Why the Covid-19 crisis proves the power and promise of the AfCFTA
The African Continental Free Trade Agreement was ratified last year but this year’s onset of the covid-19 pandemic forced African Union leaders to postpone its taking effect. The disease has had a serious impact on the continent, having claimed prominent leaders and infecting 578,207 in confirmed cases as of July 12th according to the Africa CDC, Johns Hopkins and government data. The economic fallout has probably been even more severe; lockdowns and supply chain seizures to import dependent African nations have severely impacted incomes and livelihoods for Africa’s largely informal workforce. However, the crisis has focused the minds of African policy makers around the necessity to create a more resilient healthcare system and the need to manufacture more of its critical needs at home. This renewed focus on productive self sufficiency can be assisted significantly by implementing the AfCFTA.
Covid-19 has provided the previously missing urgency amongst leaders around developing the sort of coherent industrial policy necessary to get any benefit from a continental free trade zone. Africa manufactures very little at the moment and many critics rightly questioned the wisdom of liberalizing internal borders without having African produced goods to sell across them. There is still great risk that creating this internal free market gets exploited by existing low-cost producers in Asia and Europe, limiting the job-creating potential its architects intend. But the recent response to the novel coronavirus may offer a blueprint on how to ensure the realization of the AfCFTA dream.
The vast market created by AfCFTA will provide an immediate boon to nascent plans being guided by the African CDC, NEPAD and others to produce various critical healthcare items such as pharmaceutical compounds, PPE and ventilators in countries such as Nigeria, South Africa and Kenya. The sudden demand for these life saving products and the enormous logistical challenges African nations suffered attempting to secure supplies from East Asia and Western Europe has left a lasting impression. During the initial frenzy of procurement countries around the globe raced to stockpile PPE and ventilators, in many cases shutting individual African nations who lacked the financial firepower and sufficient order quantities to elbow into global queues for scarce supplies at mainly Chinese manufacturers.
In response, the African Union launched a pooled procurement online market place to aggregate the orders of African nations. Now leaders and businessmen are going a step further – setting up supply for this local demand on African soil. A range of textile firms, diaper manufacturers and equipment makers are adding additional lines and re-purposing existing capacity to produce PPE, medical equipment and ventilators. A surfeit of concessional finance, international donors and grants from African philanthropists such as Aliko Dangote and Mike Adenuga has bolstered the purchasing power of African health ministries, jump starting demand for new output.
AfCFTA’s implementation can help sustain the opportunity for new production capacity and demonstrate the power of the shared market to would-be entrepreneurs in other sectors. The key deciding factor for the success of the continental free zone will be Africa’s indigenous business community rising to the occasion – manufacturing for the needs of Africa’s 1.2 billion consumers. To encourage those entrepreneurs and investors African governments and supranational indigenous bodies like the African Union should build on the lessons they have learned in rapidly coordinating to intervene in the covid-19 response. The same tools and institutional structures being pulled together to rapidly promote the production of healthcare items and vaccine delivery should immediately be expanded and adapted to FMCG, automotive assembly, apparel and other heavily consumed items across the African continent. It is only with this emphasis on local production that Africa will enjoy the dividends of the AfCFTA: jobs for its young, growing population and meaningful wealth creation for its business community and their investors.
Franklin Olakunle Amoo is the managing partner of Baylis Emerging Markets, an investment firm focused on African industry and manufacturing. Baylis is a founding partner of the Africa Pandemic Response Alliance, an African led initiative coordinating the response to the covid-19 pandemic on the continent
