African leaders sign free trade agreement

By DAILY NEWS Reporter and Agencies

AFRICAN heads of state signed the African Continental Free Trade Area (Af- CFTA) agreement in Kigali, Rwanda, yesterday to establish a continental free trade area that will allow Africans to trade and move freely on the continent.

This is the biggest free trade agreement since the establishment of the World Trade Organisation (WTO). Forty Four 44 countries signed the historic AfCFTA 2018 deal, 43 endorsed the Kigali Declaration that spells out renewed commitment and timelines toward a prosperous continent, while 27 signed the protocol on free movement of persons.
Prime Minister Kassim Majaliwa represented President John Magufuli at the summit to endorse creation of the free trade area, which is aimed at providing a single continental market for goods and services, with free movement of business people and thus paving the way for a bigger market for products.
The agreement is touted by the African Union (AU) as encompassing a market of 1.2 billion people and a gross domestic product of $2.5 trillion. It is hoped that it will encourage Africa's trade to diversify away from its traditional commodity exports outside of the continent, the volatile prices of which have hurt the economies of many countries. "
Less than 20 per cent of Africa's trade is internal," Rwandan President Paul Kagame, also currently Chairperson of the AU, said in a speech on Tuesday. "Increasing intra-African trade, however, does not mean doing less business with the rest of the world."
But, the deal had its critics. It was announced over the weekend that Nigerian President Muhammadu Buhari would not be attending the summit, despite his federal cabinet last week approving the deal. "
This is to allow more time for input from Nigerian stakeholders," said an official statement from the foreign ministry. The agreement is opposed by the Nigeria Labour Congress, an umbrella organisation for trade unions in the country. "
Given the size of its economy, population and given its political clout, Nigeria's stance towards the African Continental Free Trade Area is key," Imad Mesdoua, senior consultant for Africa at Control Risks, a global risk consultancy with offices in Lagos, said.
Nigeria is the continent's most populous nation and considered by some metrics to be sub-Saharan Africa's largest economy. "There is a general sentiment among (labour unions and industry bodies) that Nigeria's export capacity in non-oil sectors isn't sufficiently robust yet to expose itself to external competition," Mesdoua said.
President of Uganda, Yoweri Museveni, also called off his visit at the last minute, although it remains unclear as to why. Africa's population is expected to reach 2.5 billion by 2050, according to the AU.
By this time it will account for 26 per cent of the world's working age population. Talks for the African Continental Free Trade Area began in June 2015. According to a study published by the United Nations last month, the deal will lead to long-term welfare gains of approximately $16.1 billion, after a calculated $4.1 billion in tariff revenue losses.
But, the report did warn that benefits and costs might not be distributed evenly across the African continent. In principle, a free trade area across Africa "makes perfect economic sense," Ben Payton, head of Africa at risk consultancy Verisk Maplecroft, told CNBC via email. "
The biggest risk is that African countries would be unable to effectively enforce external customs controls. For example, this would mean cheap Chinese goods that are imported into Ghana could eventually cross various African borders without further controls and make it into Nigeria. This problem already exists, but a free trade area would potentially make it worse."