Why AfCTA isn’t going to solve all of Africa’s trade woes
The Africa Continental Free Trade Area (AfCTA) aims to remove existing trade barriers between African nations, allowing the free movement of goods and services between member nations. The idea is to bolster trade between African nations and reduce their dependency on importing from countries outside of the continent.
Most governments are behind AfCTA and representatives can offer a comprehensive list of ways it’s going to improve African economies.
For the most part, a free trade agreement is a key economic step for Africa standing on its own two feet. However, there are a number of issues that AfCTA is only going to emphasise and the positive impact of a free trade agreement could be jeopardised unless these concerns are addressed.
Africa’s rising debt levels
One of the biggest issues facing African economies right now is rising debt levels. Rwanda, Ethiopia and Uganda are some of the worst cases in East Africa, where Uganda’s debt has nearly trebled in the past three years alone – to more than 50 percent of the country’s GDP.
Nearly two-thirds of borrowing over this period has been external, which means soaring debts puts countries like Uganda at risk of defaulting. With the money pouring into Africa from overseas nations, often with steep interest rates, the continent faces a serious debt problem that needs to be addressed.
African’s infrastructure issues
Much of the investment coming into Africa revolves around infrastructure yet countries are far from having the transport networks required to make the most of a free trade agreement. Having market access to member nations is great but this doesn’t in scenarios where goods or services can’t be delivered.
The obvious answer for African nations will be to develop infrastructure as quickly as possible but this comes with the threat of increasing debt significantly further over the early years of AfCTA and this is a risk that can’t be underestimated.
One issue getting nowhere near enough attention in AfCTA discussions is the potential impact on Africa’s environment. With borders open for business, the strain on Africa’s natural resources is likely to multiply and countries are already struggling to sustain the current levels of processing oil, gold, agricultural produce and various other natural resources.
Aside from the impact on surrounding environments, there’s also the question of supply. Is Africa capable of producing enough raw materials for its own needs before exporting to other countries? Governments need to make sure the correct policies are in place before any trade agreement comes into effect to ensure Africa actually benefits.
Featured image: By Irene Scott/AusAID, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=32167593