Chiza Charles Chiumya is the acting director of Industry, Minerals, Entrepreneurship and Tourism Directorate at the department of Economic Development, Trade, Tourism, Industry, and Minerals in the African Union Commission (AUC).
At a time when globalization is losing ground and nationalism is recapturing economic policies around the world, the AU committed to defy the odds, operationalizing the AfCFTA on January 1, 2021. Yet, none of the member states who opted to integrate their economies have started transacting under the continental trade umbrella so far.
Nonetheless, the Russia-Ukraine war, followed by a global economic turbulence and hyper inflated prices for commodities imported to Africa, revitalized the critical importance of AfCFTA. Charles, who underlines that the AfCFTA is not only the venue for Africa’s shared industrialization, but also a response to Africa’s unfair representation in the global arena. The Reporter’s Ashenafi Endale was granted the opportunity to sit with Charles. Excerpts:
The Reporter: It has been a year since the AfCFTA was operationalized. How many countries are transacting under the trade umbrella and how do you evaluate the progress of the integration activities so far?
So far, the major activities have been limited at domesticating the agreement itself. As such, no major transaction has been recorded yet. Countries are still busy at domesticating the agreement. That means they are trying to make sure all the documents required to move goods and services across the border and the AfCFTA, are put in place.
There are also other elements, negotiations to be finalized such as rules of origins for some of the goods. That has to be finalized yet. There are also tariff offers, which is still ongoing. In some areas for which tariff offers are finalized, trade could be started
I heard West African countries; particularly Nigeria, Guinea and South Africa are already trading under the AfCFTA?
They are still preparing and domesticating the agreements.
Is the delay attributable to the COVID-19 pandemic or other factors like the lack of political commitments form member states, and a weak private sector interest?
I think there are number of factors working together to affect the progress. Obviously COVID-19 badly hit the continent for the past three years. This moved focus to a more survival mode for countries, which has immensely contributed to the delay.
In terms of readiness, there is a lot to be done yet. It is the private sector that has to activate the AfCFTA. We have yet to see an organized private sector that is able to take advantage of the agreement. What that means is the AfCFTA is a potential, an area that has to be worked on. So we have to make sure our private sector is prepared, and supported to be able to produce the goods and services for this big market.
Some countries like Ethiopia did not offer the tariff free goods and did not start negotiations still. Countries relying on import are also worried of the customs revenue loss due to the AfCFTA. Is there a deadline or even a punishment for such countries to operationalize the agreement they ratified?
Let me correct you there, Ethiopia has been effectively participating in the negotiations of this agreement. The fact is, Ethiopia probably is late to submit the tariff offer, but does not mean they have not been negotiating.
I am sure Ethiopia has been taking time to consult on that widely, among its major stakeholders, especially the private sector. Whatever they are going to offer is going to be meaningful not only for Africa but also specifically for the Ethiopian private sector. So that could explain the delay you are talking about.
Ethiopia is effectively participating in the process starting from the beginning. They are one of the states that signed and ratified the agreement early. That is the commitment of Ethiopia.
Yes, I know there are worries about revenues and that is not only in Ethiopia. The analysis shows that everyone is going to benefit from the AfCFTA. But there are resources available for countries that are going to suffer under the agreement. With the support of Afrexim Bank, this instrument is put in place so that countries are not hindered from participating in the AfCFTA.
How is the banks compensation fund going to work?
The instrument is still under development and not yet finalized. Countries that show there is a need for such type of assistance would benefit. It will have several windows and one of these assistance package windows is to apply for an adjustment.
The other is a compensation package that can be linked to revenue loss. The AfCFTA is working day and night to make sure this potential is usable for the continent.
What would the impact be on countries that are late to operationalize the agreement?
The major impact for those that might come late would be a catch-up job. That will probably be a challenge. As of now, all the countries are working on domesticating the agreement 100 percent. Domestication can be done as quickly as possible. That is what countries should do to benefit the most from the agreement.
Following Brexit and COVID-19 emergency activities, most countries are prioritizing nationalism and protectionism. Do you think African states’ political commitment to the AfCFTA and regional integration aspirations is falling behind?
If there is an agreement that received more than 100 percent commitment from political leaders in Africa, has been the AfCFTA. And their commitment did not waver. From the start to now, the political leadership in Africa is very committed, which is commendable.
Yes, a lot of nationalism has been growing in the past five years in the global economy. This ranges from US activities, to Brexit and other protectionism policies.
But Africa has been sending a clear message that nationalism is not the way to go. For Africa, the best way is to stand together as a continent. There is an advantage in coming together, than to go alone.
We talk about the AfCFTA being a market of 1.3 billion people, and a GDP of USD three trillion. That is a lot. I do not think dividing that is the way Africa wants to go. The encouraging thing is the leadership has the commitment.
The AU is undertaking a reform program, among which is for the AU to narrow its focus on political, peace and security areas. Other sectors including the economy should be outside the AU, under an independent continental institution. Do you think the AfCFTA and continental economic integration would perform better outside the AU?
When we talk about the reform, we have a blueprint, which is Agenda2063. The basic aim of the reform is to make sure the AUC is able to deliver on that agenda. Agenda 2063 is basically an economic transformation agenda. So what are we transforming?
The AU’s agenda goes beyond politics, peace and security. We are transforming the economy. As of now, there is no way we are going to leave the economic part of it and transform the politics alone.
At the heart of Africa’s problems and challenges, are economic challenges. So both politics and economy have to enforce each other. That is the direction the continent is taking.
Which countries do you think have an advantage to benefit from the AfCFTA?
Morocco, Nigeria, Egypt, Kenya and South Africa are comparatively better positioned. They have comparatively better industrial base and production capacity. Small economies like Ethiopia have also competitive advantages in a number of sectors like leather, textile, coffee and other items. You cannot find these items anywhere in Africa.
How do you evaluate the capacity of the private sector, in actively participating in AfCFTA and create jobs, realize cross border value addition and catalyze continental economic growth?
If you ask the African private sector what the major challenges of doing business are, to trade across the continent, they tell you two major bottlenecks.
The first is the size of African markets is too small. The second is the transactional cost of trading across African countries. But now, we are seeing fast growing African markets that the private sector can utilize. Various institutions are also pooling efforts and channeling investments towards infrastructure integration.
The private sectors are no more limited to their respective domestic market. If there is an Ethiopian business, Africa is its domestic market.
However, the AfCFTA belongs to an organized private sector. If the private sector in each country is not organized, it is difficult to utilize the potentials of the AfCFTA. It would not be easy for fragmented businesses to supply to the continental market. There is a lot to be done to ready the private sector.
The AfCFTA is just a document. We need to give life to that. And that can be done by capacitating and empowering the private sector. National institutions must work on creating awareness and sensitization of AfCFTA benefits. There has been small works done to this end.
Trade financing also needs to take off in Africa. There must be more financing for trade across Africa. Continental trade information is also critical for the private sectors decision making process. Above all, maximizing production across Africa is critical, and finally, we have to make sure the products cross borders seamlessly and without challenges.