To realise the promise of the African Continental Free Trade Area (AfCFTA) and achieve its development goals, the continent must take bold actions on many fronts.
These were the words of Dr. Vera Songwe, the United Nations Under-Secretary-General and Executive Secretary of the UN Economic Commission for Africa (ECA) Addis Ababa, Ethiopia, last Friday.
She made the remark in her address at the meeting of the Committee of Experts, preceding the 51st Session of the Conference of African Ministers of Finance, Planning and Economic Development, which begins on Monday in the Ethiopian capital.
The 2018 edition is themed: ‘African Continental Free Trade Area and Fiscal Space for Jobs and Economic Diversification’.
The Tide source reports that the ECA envisages this agreement as an instrument to reposition the African continent as a competitive player in the global economic arena.
According to Songwe, the most important and urgent action is to create the fiscal space needed to foster both public and private investment, while ensuring economic diversification with the view to creating jobs.
“Now we must seize the momentum at hand to focus on how to operationalise the AfCFTA agreement, in a manner that realises its potential to the benefit of the average African.
“Our collective market potential cannot be underestimated, as incomes rise and the middle-class continues to grow.
“Household spending is expected to grow at 3.9 per cent per annum to reach 2.1 trillion dollars and corporate spending is expected to reach 3.5 trillion dollars by 2025.
“Taking the opportunities created by AfCFTA, this is an opportunity for corporate Africa to leverage these expansions and boost its economic growth.
“Through implementation of the agreement, we can generate the kind of growth that can support economic diversification, industrialisation and development,” she said.
The ECA boss disclosed that manufactured products make up 46 per cent of intra-African trade and only 22 per cent of Africa’s trade with the rest of the world.
“So, boosting intra-African trade through the AfCFTA is likely to support the continent’s industrialization. Indeed, according to our estimates, the AfCFTA would increase Africa’s industrial exports by over 50 per cent by 2022,” she said.
Dismissing the fears that the AfCFTA would lead to losses of tarriff revenues to individual countries, Songwo contended that the impact of the Agreement on fiscal revenues is likely to be minimal.
“Intra-African trade is only a small share of Africa’s total trade. Most of the trade is already liberalised under Regional Economic Communities Free Trade Agreements (REC-FTAs).
“Countries will be allowed to exclude a certain number of tariff lines from liberalisation as intra-African trade tends to be highly concentrated in a small number of tariff lines.
“It may be possible for countries to exclude a large share of the tariff lines that are important for raising tariff revenue if they need to do so. As a result, tariff revenue losses will be limited.
“Tariff revenues are not even the largest source of government revenue for African countries they account for only around 15 per cent of total tax revenue in Africa.
“Tariff reductions in AfCFTA are to be phased in gradually, over a period of 5 years for developing countries and 10 years for least developed countries, or 10 years and 13 years respectively for sensitive products,” she said.