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‘Economic Orgasm’: AFCTA, the climax of Africa’s economic integration. Will it benefit Zimbabwe?

‘Economic Orgasm’: AfCFTA, the climax of Africa’s economic integration. Will it benefit Zimbabwe?

The African Continent Free Trade Area (AfCFTA) came into force as a commendable development that lays the foundation for more, building on existing efforts for regional integration. The great support of continental countries and leaders is worth it. At the same time, however, AfCFTA’s strong political support and enthusiasm for its rapid progress has led some to claim that its potential benefits have not been challenged, especially in terms of gains from intra-African trade. Most commentators seem unwilling to openly question a popular this voluminous Pan-African project, “A good thing, but …” is the gist of reactions all around the world and in Africa itself concerning the continent’s new intra-continental free trade agreement and what it is projected to bring in most African countries.

AfCFTA

AfCFTA is a continental agreement that aims to change the African economy by removing trade barriers between countries on the African continent and deepening integration through better infrastructure development, investment flows, and increased competition. AfCFTA will gradually eliminate tariffs on intra-African trade, making it easier for African companies to trade within the African continent and serve and benefit from the growing African market. The cooperation of customs authorities on product standards and regulations, as well as transit and trade facilitation will also facilitate the movement of goods across African borders.  In addition, the agreement attempts to cancel a century-old trade agreement in which African countries trade with countries outside the African continent more than with each other.

In this ancient system, Africa mainly exported raw materials and imported finished products, which in turn slowed the development of regional and continental value chains.   Therefore, in this sense, AfCFTA brought together the member states of the African Union, covering a market of more than one billion people, including a growing middle class, and a gross domestic product (GDP) of more than 3.4 billion. ) With the facilitation of trade, AfCFTA aim to create a single market for goods and services on the African continent.

As the agreement relies heavily on a simplified immigration system, AfCFTA  also focus on enhancing the flow of businessmen, which promote investment flows across African borders anticipated. AfCFTA also strengthen intra-African trade through better coordination and coordination of regional economic communities (RECs) trade liberalization and facilitation and tools.  Local companies are also projected to benefit from participating in the regional value chain, which enables them to focus on their competitive production processes and activities.

The flexibility of trade between African countries that AfCFTA intends to achieve will promote the establishment of regional value chains, in which inputs are obtained from different African countries to increase value before exporting abroad.   This will also open up access to technology and branding opportunities, while accelerating diversification and export growth. In most economies in the region, the focus is on completing the entire production process within the value chain internally, which brings challenges related to outsourcing some components from other countries in the region to make them more competitive.

Taking a closer glance to Zimbabwean situation, one of the overarching goals of the recently launched National Development Strategy (NDS 1) is “to rebalance the economy by increasing the contribution of value-added exports to total exports from 9% in 2020 to 20% in 2025.” The recovery of the Zimbabwe economy requires increased exports, especially exports of value-added goods and services as well as high increase of foreign direct investment.

Therefore, the expected impact of the African Continental Free Trade Area (AfCFTA) on the national economy cannot be overstated.  With the opening of the continental trade agreement, the larger economies have also provided export opportunities for local businesses, which should not be seen as a pure threat to local industries.  For example, Nigeria has a market for Zimbabwean products such as sugar, fish, malt, black tea, and peas.  There is also a market for building materials such as wooden furniture, doors and windows, indicating that local businesses can enter all African countries, regardless of size, as long as they work hard.

It is now vital that Zimbabwean companies seize the opportunity to increase the presence of their products in African countries. However on the other hand, from a more practical glance, are the projected benefits realizable? Historically, Africa has never been short of economic and policy documents. The African trade and investment policy landscape is littered with failed grand plans and ambitious policies that have not succeeded in bringing about much-needed trade.

 

The Organization of African Unity (OAU), which became the African Union (AU) in 2002, was formed in Addis Ababa in 1963 with great emphasis put on economic co-operation. There were claims that Africa should not depend on aid from the Global North, but develop through trade and investment. Despite this, nothing tangible has changed on the ground. Effective trade requires effective channels, institutions and systems. However, this is the major problem in Africa and Zimbabwe in particular. Taking for instance Zimbabwean road channels, the main road system generally follows the line of the then white settlement along the spine of the country, with two branches north to Victoria Fall, no major road constructions were made by the post-colonial regimes, and in matter of fact, that which has been left by the colonial rule has not been adequately maintained since the mid-1990s, and much of it has fallen into a state of disrepair. As with the road system, the rail network has also deteriorated even worse and no major efforts has been put to curb the railway deterioration. Thus with the dismal state of our road and railway channels, smooth flow of goods and services is a big challenge.

Intra-African trade comprises a higher share of manufactured goods, and meeting domestic demand for these can better position Zimbabwe in global value chains. For this, Zimbabwe must find answers to several questions including mainly those of production growth. Clearly, looking into Zimbabwean economic situation, increased production for exports cannot happen in a vacuum. AfCFTA, attempts to solve demand issues by creating a single African market, but there are reasons that Zimbabwe hasn’t been able to scale up production to match the consumption of its own citizens.  Productivity, or being able to produce more output with fewer resources, may be a harder nut to crack in Zimbabwe. Increased productivity has been recognised as a key driver of growth and trade visibility.

However, improving productivity requires more efficient allocation of factor endowments like land, labour and capital while leveraging appropriate technologies. Zimbabwe is major exporter of raw materials, production and manufacturing is quite low, this being attributed to many factors a story for another day. The five biggest exports from Zimbabwe are: nickel matte and oxide sinters; gold; unmanufactured tobacco; nickel ores and concentrates; and unset diamonds and those five represent more than seventy-five percent of all Zimbabwean exports by value. Little processed or manufactured products are being exported from Zimbabwe; there is no value addition of raw materials. Zimbabwe major imported goods are petroleum, medicaments, and motor vehicles, thus Zimbabwe’s comparative advantage lies within raw materials, this comes as a challenge to balance between exports and imports even within AfCFTA. Africa could become a beacon of multilateral cooperation in an increasingly divided world. Will the AfCFTA lay the foundation for Zimbabwe’s advancement? Or will it be a precursor to the premature unravelling struggling economy? We’ll soon find out.

By Mahaka Abel Simbarashe 

MSc International Trade and Diplomacy (Student)

University of Zimbabwe

+263 775 764 869/+263 719 564 328 [email protected]

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