The Challenges of the African Free Trade Area (AfCFTA)
We reported in the previous edition of the Newsletter on the launch of the AfCFTA on 1 January 2021. The benefits of removing intra-Africa tariffs and national non-tariff barriers will become evident over the coming year. Challenges exist of course. For example, some of the poorest African countries rely heavily on customs duties (tariffs). The African Export-Import Bank has mobilized $1 billion to offset revenue losses for countries that lower cross-border tariffs as part of the AfCFTA. However, a World Bank report shows that short-term tariff revenues would decline by less than 1.5% for 49 out of 54 African countries, with total tax revenues set to decrease by less than 0.3% in 50 countries under the deal. This is because only a small share of tariff revenues come from intra-African trade. The bulk is from a few tariff lines (like luxury goods, cars, etc, from countries outside Africa). The AfCFTA also allows some protectionist measures to be maintained even if countries liberalize. Dr Wamkele Mene, secretary-general of the AfCFTA, said in an interview that officials are considering several options, including an escrow account to reimburse exporters trading under the agreement, even as their countries are still working to implement the necessary customs infrastructure.
Other issues also have arisen. For example, in East Africa, most governments used government procurement to support domestic industries through local content bills and regulations to give preference to domestic suppliers—a classic industrial policy tool. But this is in violation of the EAC Common Market Protocol. There are now suggestions from the regional level to move from national initiatives towards “BEABEA” – Buy East African, Build East Africa.
The EFA believes that both at regional level, from where this example comes, and at pan-African level concentration should be given to building pride in African made products.
We propose that some sort of brand logo is needed (suggestion – a sun, with the continent in the middle, and the rays each representing an AfCFTA country?). Other ideas welcome – let me know!
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