Business - Commentary
Africa Tries Free Trade By Alexander C.R. Hammond ECONOMIC NATIONALISM HAS PLAGUED AFRICA since decolonization. In 2021, that is set to change. On January 1, the long-awaited African Continental Free Trade Area (AfCFTA) came into effect. Aside from the economic benefits that the arrangement will bring to the continent, Africa's newfound support for free trade and liberalization marks a clear rejection of the socialist ideology that has tormented African politics for decades. As it stands, 36 of the 55 African Union (A.U.) nations, including the regional economic powerhouses of Nigeria, South Africa, and Egypt (which together make up a third of the continent's economy), have ratified the free trade area. Another 18 nations have indicated their support by signing the trade agreement and are expected to become full members soon. So strong is the appetite for free trade in Africa that Eritrea—often dubbed "Africa's Hermit Kingdom"—is the only nation on the continent that remains reluctant to support the agreement. Eritrea may eventually reconsider. Within 5–10 years, the AfCFTA will ensure that 90% of tariffs
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on goods traded between member states will be abolished. Within 13 years, 97% of all tariffs will be removed. By 2035, the World Bank has predicted, this enormous liberalization effort will boost Africa's gross domestic product by $450 billion, increase wages for both skilled and unskilled workers by 10%, and lift more than 30 million people out of extreme poverty, defined as living on less than $1.90 per day. According to the same estimates, by 2035, the AfCFTA will see more than 68 million people rise out of moderate poverty, defined as living on $1.90–$5.50 per day. The "countries with the highest initial poverty rates," the World Bank says, will see the "biggest improvements." The likely economic benefits of the AfCFTA are impressive. These rapid gains are ultimately a consequence of diverging from the economic nationalism that has kept much of the continent impoverished. Africa's turbulent relationship with socialism began in the late 1950s and early 1960s, when a plethora of newly independent states rejected the capitalist model. Many of the new leaders viewed see page 12
DAWN
www.africabusinessassociation.org
