KIGALI: Forty-four African countries have signed an agreement establishing a free trade area seen as vital to the continent’s economic development, the head of the African Union said on Wednesday.
The creation of a free trade area, billed as the world’s largest in terms of participating countries, comes after two years of negotiations and is one of the AU’s flagship projects for greater African integration.
A separate agreement saw 27 countries agree to the free movement of people across their borders, allowing nationals from other signatory nations to stay in their countries for up to 90 days.
“We have come here to fulfil the aspiration of our peoples for integration and unity,” said Moussa Faki Mahamat, chairman of the AU commission.
“The agreement establishing the CFTA (African Continental Free Trade Area) was signed by 44 countries.”
The deal will still have to be ratified at a national level and is only due to come into force in 180 days.
However, Africa’s largest economies, Nigeria and South Africa, did not sign the agreement.
Nigeria’s President Muhammadu Buhari pulled out saying he needed more time for consultations at home following objections from business leaders and unions.
South Africa’s President Cyril Ramaphosa hailed the agreement saying it would “catapult African countries and companies to much higher levels of growth” but that he would only sign it once it was ratified by his country’s parliament.
“Some countries have reservations and have not finalised their national consultations. But we shall have another summit in Mauritania in July where we expect countries with reservations to also sign,” said Albert Muchanga, the AU Commissioner for Trade and Industry.
However economic powerhouses Kenya, Morocco, Egypt, Ethiopia, and Algeria did sign the deal.
If all 55 African Union members eventually sign up, it will create a bloc with a cumulative GDP of US$2.5 trillion (RM9.8 trillion) and cover a market of 1.2 billion people.
Currently, African countries only do about 16% of their business with each other, a relatively small amount of intra-regional trade activity when compared to Latin America, Asia, North America and Europe.
Furthermore, with average tariffs of 6.1%, businesses currently pay higher tariffs when they export within Africa than when they export outside it, according to the AU.
“If we remove customs and duties by 2022, the level of intra-African trade will increase by 60%, which is very, very significant,” Muchanga told AFP in an interview before the summit.
Proponents of the deal argue that African economies on their own are too small to support economic diversification and industrialisation on their own and will benefit from having a unified platform to negotiate trade deals with wealthier nations.
The “CFTA will make Africa one of the largest economies in the world and enhance its capacity to interact on equal terms with other international economic blocs,” said Faki in a speech before the signing ceremony.
“The world is changing, and changing at a great speed. International competition is fierce. It leaves no room for the weak.”
However, critics highlight a dearth of roads and other infrastructure linking different African nations, as well as the fact that many countries do not manufacture goods their neighbours may want to import, as challenges to the deal.
Sola Afolabi, a Nigeria-based international trade consultant, told AFP the fact already-existing regional trade blocs were not working, should be a red flag.
“If there is no reward for compliance and there is no punishment for non-compliance, then it is going to be a very nice agreement without any teeth or any legs,” he said.
Faki acknowledged that Africans “have seen so many proclamations remain a dead letter, so many commitments without practical execution that they have come to doubt the strength of our commitment.”
He urged for a break in this trend, calling for a deal that “must confound those who, outside Africa, continue to think – with barely-concealed condescension – that our decisions will never materialise.”