
Viewpoints | Sep 17,2022
Oct 15 , 2022
By Landry Signé ( Landry Signé, Founder and Chairman of the Global Network for Africa’s Prosperity. Ameenah Gurib-Fakim, the first female president of the Republic of Mauritius, is a distinguished adviser at the Global Network for Africa’s Prosperity. This article first appeard on Project Syndicate. )
The real game changer is the AfCFTA. Removing tariffs for a wide range of products across the continent will lower production costs and shift foreign direct investment towards manufactured goods. This, in return, will reduce transit costs and shorten supply chains, significant benefits in a globalised economy, writes Landry Signé, a professor and a managing director at Thunderbird School of Global Management and a senior fellow at the Brooking Institution.
Africa is on the cusp of an economic transformation. By 2050, consumers and businesses investing on the continent will reach roughly 16.1 trillion dollars.
The coming boom offers tremendous opportunities for global businesses, especially US companies looking for new markets.
But unless African policymakers remove existing barriers of regional trade and investment, the continent's economy will struggle to reach its true potential.
Two major trade agreements, the African Growth and Opportunity Act (AGOA) and the African Continental Free Trade Area (AfCFTA), make it easier for African countries to trade with one another and the United States. The agreements are promising to remove long standing impediments of industrialization.
AGOA, passed by the US Congress in 2000, gives countries in sub-Saharan Africa preferential trade access, allowing them to export duty free products to the US. Although AGOA expires in 2025, US president Joe Biden's sub-Saharan Africa strategy, unveiled in August, highlights its positive impact and promises to work with Congress on ways to proceed after it lapses. AfCFTA, on the other hand, is an intra-African trade agreement with no expiration date. Established in 2018, its goal is to deepen trade ties between African countries by removing tariff and non-tariff barriers.
Although these agreements' scope, focus, beneficiaries, and structure differ significantly, they are essential to strengthening African regional integration. Rather than viewing them as separate or competing agreements, policymakers and investors should recognise how they can complement each other in creating, sustaining, and transforming value chains across the continent.
Value creation is critical to Africa's economic transformation. In 2014, manufactured goods accounted for about 41.9pc of the trade between African countries, compared to 14.8pc of their exports to the rest of the world. Greater regional integration will provide Africa with a larger supply market, accelerating manufacturing specialisation and making African producers more competitive globally. More robust manufacturing industries will provide jobs for low-skilled workers, particularly those not integrated into the formal economy currently.
AGOA has already created some opportunities for cross-border value chains. Yet, despite some success stories like Madagascar's apparel industry, which relies on an extensive regional supply chain, such opportunities remain limited. While integration has improved since AGOA's implementation, particularly since 2015, it remains somewhat superficial. Less than 17pc of Africa's commercial value is currently generated through intra-African trade.
The real game changer is the AfCFTA. Removing tariffs for a wide range of products across the continent will lower production costs and shift foreign direct investment towards manufactured goods. This in return will reduce transit costs and shorten supply chains, significant benefits in a globalised economy.
The International Monetary Fund (IMF) predicts that under the AfCFTA, Africa's expanded goods and labour markets will become more efficient, driving significant competition between the countries. By creating a true continental market that prompts a higher rate of intra-African trade, the AfCFTA will likely provide a further incentive to US-based multinationals.
Effective regional integration is essential for Africa. Without it, the continent will continue to be overlooked and outpaced globally in manufacturing, information technologies, and agriculture. When considering the future configuration of AGOA and the AfCFTA, policymakers should regard them as complementary mechanisms for ensuring Africa's long-term economic development.
PUBLISHED ON
Oct 15,2022 [ VOL
23 , NO
1172]
Viewpoints | Sep 17,2022
Viewpoints | Sep 11,2020
Commentaries | Nov 27,2018
My Opinion | Mar 11,2023
Viewpoints | Oct 15,2022
Commentaries | Dec 10,2018
Commentaries | May 01,2020
Commentaries | Apr 11,2020
Viewpoints | Mar 04,2023
Viewpoints | May 11,2023
Photo Gallery | 69310 Views | May 06,2019
Photo Gallery | 61188 Views | Apr 26,2019
Fortune News | 53043 Views | Jul 18,2020
Fortune News | 52832 Views | Sep 01,2021
Commentaries | Jun 03,2023
Dec 24 , 2022
Biniam Mikru heads the department of cabinet affairs under Mayor Adanech Abiebie. But...
Jul 2 , 2022 . By RUTH TAYE
On a rainy afternoon last week, a coffee processing facility in the capital's Akaki-Qality District was abuzz with activ...
Nov 27 , 2021
Against my will, I have witnessed the most terrible defeat of reason and the most sa...
Nov 13 , 2021
Plans and reality do not always gel. They rarely do in a fast-moving world. Every act...
At the hub of Ethiopia's fiscal planning on King George VI Street, the country's budg...
May 27 , 2023
Tauted as a somnolent giant, Ethiopia's financial scene now stirs, roused by favourab...
May 20 , 2023
The pungent irony wafting from Pretoria last week was hard to miss. Cyril Ramaphosa,...
May 13 , 2023
In March this year, Kamala Harris, the United States Vice President, visited Ghana, T...
Jun 6 , 2023 . By AKSAH ITALO
The tripartite Labour Advisory Board constituting labour, employers and authorities r...
Jun 3 , 2023 . By BERSABEH GEBRE
Addis Abeba's City Administration resumed land auctions after a five-year lull. The a...
Jun 3 , 2023 . By BERSABEH GEBRE
A federal agency invitation to procure a large volume of edible oil found itself with...
Jun 3 , 2023 . By AKSAH ITALO
Public events in the capital foresee a regulatory framework as the Addis Abeba Mayor...