Africa -China Review Africa -China Cooperation and Transformation
The African Continental Free Trade Area (AfCFTA) on the other hand is a brainchild of the African Union and can be considered as “Free- trade zones on steroids”. In other words, the intentions, the urgency, the preparedness to implement by members is more exemplified compared to what was done during the setting up of free-trade zones by the various countries in the past. An agreement referred to as the African Continental Free Trade Agreement that was signed by 54 out of 55 African countries saw the creation of the AfCFTA. The agreement entered into force on 30 May 2019.
What is of most significance is that this agreement is bringing together almost all African Countries and forming a trade area that is supported by most of the original various economic blocks that had been set up before e.g, COMESA, SADC and EAC. This presents Africa as a single economic block which increases its ability to attract foreign investment as a larger block, be able to negotiate better terms on imports as a block and be able to present a bigger market to the would-be investor or even exporter.
African resources have in the past been “taken for a song” only for her to import the same resources with slight improvements a higher price. Formation of this bigger block will allow Africa to combine forces and foster ways of beneficiating its resources for better profits of its exports among other things.
Post-Colonial Africa necessitated co-operation between various Africa states in order to enhance political, economic and commercial ties. A number of blocks were created for example, Southern Africa Development Community (SADC), East African Community (EAC), Economic community of west Africa states (ECOWAS), Common Market for Eastern and Southern Africa (COMESA), Economic and monetary community of central Africa states (CEMAC), Economic community of central African states (ECCAS), Union du Maghreb Arabe or Arab Maghreb Union (UMA) and many more. All these blocks were aimed at regional integration of one form or another without necessarily paying much attention to possible competing interests between blocks or even opposing effects between them.
The Organisation of African Unity (OAU) that was formed immediately after independence of most African states was mainly aimed at uniting Africa in all respects as a political, economic and commercial block. The idea was carried forward by the African Union (AU) which replaces OAU.
The development of the various blocks also saw development of “Free-trade zones” which are sometimes referred to as special economic zones (SEZs) in some countries. These economic zones were not necessarily established as a united African initiative. The intention though was aimed at establishment of liberal market economies. These zones had and still have a range of intentions for example, attracting investors by setting up certain incentives like tax free periods, stimulation of industrial development in some cases, improve economic activity which eventually results in improved job creation.
Africa has a lot to offer to the rest of the world and it is high time this was done in ways that benefit and develop African states. Africa has minerals spread all over the continent. Ranging from Oil in Sudan, Angola, Libya, Egypt, Algeria and many other recent reserves in Uganda and DRC to name just a few, to Diamonds, Gold, Coltan, Tin and the list goes on. Africa is also endowed with a sizeable population of manpower. The AfCFTA is expected to create a market covering 1.2 billion people with a combined GDP of about $2.5 trillion. This is a large market for any business, company or individual willing to invest.
Free movement of capital and persons is one of the ways in which the AfCFTA is expected to stimulate economic activity. The African Union has gone a step further by encouraging the adoption of the African Union passport and the creation of a visa free zone within the AfCFTA countries. These should all be seen as enablers of economic co-operation and development.
Approaching economic development with a common front has many advantages for the African continent and its people. One of the problems African countries have been having by introducing trade zones, was to offer tax incentives to investors who would capitalise on incentives, only to wind out business and move to another country when the incentive period is over and when the country is supposed to start benefiting from the investment. These are the types of investments that the AfCFTA will guard against.
Genuine investors who are looking for long-term investments are guaranteed liberal regulatory environments and stand to gain allot from the incentives offered by the AfCFTA. These just like any free trade zones have to offer attractive terms that will not only favour investors but the African countries as well. Some of the incentives the investors stand to benefit include but are not limited to negotiated tax holidays depending on the type of investment, waivers of certain duty taxes, relaxed restrictions on foreign exchange repatriations and state assistance in set up and operations.
Africa has come of age to resolve its economic hardships and reduce dependence on foreign aid and AfCFTA offers one of the best ways to achieve this. It is beneficial to any foreign investing companies to take advantage of the vast market that is created by the common African market, while Africa will also benefit in creating profitable businesses and employment for its citizens.
Mr. George Nsamba is a risk management practitioner
Based in Johannesburg South Africa