African countries have to take bold action to realise the benefits of the free trade area which will reposition the bloc as a competitive player in the global arena, a UN official has said.
BY NDAMU SANDU IN ADDIS ABABA, ETHIOPIA
Speaking at the committee of experts meeting in Addis Ababa yesterday, UN undersecretary general and executive secretary of the Economic Commission for Africa (ECA), Vera Songwe, said the African Continental Free Trade Area (AfCFTA) that was signed has ushered a new era of promise and provides a historic opportunity for Africa to unleash its development potential.
The committee of experts meeting is part 51st session of the Conference of African Ministers of Finance, Planning and Economic Development which runs up to May 15 under the theme, African Continental Free Trade Area and Fiscal Space for Jobs and Economic Diversification.
The urgent action, she said, includes the creation of 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 agreement, in a manner that realises its potential to the benefit of the average African,” Songwe said.
She said household spending was expected to grow at 3,9% per annum to reach $2,1 trillion and corporate spending projected to reach $3,5 trillion by 2025 urging corporate Africa to take advantage of opportunities created by the AfCFTA to leverage on the expansions and boost its economic growth.
“Manufactured products make up 46% of intra-African trade and only 22% 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 industrialisation. Indeed, according to our estimates, the AfCFTA would increase Africa’s industrial exports by over 50% by 2022,” Songwe said.
Critics say AfCFTA will lead to the loss of fiscal revenue if tariffs are removed. But the ECA head said losses will be minimal as intra-African trade constituted a small share of Africa’s total trade.
“Most of the intra-African trade is already liberalised under Regional Economic Communities Free Trade Agreements. Therefore, AfCFTA is likely to affect only around 7% of Africa’s total imports under current trade patterns,” she said adding that countries would be allowed to exclude a certain number of tariff lines from liberalisation.
Songwe said tariff revenues accounted for around 15% of total tax revenue in Africa, therefore, not the largest source of revenues and that tariff reductions in AfCFTA were to be phased in gradually, over a period of five years for developing countries and 10 years for least developed countries, or 10 years and 13 years respectively for sensitive products.
The AfCTA is projected to boost intra-regional trade by removing bottlenecks to trade. Statistics show that Africa has the highest average tariffs on intra-regional trade of 6,9% against 1,6% in West Asia, 4,7% in North America and 2,5% in Europe.