The marginal progress trailing the Africa Continental Free Trade Area (AfCFTA) since its commencement in January 2021 goes beyond slow documentation and ratification by states according to experts.
Other than the slow documentation, logistics-related challenges, currency mismatch, and poor base of trade exchange will constrain the effective, efficient and timely implementation of the agreement, they said. This was discussed by economic experts during a panel session focused on Africa can leverage trade, manufacturing and economic integration to make a significant rebound at the ongoing Africa Business Convention 2022 organized by BusinessDay.
Kunle Elebute, chairman, KPMG Africa said that African countries have not fully adopted value addition practices which is detrimental to their trade activities seeing that most countries in the continent are largely based on commodities. “AfCFTA is a great initiative but what can we describe as the underlining economic activity that can be exchanged under trade, Africa is simply the domain for the global economy to take out commodities and process,” he said.
The effect of poor value addition practices is amplified by the Nigerian Export-Import Bank (NEXIM), which states that the global value of raw cocoa export is $10 billion while the total value of all finished goods from cocoa annually is $200 billion with chocolates alone having $100 billion. Elebute also mentioned that the continent lacks the necessary logistics infrastructure to facilitate trade which is a major determinant of successful trade activity.
According to the AfCFTA secretariat, issues around currency mismatch in the African continent cost it $5 billion annually which the recently launched Pan-African Payments and Settlement System (PAPSS) is expected to effectively address. Kelvin Uwaibi, managing director, Edo State Investment Promotion Office (ESIPO) said issues around having a uniform currency is a problem especially as foreign currencies like dollars and pounds serve as mutually accepted currencies.
He said if the continent could kick start the PAPSS, it will help bridge the gap presented by the currency difference across countries. “Once we have an easy payment platform that will be the best and first way to start, technology will play a huge role in this, we need to strengthen the payment system and get more partners on board if we can achieve that then we can go with the regional currency,” he said.
He added that lack of data and poor record-keeping is also detrimental to the successful implementation of the trade agreement noting that there is a lot of informal trade exchange between countries that are not documented. He added that sub-nationals need to look at how they can start to produce locally and also trade with each other, adding that interstate trading should be groomed before going to the continent.