19 has shed light on the underdeveloped status of African supply and value chains. But, he says, supply chain diversification fits well with Africa’s existing industrialisation agenda.

Industrialisation is a no-brainer for Africa. Making things and selling them has made many  countries wealthy. But this does not happen by accident. It requires political will to remove roadblocks and encourage investment into countries with small and often weak economies.

This also requires the AfCFTA to be driven forward decisively and not left to gather dust on AU shelves.

The commitment to open borders and free trade may run counter to national efforts to rebuild economies after lockdowns that promote inward-looking policies as governments have sought to limit the spread of the coronavirus. But the delay in the AfCFTA gives signatories to the agreement time to start on an outwardly-focused journey again.

The pandemic is not just a crisis; it is a wake-up call for Africa. Mismanagement and poor policy decisions going back decades have been exposed. After this, a return to normal should not be an option. What is required is new, creative thinking about how to make the continent more resilient, inclusive and dynamic as it faces new realities and new risks.