Africa Embraces the Promise of Free Trade
Developing regional value chains (RVCs) is essential for fostering intra-African trade and transforming Africa’s economy. By leveraging existing competitive advantages of neighboring African countries, RVCs have the potential to reduce the continent’s dependence on commodity exports and diversify economic output. RVCs facilitate economies of scale and attract investment. This in turn promotes competition, more innovation, and finally higher productivity. To achieve the CFTA’s ultimate goal of changing Africa’s economic structure, African workers must climb-up the value chain “from lower to higher productivity sectors” to add more value to each product and service they produce or render. Manufacturing goods and agri-foods account for the majority of intra-African trade, which offers RVCs room to grow across the continent. Strong RVCs would help African regions and companies to not only take part in (i.e. export commodities), but more importantly contribute significant value to global value chains (GVCs). Meaningful participation in GVCs will bring cutting-edge knowledge and technology, and, in turn, higher productivity to African regions and companies. A more productive private sector will stimulate economic growth and increase household income. As explained above, the CFTA’s aim to reduce tariff and non-tariff barriers is vital to allow RVCs and GVCs to develop.
To make the CFTA a reality, the forty-four signatory countries must first follow through on their commitment to ratify the agreement. The Tripartite Free Trade Area (TFTA), set-up to combine three of the continent’s RECs, offers a cautionary tale. Launched with much fanfare in 2015, only two countries have ratified the TFTA thus far. Fifteen countries must ratify the CFTA for it to enter into force. Finally, to facilitate Africa’s economic transformation, the CFTA’s signatories must assuage fears in Nigeria and South Africa to convince the continent’s two largest economies to join the agreement.