On March 21, 2018, the African continent launched one of its star projects: the largest in the world with 1.3 billion inhabitants, laying the foundations for a greater economic unity that in the future could also be political. Almost seven years later, 54 of the 55 countries have signed the agreement, all except Eritrea, and the first tariff-free internal transactions are a reality, although the challenges facing the project are enormous. Fragmentation, mistrust between States, inadequate infrastructure and a great diversity of currencies hamper, to a greater or lesser extent, the creation of this common market.
The initiative arises within the country and the definitive political impetus comes from Rwandan President Paul Kagame, who convinces his peers that the time has come to move towards greater cohesion. African trade is marked by a large export of raw materials abroad (China, EU, United States and Russia, above all) and by the import of energy, machinery and products. And intra-African trade represents only 16% of the continent’s exchanges. The objective is to knock down internal tariffs to raise this percentage to 38% in 2030, lift 30 million people out of poverty, increase continental GDP by 7% in 2035 and generate industrialization.
“The process is moving slowly, but it is normal for it to be that way,” says Ainhoa Marín, doctor in Economic Sciences and head of economic projects at the Foundation. “The European Union began as a common market in 1957 and we had to wait until 1992, 35 years later, for it to be established as a free trade area. In the case of Africa, the political will is strong and the institutional apparatus has been set up quickly, but the reality of trade prevails, there are many countries and progress will be made at different speeds,” he assures. In these seven years, 80% of the signatory countries have already established lists of products that they agree to import exempt from customs fees from other African nations, which led the AU to launch the operational phase of the ZLEC as a tested this year in a dozen countries, among which are heavyweights of the continental economy such as Egypt, Nigeria or South Africa.
“Today we are witnessing a historic moment in the economic destiny of Africa. We celebrate the beginning of preferential trade within the framework of the continental free trade area. We are going to witness the first shipment of products from South Africa to other AfCFTA countries, which shows that it is now a reality.” With these words, spoken on January 31 from the port of eThekwini, South African President Cyril Ramaphosa kicked off the first intra-African exchanges, “carrying forward the dream of an increasingly bigger and stronger Africa.” , he assured.
An important step
In an Africa greatly affected by the external debt crisis that spread after the covid-19 pandemic and subjected to the commercial turbulence of the Ukrainian war, the bet is to overcome internal differences and create a solid economic bloc with a single voice. The recent inclusion of the AU in the G-20 is a step in this direction.
The first and stammering beginnings of customs harmonization are, however, facing forces pulling in the opposite direction. The recent disconnection of Mali, Niger and Burkina Faso from the Economic Community of West African States (Cedeao), conflicts such as Sudan or Somalia and the border closures between neighbors, such as Rwanda and Burundi or Morocco and Algeria, distance the dream of the unit. At the same time, countries with little economic weight fear an invasion of goods at lower prices from more solid economies, which has generated a climate of mistrust that the small print of the ZLEC must overcome.
“The main difficulties come from the lack of adequate transport infrastructure, the elimination of non-tariff barriers and political problems and internal conflicts,” adds Marín, who cites Cedeao as an example. “For a long time this regional economic bloc was presented as a model of success, with free mobility of people and even a common currency project, the eco. However, this organization is going through a serious crisis due to the announced departure of Mali, Niger and Burkina Faso. Progress is probably made more quickly in the south and east of the continent,” he comments.
The most pessimistic analyzes also claim that the absence of a common currency and the need to resort to reference currencies such as the dollar or the euro is an obstacle, but Marín does not consider it to be the most urgent problem. “I would put him last. “You can create a common market without a single currency, Europe did it for a while,” he adds. Currently, 80% of payments between African countries go through external banking systems, especially European and American. To alleviate this anomaly, the AU launched the Pan-African Payments and Settlement System (PAPSS), which allows the real-time payment and conversion of local currencies without foreign intermediaries, allowing savings of about 4,700 million euros a year.
The great challenge is industrialization, that at least certain African countries are capable of refining hydrocarbons, producing electric cars, carrying out the transformation of their agricultural and livestock products or manufacturing clothing. It is already happening, with Nigeria, South Africa or Morocco as spearheads. But also that they are capable of protecting the weakest countries and productive sectors. “Compensation mechanisms must be established, perhaps this is one of the aspects in which the AfCFTA is most lame,” concludes Marín.
