African Free-trade Zone Still Faces Hurdles
Egypt sole MENA country so far to ratify agreement touted as ‘game changer,’ but deal could take years to implement
Leaders in Africa are heralding the continent’s newest economic bloc as the fulfillment of a dream, but experts caution that there is a long road ahead before any real benefits can be reaped from the African Continental Free Trade Area (AfCFTA).
Launched on August 30 at the African Union (AU) summit in Niger, AfCFTA joins a list of other free-trade agreements on the continent – although the others function with questionable success, according to Alexandre Kateb, an economist and adjunct professor at the Paris Institute of Political Studies who specializes in emerging markets.
Those deals include the 1994 East African COMESA, which brings together 21 countries, including Egypt, Libya and, most recently in March, Tunisia. Following a deadlock in the 1989 Maghreb Union agreement, Kateb says, Morocco has requested membership in another bloc, the West African ECOWAS.
“It is very difficult to say at this moment [what the implications of AfCFTA] will be, but what is quite sure is that this free-trade agreement will push [the African countries that are part of the so-called MENA, or Middle East/North Africa, region] to further develop their relations with African countries,” he told The Media Line.
“There are many challenges,” he continued. “This agreement is still, for the time being, an agreement on paper. What is most important will be to see how this is translated on the ground. The African pan-African institutions… are often long on agreements and short on implementation.”
Putting the new agreement in motion will extend over years “if not decades,” he said, because the most urgent issues are at the regional level rather than the continental level, though once implemented, it could enhance African trade for Egypt.
Theoretically, AfCFTA has the potential of uniting Africa’s 1.2 billion people to create the world’s largest economic bloc, with an estimated value of $3.2 trillion. In an interview with South African TV, President Cyril Ramaphosa lauded it as an “enabler and game changer” that would “catapult the economy” of numerous African nations.
“When you have Nigeria and you have Egypt and you have got South Africa, then you have the powerhouses of the continent, and now those will get the continent to move forward,” Ramaphosa said.
At the AU summit’s opening, union chairman and Egyptian President Abdel Fattah al-Sisi acknowledged that the real test of the agreement would be its success in achieving the economic growth that “will turn our people’s dream of welfare and quality of life into a reality.”
Sisi told delegates: “The eyes of the world are turned toward Africa.”
According to 2017 data from the International Monetary Fund, Egypt, Algeria and Morocco are among the top six economies of Africa, with GDPs of $237.1 billion, $178.3 billion and $109.8 billion, respectively.
Sarah Yerkes, a fellow at the Carnegie Endowment for International Peace (CEIP) specializing in Tunisia and North Africa, notes that the North African countries have long been seeking ways to better integrate economically with the rest of the continent.
“Both Tunisia and Morocco, in particular, see themselves as the gateways to Africa for European companies and will likely take advantage of this new agreement to improve their positions as hubs for private-sector investment within the continent,” she told The Media Line in an email. “North African countries have a lot of products to trade, from agricultural products such as olive oil, to textiles.”
Still, the Paris Institute’s Kateb says a lack of coordination and consistent strategy among the North African countries could hinder any economic advancement of AfCFTA in the MENA region.
“This free-trade agreement can, maybe, push them to make some additional reforms, especially Algeria, which is a laggard in term of reforms and economics,” he said, noting that the country has not yet joined the World Trade Organization, which deals with global rules and guidelines.
Algeria is riddled with a stream of red tape that hinders progress in its customs and logistical regulations, he said, calling it “a long way from being a trade-able nation which will benefit from any trade agreement. Algeria’s economy,” he added, “is very much turned inward and does not have the capability to export any competitive product other than oil and gas.”
For MENA countries, trade with Africa is fraction of what it is with other nations, he added, and even the trade among themselves is not very developed. As it is, he said, existing Arab free-trade areas were not being taken advantage of.
“Today, there are many technical hurdles – non-tariff barriers [that need] further work at this level, and then maybe [they can begin] on the African level,” Kateb added.
On the other hand, he said, both Morocco and Tunisia are banking on using new marine ports as hubs for African trade. The second phase of the Moroccan port in Tangier was launched in early July and is the first in Africa with container terminals. The country already exports cars to the rest of the continent by sea since proper overland infrastructure is non-existent, he said.
“There are [military] conflicts, and the roads are not very good when you go down the continent, starting from Mauritania or Senegal,” he said. “What is missing from this agreement so far [and] what people really need is better infrastructure.”
The Tunisian port project will be connected to other African countries by an existing road that goes through the Sahara and connects to China’s new Silk Road global infrastructure project so it could be a conduit to Asia, he said.
“If this project is really completed, it could be [promising]. The problem is that Tunisia does not have money for that. It is already in debt and needs investors to come either from China or from the oil kingdoms of the Middle East,” he said.
“It could be a positive boost for Tunisia’s economy and the whole region could push other countries to come together work closer,” Kateb added. “Politically, it could bring more stability to the region. Libya would use [the] Tunisian port as well.”
However, said CEIP’s Yerkes, continuing local conflicts – in Libya as well as that between Morocco and Algeria over the Western Sahara – remain obstacles to economic development in the MENA area. In addition, difficult border regimes and the lack of infrastructure there are problematic.
In addition, she said, the Sahrawi Arab Democratic Republic (SADR) – a partially-recognized, self-declared state claiming control over the disputed territory of the western Sahara presently occupied by Morocco – is a signatory and has ratified the new AfCFTA agreement, which will undoubtedly cause a headache for Morocco, which does not recognize the SADR as an independent entity.
“It is not likely that this agreement will do much to improve trade among the North African states, but rather should facilitate increased trade between individual North African states and sub-Saharan Africa,” she said. “Additionally, Algeria’s staunch protectionist stance… will be a major impediment toward Algeria making much progress under this agreement.”
Rampant corruption in much of North Africa and its complex bureaucratic structures will also be challenging to overcome, she added.
“Simply removing tariffs,” she said, “will not alleviate anywhere close to all of the challenges facing the economies of the region.”