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COVID-19 delays AfCFTA, buys time to fix trade hiccups

There has not been a greater need in living memory for cooperation among African states. The African Continental Free Trade Agreement (AfCFTA) is expected to help bring 30 million Africans out of extreme poverty and raise the incomes of 68 million others. Rolling out the agreement has, unfortunately, been paused due to the COVID-19 pandemic, but officials have now agreed to move discussions online.

After years of negotiations, 44 African countries signed the agreement in 2018 — a historic agreement that would create the world’s largest free-trade zone. In the following years, an additional ten countries, including Nigeria, signed on to the agreement.

AfCFTA will bring all eight economic blocs and trading areas on the continent together, thereby uniting 1.3 billion people in a $3.4 trillion economic bloc. According to the African Union, the main objectives of the AfCFTA are “to create a single continental market for goods and services, with the free movement of business persons and investments, and thus pave the way for accelerating the establishment of the Customs Union.” The agreement intends to create incentives for African countries to trade with one another, rather than with foreign trading partners.

With the onset of COVID-19 and its destabilising effect on economic, welfare, and healthcare systems across Africa, there could not have been a better time to implement the free trade zone. AfCTFA, scheduled to be implemented in July 2020, was postponed to January 2021 due to the logistical challenges associated with COVID-19. Although not yet realised, the AfCFTA stands to play an essential role in post-COVID economic recovery efforts on the continent.

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With the onset of the pandemic, the World Bank predicts that economic growth in sub-Saharan Africa will decline from 2.4 percent in 2019 to between -2.1 and -5.1 percent in 2020, thereby plunging the continent into its first recession in 25 years. This forecast is primarily based on the fact that Africa’s largest economies (South Africa, Nigeria, and Angola) depend on revenue from exports whose prices have fallen.

African economies are heavily dependent on extra-regional trade. From 2000-17, exports from Africa to the rest of the world ranged between 80 to 90 percent. While, in 2017, intra-African exports made up a mere 16.6 percent of Africa’s total exports, much lower compared with 68.1 percent in Europe, 59.4 percent in Asia, 55.percent in America. With the AfCTFA, African countries can trade internally with ease as well as boost local production and diversify their portfolios. In doing this, the development of better quality jobs and increased quality of life for citizens will follow.

Despite the immense potential AfCFTA has to offer, African governments still have much ground to cover in unlocking the full benefits of the free-trade zone. COVID-19 has exposed the inadequacies of local and regional supply chains that hinder trade. In the time between the pandemic and the implementation of AfCFTA, we can focus on improving our trading infrastructure and fine-tuning the agreement to ensure that all structures are in place and ready to go.

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