Turning Lemons to Lemonade: Impact of COVID-19 on the African Continental Free Trade Agreement, Lynda Chinenye Iroulo, 2020

10 janvier 2022Wathinote Covid-19

Author : Lynda Chinenye Iroulo

Affiliated organization : United Nations University on Comparative Regional Integration Studies (UNU-CRIS)

Type of publication : academic article

Date of publication : 2020

The infiltration and spread of COVID-19 stalled the efforts, resulting in border closures and the suspension of many economic activities which threaten to weaken many of the continent’s economies and impede the commencement of AfCFTA. Although the AfCFTA Secretariat has been commissioned, commencement is still delayed. So far, its activities have been devoted to talks with member states with no concrete policy implementation on how to utilise AfCFTA to cushion the impact of the pandemic.

The Promise of AfCFTA

AfCFTA is designed to rectify the anomaly by fostering economic integration through a unified, single market and customs union; to promote the free movement of people, goods, and services; and shortly, adopt a single currency. AfCFTA is expected to escalate intra-African trade through better harmonization and coordination of trade liberalization as well as to assist the Regional Economic Communities (RECs) in facilitating trade instruments across Africa. It is anticipated that AfCFTA will enhance competitiveness at the industry and enterprise level through the leveraging of opportunities for scale production, continental market access and better reallocation of resources.

Old Meets New Challenges

Before the outbreak of COVID-19, AfCFTA was already faced with enormous challenges, begging the question of whether Africa was ready for a single market. The continent still struggles with fundamental components – dilapidated infrastructure for industrial transportation, the onerous task of moving commodities due to expensive and inefficient transport systems and corrupt customs officials, the lack of social welfare benefits to cushion the impact of competition, and industrialisation.

Although seven of the world’s 10 fastest-growing economies are in Africa, the bulk of its states rank low in competitiveness. This could be explained by the variation in economic development, physical and technological infrastructure between developed and many developing economies, and the inability of several developing economies “to undertake the critical economic and institutional reforms needed to raise their market efficiency”.

The nature of the African economy makes the task of AfCFTA in times of COVID-19 more daunting. Africa’s major exports are with countries that have been hit hard by the COVID-19: the EU, US, and China. This means that prices of commodities on which many African countries remain dependent on have fallen, which in turn affects foreign exchange, government revenues, and domestic demand

The differences in financial systems continue to challenge the efficiency of AfCFTA. AfCFTA still grapples with the contrast between international and national interest rates and exchange rate movements by the banks.

A major impediment to functionality might be the lack of broadband connections to the internet – meetings which bring stakeholders together will have to be done virtually. Although meetings have resumed virtually, a broadband internet connection will be needed for optimal performance. Advanced digitalisation will be crucial for the functionality of the AfCFTA secretariat as well as promoting intra-African trade during a pandemic.

Given that the pandemic has heavily impacted life as we know it in Africa, member states have turned their attention to the invisible enemy. African leaders are now insouciant to AfCFTA due to COVID-19 having taken centre-stage of efforts. National policies have moved from elsewhere to focus on containing and minimising the spread of the virus – upgrading and stocking up on health amenities and equipment are prioritised.

The nature of the African economy makes the task of AfCFTA in times of COVID-19 more daunting. Africa’s major exports are with countries that have been hit hard by the COVID-19: the EU, US, and China. This means that prices of commodities on which many African countries remain dependent on have fallen, which in turn affects foreign exchange, government revenues, and domestic demand.

Also, a large proportion of Africa’s sector is informal – this sector is split between wage and self-employment. The informal sector is largely made up of people who do not hire others, for example, street vendors, retailers in local markets, and home-based businesses. Farmers who specialise in large scale production find it challenging at the moment to transport many of their supplies to retailers. The suspension of most economic activities and movement has affected the bulk of service providers and producers of commodities – leaving the informal sector without support during the pandemic. This will have drastic implications for businesses and income across the continent.

The infiltration of the pandemic into the continent means that if economic activities are to carry on amidst the crisis, e-commerce should be taken more seriously.

A Look on the Bright Side…

COVID-19 has major implications for African economic integration. Governance issues such as infrastructure and social welfare still need to be resolved for AfCFTA to be successful. However, opportunities the situation offers could be used to Africa’s advantage. A possible upside could be that Africa’s current isolation from its external trading partners could be a blessing in disguise if local resources are leveraged to resolve economic challenges while encouraging intra-African trade.

I would argue that they need to change their game plan if they want to record achievements. Africa must opt for a multi-speed approach; a strategy of differentiated integrations whereby common objectives are pursued by member states who are both willing and able to implement the agreement immediately rather than waiting for all member states to be on board at the same time. Benefits accrued will persuade other members to commit to the conditions of the AfCFTA.

More than ever, Africa needs to be self-sufficient and it needs to do this through AfCFTA. A bandwagon strategy aimed at the exchange of COVID-19 medical equipment should be initiated. The role of AfCFTA should be to encourage small coalitions of member states willing to open its borders and trade now

The nature of the African economy implies that the continent cannot afford to close its borders. The goal of AfCFTA is to encourage intra-African trade and this should be further promoted. Borders should be opened for goods, and Green Lanes created for essential commodities. The potential of AfCFTA, based on rules of origin, is evidenced in the haste for essential commodities such as Madagascar’s COVID-Organics.

Digital trade is crucial during this pandemic. The digitalisation of trade will allow member states to compete fairly and simplify cross-border and national trade. Bridging the technological infrastructure and literacy divide will determine the extent to which e-commerce will be adopted and ultimately enable intra-African trade. AfCFTA needs to collaborate with firms to ensure ease of trading.

More than ever, Africa needs to be self-sufficient and it needs to do this through AfCFTA. A bandwagon strategy aimed at the exchange of COVID-19 medical equipment should be initiated. The role of AfCFTA should be to encourage small coalitions of member states willing to open its borders and trade now.

Les Wathinotes sont soit des résumés de publications sélectionnées par WATHI, conformes aux résumés originaux, soit des versions modifiées des résumés originaux, soit des extraits choisis par WATHI compte tenu de leur pertinence par rapport au thème du Débat. Lorsque les publications et leurs résumés ne sont disponibles qu’en français ou en anglais, WATHI se charge de la traduction des extraits choisis dans l’autre langue. Toutes les Wathinotes renvoient aux publications originales et intégrales qui ne sont pas hébergées par le site de WATHI, et sont destinées à promouvoir la lecture de ces documents, fruit du travail de recherche d’universitaires et d’experts.

The Wathinotes are either original abstracts of publications selected by WATHI, modified original summaries or publication quotes selected for their relevance for the theme of the Debate. When publications and abstracts are only available either in French or in English, the translation is done by WATHI. All the Wathinotes link to the original and integral publications that are not hosted on the WATHI website. WATHI participates to the promotion of these documents that have been written by university professors and experts.