AfCFTA can benefit Africa’s youth and women and increase Sino-African cooperation

The new year has come with good tidings for Africa despite the devastating economic effects of the novel coronavirus pandemic on the global economy. On the first day of 2021, African countries officially opened their markets under the continental free trade agreement (FTA) for duty-free trading of goods and services across borders.

Coincidentally, on the same day, the UK’s much talked about Brexit deal kicked off, officially marking the end of the UK-EU relationship. Initially, Africa’s FTA was scheduled to commence on July 1, 2020; but due to the pandemic, it was postponed to give African countries ample opportunity to contain the spread of the coronavirus.

An FTA is an accord among countries whose main objective is to lower barriers to imports and exports among themselves. Under the auspices of such a free trade policy, goods and services are traded across international borders with few or no government tariffs, quotas, subsidies or prohibitions that may scuttle their exchange.

The launch of the African Continental Free Trade Area (AfCFTA) is historic because it’s the largest free trade area in the world by virtue of the number of participating countries since the development of the World Trade Organization. The agreement establishing AfCFTA was signed by leaders from 44 African countries at the African Union Summit in March 2018 in Kigali, Rwanda. Thus far, 35 of the 54 African countries have ratified the trade pact. AfCFTA will create a single market for goods and services, facilitate the movement of people, promote industrial development and sustainable and inclusive socioeconomic growth and help resolve the multiple membership issue in line with the African Union’s Agenda 2063.

As the world’s largest single market, AfCFTA is estimated to have a market of 1.2 billion people with a combined GDP of $2.5 trillion. It is expected to boost intra-Africa trade, particularly the intra-Africa exports, which currently stand at 16.6 percent, compared with intra-EU trade figures of 68.1 percent in Europe, 59.4 percent in Asia and 55 percent in America as per the UN Conference on Trade and Development’s Economic Development in Africa Report 2019.

Income gains

The questions often asked are how this single continental market is important to African economies and what benefits will the women and youth harvest from AfCFTA.

In addition, does AfCFTA offer an opportunity to expand China-Africa relations?

In looking for the answers, it is important to understand that this single continental market is expected to be the critical tool that will offer a perfect response to Africa’s development challenges. According to the World Bank, the successful implementation of AfCFTA has the potential of lifting nearly 30 million Africans out of extreme poverty and raising the incomes of 68 million people who live below the line of $5.5 per day—the majority of whom are women and youth.

Some of the expected benefits of this single continental market will be to boost intra-Africa trade, promote industrialization, create job opportunities and improve the competitiveness of the African industries and their products in the international markets. The UN Economic Commission for Africa indicates that AfCFTA has the potential to increase intra-Africa trade by over 50 percent while the World Bank asserts that the pact will cut red tape and simplify customs procedures that would drive potential income gains.

AfCFTA is an effective avenue for dealing with the problem of youth and women unemployment in Africa through job creation. According to the World Bank, youth unemployment in Africa stands at 60 percent of the continent’s total joblessness. Young women are more affected by unemployment than young men. The opening up of the free trade area offers youth and women greater opportunity to be principal players in regional value chains. With the digital economy and e-commerce growing at a rapid rate, the youth and women will benefit immensely by leveraging on Africa’s digital infrastructure to maximize existing opportunities through AfCFTA.

Capital constraint, which has been a major challenge for youth and women-led startups and enterprises, may become an issue of the past if new innovative solutions of providing credit for e-commerce, including fintech solutions, can be adopted by the youth within AfCFTA. This can be realized through cross-border crowdfunding initiatives to fund youth and women-led e-commerce. Africa, unlike Europe, Asia and the Americas, has been lagging behind in nurturing youth talent. The successful implementation of this single market, which allows for free movement of persons, offers youth and women an opportunity to explore their potential fully and ply their trade anywhere on the continent.

Additionally, AfCFTA places emphasis on opportunities for women entrepreneurs, focusing on women in informal cross-border trade, gender and regional value chain analysis and affirmative action/preferential public procurement. This is documented in a report by UN Women, Opportunities for Women Entrepreneurs in the Context of the AfCFTA.

New opportunities

The growth of Sino-African relations provides the perfect impetus to kick-start African free trade. China’s partnership with African countries through the Belt and Road Initiative will deepen the relations and increase investment in infrastructure connectivity, trade facilitation and industrial promotion. Chinese investment in railways, roads, airports, ports, power stations and telecommunications will act as an enabler for intra-Africa trade. At the Beijing Summit of the Forum on China-Africa Cooperation held in 2018, Chinese President Xi Jinping pledged $60 billion toward infrastructure development in Africa.

There is also need for cooperation in manufacturing. China remains the “world’s factory” because of low labor costs, a technically skilled workforce, technical know-how and good infrastructure. Chinese products remain competitive in international markets and it will be beneficial for African countries to learn from the Chinese experience on manufacturing for export through value addition to grow the intra-Africa trade.

So far, China has signed agreements with 39 African countries to establish cooperation in building industrial capacity to promote local manufacturing of goods and enhance economic diversification. In addition, China signed an FTA with Mauritius (first ever with an African country), which will facilitate intra-Africa trade by positioning the African island nation strategically within AfCFTA. The agreement will assist in building up the 21st-Century Maritime Silk Road that aims to connect and develop infrastructure connecting East Africa, Asia and Indian Ocean countries, thus benefiting AfCFTA.

Apart from trade, there is also an urgent need for cooperation in technological transfer. Africa is endowed with adequate natural resources, and the implementation of AfCFTA offers the continent an opportunity to learn from China the application of appropriate technology in order to foster economic growth and development.

The writer is an economist, consultant and regional commentator on trade and investment based in Nairobi, Kenya.