Africa finally lands a trade deal that could work
Representational image. Image Credit: Pixabay

Africa enjoys massive natural resources that are yet to be tapped to its potential, stemming from several reasons such as poor management and lack of funds for both soft and hard infrastructure.

For instance, Sudan, which is the backyard of the Arab world and Africa, exploits only 20 per cent of its arable lands, while it can increase its agricultural production several times. Africa is also home to enormous resources like oil, gold, uranium, copper and other minerals.

Earlier this month, African leaders announced plans for a continent-wide free trade area, a move that marks a significant turn in intra-African economic and trade ties that would yield invaluable economic gains and contribute to solving many problems that have hobbled these economies.

If successful, the African Continental Free Trade Area would create a 55-nation trade bloc and a single unified market for the continent’s 1.3 billion people and boost economic development in an estimated market of $3.4 trillion. The agreement was reached after four years of arduous negotiations, to overcome all obstacles facing the implementation of the agreement. This is because there are many complex hurdles that are not easy to overcome.

In fact, African countries suffer from political and social conflicts and divisions. This is the reason that prompted Egyptian President Abdul Fattah Al Sissi to say during the African summit “We still have a long way ahead ... but we need to continue it”.

He cited the Arab experience when Arab countries approved a similar agreement 15 years ago, but it remained inactive because of disparities over political issues or those related to trade regulations and laws. African countries will face similar difficulties that if not overcome will consign the agreement to paper and nothing else.

Hence, African nations need to overcome legal obstacles hindering the implementation of the agreement because some countries lack the required regulations. Other countries’ laws are varied and sometimes conflicting. This requires them to take rapid action to amend these laws and seek convergence.

They also need to pump in huge investments to develop intra-trade infrastructure so that it can meet anticipated growth. Aside from political differences that need to be reduced as a means to create an atmosphere of trust necessary for this type of collaboration, there are structural economic factors related to each African country’s trade ties with partners from outside of the continent, such as the European Union, which is deeply linked to the Arab Maghreb.

On the other side, there are some East African countries with strong trade ties to China. The development of intra- African trade needs more diversified economies. This needs time and huge investments, because trade between similar economies is usually limited and does not exceed 10 per cent in the African continent.

The impact of the new agreement can be seen in the context of the current low levels of intra-Africa trade. However, the GCC’s free trade agreement shows that there are numerous benefits. Its implementation 30 years ago have nearly doubled trade between GCC countries, rising from 6 per cent to 15 per cent of the total GCC.

Thus, despite the above mentioned challenges, the African countries will undoubtedly achieve gains. The agreement will help unlock Africa’s long-stymied economic potential by boosting intra-continent trade. It will also help create jobs and reduce the prices of many locally manufactured goods after exemption from customs duties. The agreement will provide better conditions for setting up joint projects and smooth the flow of capital.

Although these gains cannot be underestimated, everything hinges on overcoming any obstacle that may hamper the new deal. Good faith, honouring commitments and enhancing mutual trust are also required to enable Africa and its peoples reap the fruits.