Although the African Union agreed to implement it by July 1st, 2019, it has been postponed and further delayed by the COVID-19 global pandemic. Whenever implemented, AfCFTA could generate up to $35 billion per annum, cut importation by $10 billion, and increase the combined GDP of the countries to more than $2.5 trillion.

Also, it will ease the movement of people, goods, and services. It will create employment opportunities and become the largest free-trade zone in the world. It will also attract direct foreign investments to every country and quicken the industrialization of the continent.

AfCFTA holds a lot of promises for the agricultural, manufacturing, transportation, and other sectors that are directly or indirectly involved in the trade of goods within the continent. For this study, we will focus on helping farmers to understand the impact of AfCFTA on the agricultural sector.

Africa has the potential to become a major food producer and supplier for the rest of the world. For maximum productivity, the countries have to deepen integration and prepare common markets for intra-continental trade. The farmers need to put over 600 hectares of uncultivated arable lands into good use for large scale commercial farming. They need to replace outdated farming tools with modern technologies and techniques. And most importantly, agricultural policies must focus on the majority group of smallholder farmers.

These will not only increase food production but create jobs and reduce poverty for farmers who rely on agriculture as the only means of livelihood. In essence, AfCFTA will help ensure that the continent can feed its rapidly growing populations. It will foster macroeconomic convergence, economic integration, and decrease inequalities between wealthy and deprived economic regions.

The African Continental Free Trade Agreement will help ensure the redistribution of agricultural produce from surplus to deficit regions. The governments will have to invest in infrastructural development to help farmers to access markets, storage facilities, drought-resistant seed, and invest in all aspects of the agricultural value chain. Governments also have to invest in research and development programs to help smallholder farmers understand modern techniques and technologies.

Implementing the AfCFTA will have farmers focus their energy on quality over quantity of yield. It will stir the need for basic infrastructure and facilities to ensure maximum productivity. In general, it will have multiplier effects in improving continental food security and sustainability from a trade perspective. Especially now when the continent is grappling to sustain production capacity due to environmental and political challenges.

Written by Joy Ejere Uche

The post A Farmer’s Guide to Understanding the AfCFTA appeared first on MTFC | Meet The Farmers Conference - Nov 2019 - Dubai UAE.

Tea farmers in Kenya. Photo Credit: iied.org

The new African Continental Free Trade Agreement (AfCFTA) is expected to be a game changer, boosting inter-African trade, spurring manufacturing, and creating economic opportunities. But for its benefits to be realised, the details need to be negotiated; and Africa’s leaders need to commit to AfCFTA for the long haul.

On 21 March 2018, 44 African states signed the African Union’s (AU) AfCFTA in Kigali, Rwanda. According to the AU, which initiated the process in 2015, the goal is to “Create a single continental market for goods and services, with free movement of business persons and investments,” with the purpose of accelerating intra-African trade. If, and when, all 55-member states of the AU sign the AfCFTA, the African Trade Policy Centre (ATPC) notes that the trade agreement will, “Cover a market of 1.2 billion people and a GDP of US$2.5 trillion [more than €2 trillion].”

Among the largest African economies, Nigeria and South Africa have not yet signed the AfCFTA. Nigeria’s President is facing pressure from labour unions and other groups who believe that the agreement will hurt the Nigerian economy by undermining local businesses. South Africa indicated its political support for the AfCFTA but stated that further internal consultations, as mandated by its constitution, were needed before signing it.

Implications for tariffs and trade

With current tariffs of 6%, ATPC notes that African businesses face higher tariffs when they export within Africa than when they export outside the continent. As AfCFTA eliminates tariffs on intra-African trade, this should encourage African businesses to trade within Africa. Intra-African trade could be boosted by more than 50% if import duties are eliminated, estimates the UN Economic Commission for Africa (UNECA), and intra-African trade doubled if non-tariff barriers are also reduced.

However, as smaller countries cannot compete with larger, better developed economies, the International Center for Trade and Sustainable Development notes that it is essential that, “The agreement actually works for countries at different levels of development.” The AU’s Boosting Intra-African Trade Action Plan (BIAT) may help; the Plan has identified seven programmatic areas, for example, trade facilitation, which will reduce road blocks and simplify customs and transit procedures at borders. AU members can use the plan to prioritise policy reforms required in these seven areas to benefit fully from AfCFTA. As UNECA notes, the BIAT Action Plan essentially complements AfCFTA with the former focusing on supply-side constraints to intra-African trade, and the latter on market access and demand-side constraints. However, according to a UNECA assessment, the BIAT Action Plan is currently hampered by three main challenges: a lack of institutional structure, an absence of monitoring and evaluation mechanisms, and insufficient resources.

Another key point, as UNCTAD notes, is that about 80% of all intra-African trade already flows through one or more of eight existing regional economic communities (RECs). What will it take for the AfCFTA to supplant the piecemeal approaches of these other agreements? Asmita Parshotam, an international trade and development expert with the South African Institute of International Affairs states that, “This will depend on whether the AfCFTA is able to supersede some of the RECs, or at least have one or two of them collapse into the overarching structure with time in its attempts to consolidate continental and regional efforts.”

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Enhancing productivity

One way some countries can begin to benefit from the AfCFTA is to begin to integrate their products into regional value chains, particularly when they can’t meet standards for participating in global value chains. This may be especially applicable to the agricultural sector. Despite agriculture providing up to 60% of all jobs in Africa, and 25% of GDP, the share of agricultural commodities in intra-regional trade has been quite low – less than 30% according to UNCTAD. TradeMark East Africa’s senior director of trade environment, Richard Kamajugo agrees, “Agriculture is a sector with room for significant productivity improvements, especially through enhancing agro-industry and agro-processing, given that the African market (intra-African trade) has accounted for over 50% of the growth in processed food exports from African countries since 2000.”

In 2006, the AU Declaration of the Abuja Food Security Summit called for promoting intra-African trade in rice, maize, legumes, cotton, oil palm, beef, dairy, poultry and fisheries products at the continental level. UNCTAD has identified additional promising products, such as potato and tea, which have shown the most potential for integrating into value chains. Kamajugo notes that, “By facilitating trade, and thereby reducing transaction costs, AfCFTA will enhance regional value chains. Growth rates for several agricultural commodities are also expected to increase.”

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However, some countries may have less to gain by stepping into the agreement. Kamajugo notes that, “As a vital component, the AfCFTA will need measures that promote integration of vulnerable groups with limited capacity and skills into larger value chains. Among these are simplifying documentation for trade regimes, such as rules of origin requirements, providing support to meet standards for phyto-sanitary requirements and re-skilling enterprises so they can focus on export competitiveness.”

Taking all these variables into account, and with the underlying instruments of the agreement still to be harmonised, many countries are taking a wait-and-see approach. “At the end of the day,” Parshotam notes, “political commitment is necessary and political will, together with technical, financial and human resources, is what will drive AfCFTA’s implementation. This will involve give and take amongst leaders, especially as the AfCFTA is rolled out at domestic levels and there is a need to drive support for implementation.”

Culled: spore.cta.int

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The post A promising new continent-wide trade agreement for Africa appeared first on MTFC | Meet The Farmers Conference - Nov 2019 - Dubai UAE.