FemiBoyede Consulting

AfCFTA: The Challenges Ahead

While there is no doubt AfCFTA will bring significant benefits to the member states of the AU as a whole, there are some challenges and possible obstacles ahead. Since its early adoption in 2018, there were a few delays due to Covid 19. To date, 54 of the AU countries have signed up (leaving only Eritrea yet to sign). Thirty-five countries have ratified the agreement.
Some experts have compared this audacious project as a vision similar to forming the European Customs union, which has taken some 50 years to tweak and become a practical, functional and beneficial union. The AfCFTA agreement will need to work closely with the existing African 8 Regional Economic Communities to sort out the issue of overlapping memberships within the RECs8. Countries belonging to multiple RECs could lead to different tariffs, standards or Rules of origin being applied to the same product. Also, some of these RECs do not have Free Trade Areas, which are required for trade liberalization.

A few countries like Nigeria (one of the last few to sign on to the agreement) argue that trade liberalization may not necessarily work in their favour. Generally, intra-Africa trade activities do not feature high on Nigeria’s list of priorities. As a country, Nigeria is more dependent on its exports to countries outside Africa. Recently, in an effort to reduce its dependence on imports and encourage local manufacturing, Nigeria closed its borders, increasing its protectionism measures. Any country may decide to carry out some temporary protectionism measures if they feel some internal industries are negatively affected. These areas need to be scrutinized more closely to ensure all economies, large or small, are comfortable with the trade liberalization that comes with the AfCFTA agreement.
Some countries also have unilateral deals with overseas countries, e.g. Kenya is negotiating a trade deal with the US, while the UK, following its exit from the EU, is seeking trade deals with some AU countries, individually. It is yet to be seen how AfCFTA will handle these types of arrangements, but the growing trend to seek such trade deals abroad may lead to problems in the future.
There are also concerns that smaller countries may not be able to put proper structures in place that will allow them to maximize the vast benefits AfCFTA will purportedly bring. Liberalization may end up hurting the smaller economies. The agreement promises to protect smaller economies from losing out to the more significant economies by having a differential liberalization schedule.
There is no doubting that many other concerns and issues will need to be ironed out as time progresses, but overall, once the necessary technological, digital, financial governance, industrialization upgrades and platforms are set up and firmly in place, Africa can start to look forward to a brighter future with the full implementation of AfCFTA.


Footnotes

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