Covid and African Market Competitiveness

By Kevin Abraham

The stated vision of the African Continental Free Trade Area is to create one African Market, and the world’s largest, barrier free trade zone. As of late 2019, 30 countries out of 54 had ratified the agreement, and although that number is low, an official date for the startup of intra-nation trading was set: 1st July 2020.

Well, that date has come and gone. Covid_19 has put the brakes on it. Borders are closed, trade is limited, and governments are focusing on dealing with the pandemic, and its fallout.

Of course, a slew of dire warnings about Africa’s economic future is never in short supply, and with Covid, there’s been an amplification of inherent weaknesses in African business and governance, and macroeconomic challenges.

A question then: is Covid the crisis that further hinders African Economic security? Or is it an opportunity to change the game for the continent?

Dianna Games, writing for African Business, believes that the delay to AfCFTA could provide an opportunity for a “much-needed rethink of Africa’s development trajectory.”

She notes [and many would agree] that implementation hasn’t moved forward at a meaningful pace – Covid or not.

The current reality is that Africa continues to track behind the rest of the world in several key aspects.  Two indicators are that African exports have grown by less than 2% against a world average of over 20%, and there’s been a decline in services exports against a significant global increase in exports of similar services.

A recent survey, the AfCFTA Year Zero Report [Ref: The AfroChampions Initiative], which bases its conclusions on trade infrastructure, customs efficiency and access to credit for industry sums it up quite neatly: out of a possible 100, Africa scores 49.1

The World Bank’s “Doing Business Index” uses eight indicators including costs of imports and exports and time taken to cross borders. Their score for Africa is 55.5 out of a possible 100.

It’s interesting that the stated function of the AfCFTA is heavily weighted on policy and action to specifically address these kinds of issues. But now, at least at first glance, it seems that the very thing that Africa might need in order to mitigate the risk of Covid has been forestalled by Covid.

Was Africa ready for AfCFTA in July anyway? The answer is that it probably was not.

Therein lies an opportunity: This delay offers Africa time to rethink how AfCFTA could be instrumental in accelerating recovery. In particular, how it could take advantage of new trends emerging from the Covid disruption.

What is global business, and the multinationals, thinking about? What might be their new strategies going forward, and how can Africa respond? For context, think about localized and diversified supply chains, localized manufacturing, liberalizing stifling regulations, fast and flexible movement across borders, investment incentives, as a start.

Such actions are feasible, but only with a concerted political will. Covid has resulted in an inward focus as countries deal with internal pandemic issues. But this is also a time when a more outward looking vision based on the AfCFTA framework could have clear benefits for Africa.

[Ref: “Pandemic highlights importance of AfCFTA” Games; Luke, D African Trade Policy Centre; Smith E, CNBC; Google searches.]