THE United Nations Conference on Trade and Development (UNCTAD) says African economies could grow by three percent as a result of the African Continental Free Trade Area (AfCFTA) which came into effect in May 2019.
In a report titled the Economic Development in Africa 2019, UNCTAD says the economic growth will be possible once all tariffs are eliminated and rules of origin are simplified.
UNCTAD says the rules of origin, which are the criteria needed to determine the national source of a product, could be a game changer for Africa and enable the trade bloc to catalyse the continent’s regional integration by generating significant gains.
“The AfCFTA is a landmark achievement, in the context of the continent’s long and rich history, in fostering regional integration to unify the continent,” the UNCTAD says in the recently report.
“The African Continental Free Trade Area will lead to the creation of a single continental market of more than 1, 3 billion people, with a combined annual output of $2, 2 trillion. The transition phase to the Continental Free Trade Area alone could generate welfare gains of $16, 1 billion and boost intra-African trade by 33 percent.”
The report says rules of origin are a “passport” enabling goods to circulate duty-free within a free trade area if those goods qualify as originating within the area. They are therefore one of the cornerstones for boosting trade on the continent.
“Realising the full potential gains from the African Continental Free Trade Area will require a broad range of complementary policies, to address multiple challenges, designed to enhance an emerging trade–industrialisation nexus on the continent: from business and trade facilitation to infrastructure, from productive capacities to entrepreneurship policies.
“But, under the African Continental Free Trade Area, it is the rules of origin – establishing the nationality of products produced in Africa – that will determine whether preferential trade liberalisation can be a game changer for Africa’s industrialisation.
“How these rules are designed, enforced and verified will critically determine the size and distribution of the economic gains from the AfCFTA, and will shape the future regional value chains on the continent.
“How lenient, flexible, easy to use and understand and accessible rules of origin are will shape the net benefits to the African private sector under the AfCFTA. African countries should also consider the differing levels of productive capacities and competitiveness of African countries when enforcing rules of origin.”
UNCTAD Secretary General Mukhisa Kituyi, who presented the report added that there is need to build capacities of the relevant institutions like customs authorities ensure impartial, transparent and predictable implementation of agreed rules of origin. This should be complemented by leveraging new and emerging technologies to lower compliance costs for the private sector, the report said.
He said AfCFTA is Africa’s renewed opportunity to steer its economic relations away from a reliance on external donors, foreign creditors and excessive commodity dependence. This, he said, will usher in a new economic and political era focused on self-reliant cooperation, deeper integration and higher levels of intra- African trade.
“The African AfCFTA could boost African economies by harmonising trade liberalisation at the continental level, promote economic diversification and intra-African trade, and foster a more competitive manufacturing sector.
“The United Nations Conference on Trade and Development (UNCTAD), as the leading United Nations body on trade and development, has embarked on this historic initiative with African member states to support them in exploiting the potential gains of the African Continental Free Trade Area. I am certain that this report will prove to be a valuable guide to policymakers as we journey along the road towards AfCFTA and beyond,” Dr Kituyi said.