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Lack of infrastructure hampering Africa’s free trade ambitions

2019-07-11  Edgar Brandt

Lack of infrastructure hampering Africa’s free trade ambitions

WINDHOEK – With 54 out of 55 African Union member states having signed the Africa Continental Free Trade Agreement (AfCFTA), the continent is on the verge of becoming the world’s largest free trade area which will merge the massive area into a single market of 1.2 billion people with a combined GDP of US$2.5 trillion (over N$35 trillion), according to the UN Economic Commission for Africa. However, local analysts have cautioned that the ambitious initiative is being hampered by issues such as non-tariff barriers, lack of financing and infrastructure problems. It has been estimated that that the Africa needs at least US$300 billion (approximately N$4,2 trillion) by 2020 to build quality infrastructure to facilitate the free trade agreement. 

“For continental trade to increase, substantial investment in infrastructure is required, not only in transport infrastructure, but in border infrastructure, in communication technologies so that business people can communicate easily across the continent, in financial infrastructure so that money can flow easily, in electricity infrastructure so that border posts can operate effectively 24 hours a day, etc. In addition, customs and other documentation should be unified to ease cross-border trade, as well as transport regulations such as axle loads, working hours of truck drivers etc,” commented Klaus Schade, a local economic analyst. 

Responding to questions from New Era, Schade added that trade across borders requires movement of people across borders, such as business persons, traders, truck drivers and so forth. 

“Namibia has taken the first step and embarked on visa on arrival, although the fee of N$1 000.00 appears to be at the upper end. Relaxing visa requirements and fees will support cross-border trade, investment and tourism and eventually deeper regional and continental integration,” Schade added. 

Schade noted that due to an enormous amount of work still to be done, it will take some time before more trade will take place between African countries and more products from across the continent will find their way onto Namibian shelves. He was however optimistic that continental integration will offer additional business opportunities in the medium to long-term, and could also increase competition on the domestic markets and provide consumers with a wider range of product choices.

Another local economist, Mally Likukela, pointed out that the signing of the AfCFTA is a welcome development for Namibia considering the envisaged developmental benefits. These include economic growth due to increased trade amongst African States which Likukela has welcomed; “This development comes at the right time where the continent is struggling with pursuing multiple and various policy initiatives and as such the signing provides an exceptional opportunity for Africa in general and Namibia in particular to harmonise its continental trade environment and boost intra-African trade as this will be critical for the success of the agreement.”  

However, Likukela cautioned that the free trade agreement currently lacks a clear strategy on how it will ensure a ‘win-win’ for all Africa’s diverse range of countries and especially for vulnerable groups. 
“Namibia falls amongst the vulnerable group due to its relatively small manufacturing base, heavy reliance on South Africa and its lack of independent monetary policy due to the Common Monetary Area agreement and membership to the world’s oldest custom union, Sacu. My worry is that no evidence of a comprehensive multi-stakeholder consultation having taken place exists. Such an exercise was required to help examine carefully the enabling factors and substantive topics related to implementation of AfCFTA,” Likukela stated.  

“At this moment I am not fully convinced that the country has examined this and positioned itself well enough to seize this opportunity and reap the maximum benefits from the AfCFTA. Amongst the issues that Namibia still need to flush-out and work on are mainly in-house competitive issues that will enable the country to have a seamless process integrating into the AfCFTA,” Likukela cautioned. 

He noted that issues such as labour laws need strengthening and harmonisation so they are seen not to be contra-free trade. Also, he called on innovations to enable the country to attract new investments and called for a focus on technology and bureaucratic issues such as red tape that usually frustrate the ease of doing business in Namibia.   

The AfCFTA, once fully implemented, will be a continent-wide free trade area for those states which have deposited instruments of ratification. While called a ‘Free Trade Area’, the agreement will be more akin to a comprehensive partnership agreement because disciplines will go beyond trade in goods to over services, investment, competition and intellectual property. 

The main objectives of the AfCFTA are to create a single continental market for goods and services, with free movement of business persons and investments, and thus pave the way for accelerating the establishment of a continental customs union. It will also expand intra-African trade through better harmonisation and coordination of trade liberalisation and facilitation.  

2019-07-11  Edgar Brandt

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