Business & Economy - National - News - November 29, 2022

AfCFTA can drive Africa’s industrialization, say development experts

By Bassey Udo

The African Continental Free Trade Area (AfCFTA) will spur Africa’s industrialisation and deepen regional integration, experts on Africa’s economic development have said.

The AfCFTA is the world’s largest free trade area and a single market for goods and services of almost 1.3 billion people across 55 countries in Africa.

The trade area, which came into force in May 2019, aims at reducing tariffs among members states and covers policy areas such as trade facilitation and services, sanitary standards and technical barriers to trade.

Speaking at a panel discussion on the theme “Industrializing Africa: Renewed commitment to inclusive and sustainable growth, trade and economic” experts said Africa can leverage on the AfCFTA to drive its industrialization and economic transformation by implementing the right trade measures and policies.

They called on the governments at various levels in the continent to institute supportive policy reforms that would foster trade.

The discussion, hosted by the International Growth Centre and the Firoz Lalji Institute for Africa at the London School of Economics and Political Science, was part of events to mark the Africa Industrialisation Week 2022.

The experts explored key questions regarding the industrialisation strategies that different African countries have adopted, and particularly on how the AfCFTA would influence industrialization strategies that contribute to poverty reduction and environmentally sound industrial development in Africa.

Contributing to the discussion, the Director, Regional Integration & Trade Division at the United Nations Economic Commission for Africa (ECA), Stephen Karingi, said the five-day African Union Summit on Industrialization and Economic Diversification, hosted by the Republic of the Niger between 20 and 25 November 2022, extensively discussed the challenge of industrialization on the continent.

Key themes discussed during the summit included the question of regional value chains and special economic zones, standards and quality policy, decarbonisation and industrialization.

“There is consensus that one of the key reasons we have the AfCFTA was basically to foster industrialization and transformation of the continent.

The questions is how do we do that,” Karingi told the panel discussion moderated by David Luke, Professor in Practice and Strategic Director at the Firoz Lalji Institute for Africa.

Describing as critical the question of creating regional value chains, Karingi said while African countries committed to tariff reduction and removing non-tariff barriers to boost inter-African trade, AfCFTA sought to exploit the comparative advantages in the different African economies.

“There is a question of how do you have regional value chains that allow you to get intermediate inputs from other African countries considering that today a lot of the raw materials that are being used in most of the global value chains are normally coming from the continent,” Karingi said, remarking that special economic zones were a perfect tool to promote regional value chains.

“The African consumer is as demanding as any other consumer outside Africa and so it is important for African consumers to be able to demand and buy what is produced under the industrialization agenda of the continent,” Mr. Karingi said, noting that with some African manufacturers being uncompetitive, the AfCFTA was an opportunity to trade in services.

The World Bank has described the AfCFTA ias a major opportunity for countries to boost growth, reduce poverty, and broaden economic inclusion by lifting an estimated 30 million Africans out of extreme poverty and boost the incomes of nearly 68 million others.

Also, the Bank said implementing the trade area would boost Africa’s income by $450 billion by 2035 and increase Africa’s exports by $560 billion, mostly in manufacturing and agro processing.

A Professor of Economics, Department of Economics at the University of Ibadan, Olawale Ogunkola, said by all indicators industrialisation was still low in Africa as some policies and strategies that would foster value addition were not effective as were established special economic zones.

“We moved to export strategies, but we are yet to take off in terms of increasing manufacturing value addition not only for our benefit, but in addressing some of the basic things we think will help us in terms of development,” Ogunkola said.

“For some countries, economic zones are like military zones, keep off. They are so disconnected from the domestic economy,” Ogunkola noted.

He called for special economic zones to be connected to the economy of host countries in terms of sourcing for inputs and skills training.

An integrated kind of approach and policy coherence, he said, were key in making special economic zones relevant.

For the Vice-President, Central African Economic and Monetary Community (CEMAC), Fatima Haram Acyl, although the ACFTA was an enabler of employment opportunities, it must be inclusive of women who make up half of the population on the continent and constitute 58 of self-employed people who they suffer from gender wage gap.

“If we are serious about our development, we cannot operate at half of our capacity. We need to include women all over and we need to empower them. Policy makers need to be deliberate and intentional with regard to complementary policies in higher education with emphasis on STEM (Science, Technology, Engineering, and Mathematics), Acyl said.

On the financing gap for infrastructure development in Africa, the panelists felt integration was key to infrastructure financing.

Multilateral finance institutions, the experts said, should be part of the free trade area, while countries need to enhance their capacity to come up with bankable projects that would attract funding.

The African Development Bank (AfDB) estimates that Africa needs $170 billion a year for infrastructural financing with an estimated gap of about $100 billion.

Karingi said involving the private sector was one way of fixing the infrastructure financing gap as well as tapping innovative finance through instruments such as carbon credits.

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