The AfCFTA Pledges to Grease the Wheels of Trade in Two Ways

If time is money, then Beitbridge must be a most expensive place. Late last year lorries carrying, among other things, cobalt from Congo, copper from Zambia and tea from Malawi snaked for miles as they waited to cross the Limpopo River into South Africa. Many were there for days. African politicians say they want to end such bottlenecks. The African Continental Free Trade Area (AfCFTA), so far ratified by 41 of Africa’s 55 countries, could boost the region’s economies by making it easier to trade among them. The first is by reducing tariffs, especially between countries in different regional blocs, such as the Southern African Development Community and the East African Community. This could boost intra-African trade by 15-25%, reckons the IMF. But double that effect would come from reducing “non-tariff barriers”, the grit that really gums up trade. The IMF reckons that if the quality of Africa’s infrastructure were brought up to the global average this would increase continental trade by 7%. It reckons that if the quality of Africa’s logistics rose to the global average, it would mean a boost of 12%. The gains are large because the cost of logistics in Africa is three to four times higher than the world average. Logistics firms, as well as the businesses with goods to move, hope that the long-mooted idea of “trade corridors” will come to fruition. These are a mix of hard and soft infrastructure linking countries. Corridors would allow a container sealed in Shanghai to reach Lagos or Mombasa, with its paperwork all approved for it to travel right on to, say, Niger or Uganda. The trade deal is meant to encourage such trade-easing efforts.

SOURCE: THE ECONOMIST