Published on The Trade Post

African free trade area lets youth to take control of their destiny, Secretary General says

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Three young African women discussing business
Photo: i am zews / Shutterstock

A fragmented internal market has long hampered trade among African nations. That has prevented the continent from fully sharing in the economic benefits of international trade, which has helped raised more than a billion people worldwide out of poverty in recent decades. But the African Continental Free Trade Area (AfCFTA) promises to be a game changer. It would create a single market that unites 54 countries with a combined population of 1.3 billion and GDP of $3.4 trillion.  It promises to boost intra-African trade and investment by reducing tariffs and other barriers and harmonizing regulations in areas such as e-commerce and intellectual property rights. African business leaders are scheduled to gather in Cape Town April 16-19 to discuss the benefits of the agreement for the private sector. In advance of that meeting, we are publishing this edited transcript of a conversation with Wamkele Mene, secretary general of the AfCFTA, who visited the World Bank late last year:

Q: How do you see Africa's a demographic dividend playing out in the context of the free trade area?

By the turn of the century, one in four people will be African, and so we must be mindful of the potential for young people to be part of what we are doing. And that's why we're going to have the protocol on women and youth in trade.

The excitement and the level of engagement are very, very encouraging from young people who want this to succeed, because they are taking control of their own destiny by creating new markets.

They understand that there are opportunities in expanding their businesses outside of their countries or regions, and that those opportunities are being created by a trade agreement that opens markets.

There was a lady, a young designer, who said to me, “I live in Malawi, I want to access the market in Nigeria. If I can get just the Nigerian market, I'll be fine.”

So, the aspirations about inclusivity are important, and we always expressed those aspirations. Now we want to codify them into legally binding obligations. If you have a small-medium enterprise that is run by a young person, or a woman, instead of a tariff reduction of 10 percent over two years, why not completely eliminate the tariff for that small-medium enterprise?

Q: What can be done to ensure that inequality among countries in Africa doesn’t widen as a consequence of the agreement?

A: We have countries in the AfCFTA with GDP per capita of $110, and then at the other extreme, GDP per capital of $25,000. We have countries that are relatively industrialized, and we have countries that import everything, including basic agricultural products.

There are countries who are going to benefit immediately, because they have the export capacity. So how do we get those countries who today may not have industrial capacity to believe that they will benefit, too, and to see the results? Otherwise politically it will become unsustainable for them to remain in a free trade area where only the largest economies are benefiting.

That's why we have gone to [the African Export Import] Bank, and we have said, “There is this problem that some countries are overly reliant on tariffs as revenue generation tools, how do we mitigate their condition? ” So, Afrexim bank has made available a facility which will be up to $10 billion. Thus far, there is about $1.2 billion that has been mobilized to assist countries to mitigate the cost of adjusting to the AfCFTA.

Q: Are there other ways of extending the gains to less developed countries?

It is important that we have a strategy that combines not only the trade rules that recognize the need for asymmetry, but there must be concrete interventions that are made in-country, on the ground.

I will give you an example. The three largest producers of vehicles in Africa are Morocco, South Africa, and Egypt. These are the countries that will benefit immediately when the auto market opens up in Africa and when the tariffs are reduced or eliminated.

But we know that for every unit of investment in the assembly line, four jobs are created in the component sector. And so we must develop a strategy. How do we get Zambia to be part of the auto value chain to process copper? How do we get the Democratic Republic of Congo to be part of the auto sector value chain to process oxides for lithium batteries? 

These are very concrete interventions that can be made over a period of time. That is why I keep saying to the African Association of Automotive manufacturers, “We are developing the rules that will enable you to invest seamlessly across the continent, but we want you to commit to invest seamlessly also in non-traditional auto sector markets outside of South Africa and Morocco."

Q: How does the AfCFTA capture the potential benefits of digital trade?

We will conclude the protocol on digital trade by June. It is a very forward-looking protocol, which is leveraging all the successes that we have seen. And it is very important that we accelerate digitization.

For example, Cabo Verde has a capacity in the storage and the processing of data. If we open the entire African market through this protocol of digital trade, we are enabling Cabo Verde to be a leading exporter in data services, management, and processing.

In the area of customs, you find countries in the same customs union, you are crossing the border and you will see 10-12 kilometers of trucks waiting to clear. And that's because of an absence of digital systems for trade. There are no systems that are interoperable.

So, in the protocol we need to find a way of developing a digital customs system so that as a trader, when you require a certificate of origin, you don't have to wait 14 days.

Q: What do you see as the balance between moving fast with a few countries versus lifting all of them together? Is there a tradeoff there?

When we started, we were worried that the big countries or a handful of countries would dominate the negotiation process. And we looked at what happened in Europe over 70 years, and we can see who the drivers were in Europe.

We took a different approach. We said, “Let us all move together at the same time.” It is incredibly frustrating because you move as fast as the slowest. But now we have 44 countries who have ratified.

If we don't take that approach, we run a very high risk of appearing as if we're trying to create an enterprise or a coalition of the willing, and that politically will be very difficult to sustain.


Wamkele Mene

Secretary-General, AfCFTA Secretariat

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