Davos: Africa strengthens free trade as global barriers rise

News from Friday, January 25, 2019

Source: UBA

2019-01-25

A new African free trade zone could be in a few weeks since the last countries have ratified an agreement signed last year. The plan to boost intra-African trade by half is attracting a lot of attention in Davos this year.

When you ask Tony Elumelu if Africa would benefit from free trade, the Nigerian entrepreneur and philanthropist does not have to think long. "If we look at other parts of the world, intra-regional trade has helped us a lot, and for us to develop in Africa, we have to accept that," he told DW at the World Economic Forum in Davos. "We need to expand and expand the market, we must also integrate Africa through trade."

He might not have to wait much longer for this to happen. Last year, 49 African countries signed the Continental Free Trade Area (CFTA) agreement, which is supposed to remove tariffs on most goods and other barriers to trade.

The agreement will come into force when 22 countries have ratified it. With only seven more to do, it may only be a matter of weeks. Thus, at a time when others are still erecting trade barriers, the continent's leaders are moving closer and closer to creating the largest free trade area since the creation of the World Trade Organization.

This would create a market with a combined GDP of around $ 3 billion and, according to the African Union (AU), would boost intra-African trade by 52%. As firms are given the opportunity to enter new markets, unemployment should decline and economic output increase. And the long-term effects could be even more important.

Create value, attract investors

"The countries that trade commodities are those who are poor, those who actually trade value-added products are those who are rich," said Akinwumi Adesina, president of the African Development Bank. But as African economies can cooperate more closely, he hopes companies will create more sophisticated value chains to produce higher quality products.
In addition, he sees the CFTA as a great opportunity to attract investors. "Africa is open for business, opportunities are there," he said. "When people look at Africa, think about the population, think about the middle clbad, think about the huge opportunities to invest across borders."

The investments would come at a crucial time when it is estimated that Africa lacks up to 100 billion dollars (88 billion euros) for infrastructure projects alone.

Make it work for the 99 percent

However, if the economic future looks promising, governments will face challenges. Winifred Byanyima, president of Oxfam International, warned leaders on what can drive unbridled globalization.

"We have richer countries, richer companies, richer people taking advantage of trade liberalization and many others left behind," she said. The question of whether low-income Africans will also benefit from the CFTA will depend on the success measures implemented by those in charge. "The most important step is creating quality jobs for our young people and for women."

A new era – also for Nigeria?

Despite these caveats, the euphoria of the CFTA is high. Before Africa is the beginning of a new economic era; and some see it as just a beginning. Bernard Gautier, of the French investment company Wendel, for example, has already called for further integration by means of common currencies.
And Tony Elumelu advocates not only to let goods move freely. "We need to have a common pbadport or at least simplify entry at the border so that people can move freely in Africa, people who move freely can trade – and not otherwise," said the billionaire.