Monday,18 June, 2018
Current issue | Issue 1389, (12 - 18 April 2018)
Monday,18 June, 2018
Issue 1389, (12 - 18 April 2018)

Ahram Weekly

Creating an African market

Steps are being taken towards creating a single African market, yet challenges remain, reports Mona El-Fiqi

 

African Market
African Market

Egypt and 43 other African countries signed the African Continental Free-Trade Area Agreement (AFCFTA) at the African Union Summit meeting held in Kigali, Rwanda, last month.

The signing is considered an important step towards creating a single African market for goods and services with free movement for businessmen and investment, thus paving the way towards accelerating the establishment of an African Customs Union.

The agreement, which should be ratified by the parliaments of the 44 countries within 120 days, is expected to be activated in 2019.  

The AFCFTA aims at bringing the 54 members of the African Union together into one large market with a combined population of 1.2 billion people and a total GDP of $2.4 trillion.

Negotations to establish the AFCFTA started in January 2012 during the 18th Ordinary Session of the Assembly of Heads of State and Government of the African Union held in Addis Ababa, Ethiopia.

African leaders and government representatives are optimistic and expect the agreement to impact positively on inter-African trade. Minister of Industry and Foreign Trade Tarek Kabil was quoted as saying that intra-Africa trade was expected to increase by 52 per cent in 2022, according to figures released by the United Nations.

Kabil added that signing the agreement paved the way to achieve African economic integration and enhance the sustainable development and growth rates of African states in the light of Africa’s Vision 2063 Strategy that has been endorsed by the African Union.

“Signing the agreement is a positive step, but its implementation will not be an easy task,” said Amani El-Taweel, a senior researcher at the Al-Ahram Centre for Political and Strategic Studies.

El-Taweel explained that although the agreement would help in reallocating the continent’s resources and supporting intra-African trade, many challenges faced its implementation, among them poor infrastructure. To improve this, Africa would need investment of some $100 billion, according to the African Union.   

The agreement also does not include clarification on how member countries can protect their local industries and markets from dumping. This loophole has made some African countries reluctant to sign the agreement.

Ten African Union member states declined to sign the agreement as a result, including Nigeria and South Africa, two of the largest African economies. Nigerian President Muhammadu Buhari said his country would not agree to anything that could undermine local manufacturers and enterpreneurs or lead Nigeria to becoming a dumping ground for finished goods.

“Protecting local industries from dumping is an important concern, not only for countries which did not sign, but for all African Union members,” El-Taweel said.

When all AU member states agree to join the AFCFTA, the bloc of 54 countries will be the largest in the world since the establishment of the World Trade Organisation in 1995. However, the implementation of the agreement is likely to be resisted by multi-national companies, since they currently play a major role in trade exchange with Africa, according to El-Taweel.

“Political instability in some African countries is one more problem that could delay the African Free-Trade Area,” she added.

Experts are confident that Egypt’s membership of the AFCFTA is a real chance to boost its foreign trade with African countries. A number of growth opportunities exist for many industrial sectors, such as pharmaceuticals, chemicals, household goods, ceramics, carpets, and military equipment, according to El-Taweel.

However, some Egyptian businessmen believe that Egypt’s signing should be followed by actions that will pave the way for Egyptian products to enter new African markets or to expand already existing businesses in African countries.

Khaled Hamza, head of the customs and imports committee at the Egyptian Businessmen’s Association, told Al-Ahram Weekly that the private sector should start studying African markets and the potential for Egyptian products in each, so that it is ready when the agreement is activated.

These studies should include the laws and regulations that control these markets. Egyptian businessmen should visit the African countries and hold exhibitions of their products, Hamza added.

To help businessmen increase exports, Egypt’s Export Development Authority has signed an agreement with the African Union Commission and the African Bank for Development to hold the first Intra-African Trade Fair in Cairo in December 2018.

The fair will include 500 companies from 50 African countries and is expected to be visited by 10,000 visitors. “The fair aims to help Egyptian businessmen meet and interact with their counterparts in the African countries. It would also be a good chance for them to conclude export deals to the African countries,” said Sherine Al-Shorbagi, head of the Export Development Authority.

According to the Central Agency for Public Mobilisation and Statistics (CAPMAS), the government statistics agency, Egyptian exports to Africa stood at around $1.3 billion, while imports reached around $1 billion, in 2016. Kenya, South Africa and Nigeria are the most important countries in Africa doing business with Egypt.

The relatively low performance of intra-African trade, which currently stands at around 20 per cent of these countries’ total, has been attributed to the deficit in trade information and high product concentration.

To develop such trade, the African Union has endorsed an Action Plan on Boosting Intra-African Trade (BIAT), which has identified seven areas that can benefit it, including trade finance, trade policy, trade facilitation, productive capacity, trade-related infrastructure, trade information, and market integration.

The BIAT targets to double intra-African trade flows from January 2012 to January 2022.

The redirection of investment to better utilise the continent’s resources could offer tremendous opportunities for growth for it to become the fastest-growing and largest market in the world, with its population projected to double by 2040.

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