Africa is home to 1.5 billion people, and this number represents about 18.6% of the global population. This makes the black continent the second most populated land mass globally.
The continent is endowed with natural resources, ranging from gold to silver, copper, uranium, petroleum, iron ore, limestone among others.
The abundance of natural resources, combined with a vast and growing population, should logically position Africa as a formidable trading powerhouse and a significant driver of global commerce.
Furthermore, this advantageous blend of resources and human capital should be catalyzing rapid development and economic growth across the continent.
On the contrary, Africa remains one of the poorest continents globally, despite boasting an immense wealth of mineral resources.
Every year, the continent receives billions of dollars in development aid from the developed world, especially from Europe and North America.
But why has so much aid fallen short of delivering the economic transformation seen elsewhere? Is it too much, or never sufficient? Has it helped or hindered? Can it be useful and productive, or should it be stopped?
The Executive Director of the National Planning Authority (NPA), Dr Joseph Muvawala says one thing is for sure; aid can create dependency thereby undermining initiatives and self-sufficiency.
He says Africa needs trade, not aid.
According to a March 2024 report on the Assessment of progress on regional integration in Africa by the Economic Commission for Africa (ECA), the African share of global trade remained at less than 3%, driven largely by merchandise trade.
In January 2021, the African Continental Free Trade Agreement (AfCFTA), a single market for goods and services on the African continent came into force.
The AfCFTA is the world’s largest free trade area bringing together the 55 countries of the African Union (AU) and eight (8) Regional Economic Communities (RECs) to create a single market for the continent. The aim is to enable the free flow of goods and services across the continent and boost the trading position of Africa in the global market.
As part of its mandate, the AfCFTA aims to eliminate trade barriers and boost intra-Africa trade. In particular, it aims to advance trade in value-added production across all service sectors of the African Economy.
The commencement of trading on the African Continental Free Trade in January 2021, Africa is sending a powerful message to the world: Africa is open for business.
With AfCFTA coming into force, Africa is significantly improving intra-continental trade and resoundingly indicating that its future development is hinged on trade, not aid.
The combined African market of the 55 member states who have signed up, is valued at USD 3.4 trillion with a population of 1.5 billion people.
AfCFTA has been praised as a game changer for African economies as it promises larger market opportunities, triggering more trade and investment and allowing greater value addition, export diversification and productivity growth – leading to more and better jobs with greater social inclusion.
The World Bank research shows that the AfCFTA could lift 50 million people out of extreme poverty by 2035 and expand incomes by USD 571 billion. Many of these gains would result from unleashing trade within the continent.
The 2022 report titled, Making the Most of the African Continental Free Trade Area: Leveraging Trade and Foreign Direct Investment to Boost Growth and Reduce Poverty shows that the creation of the African Continental Free Trade Area provides a unique opportunity to boost growth, cut poverty, and reduce Africa’s dependence on the boom and-bust commodity cycle.
“Reductions in nontariff barriers on goods and services and improvements in trade facilitation measures will account for about two thirds of the US$450 billion in potential income gains by removing long delays across most of the continent’s borders and lowering compliance costs in trade, making it easier for African businesses to become integrated into regional and global supply chains,” the report reads in part.
“The AfCFTA is likely to attract cross-border investment by eliminating tariff and nontariff barriers and replacing the existing patchwork of bilateral and regional trade deals with a single, unified market. Investors in any one of 55-member countries will have access to a continent of 1.3 billion people with a combined GDP of US$3.4 trillion. Integration in global and regional value chains offers a further magnet for FDI and the jobs, investment, and know-how that FDI brings.”
FDI is important because it brings the fresh capital, technology, and skills so badly needed to raise living standards and reduce Africa’s dependence on volatile commodity exports.
However, Uganda’s National Planning Authority Executive Director, Dr Joseph Muvawala questions the strategy of AfCFTA, and wonders if the agreement has yielded any results.
“We produce, and we are doing a good job producing, but in what context is Africa producing? Are we strategic in production. Can we compete with economies in production of agriculture? Which economies subsidize 70%, and then when you come here, you say, no subsidies. In which market are you going to sell?” Muvawala wonders.
“We have the biggest market, one of the biggest markets, but that market is only important when we deal with it in an innovative way. We talk of AfCFTA; tell me, how many countries have sold to each other on the African continent? Why don’t we stop sloganeering and do real things. AfCFTA will save Africa, I don’t think Uganda has achieved anything in AfCFTA. Ladies and gentlemen, do we need AfCFTA or we need African brothers to trade with African brothers? We are not going to be able to solve the colonial borders. They are there. They exist, but they are meaningless.”
Despite trade under the Agreement establishing the African Continental Free Trade Area having officially started on 1 January 2021, the envisaged changes in intra-African trade are yet to appear. Intra-African trade as a share of global trade declined from 14.5 per cent in 2021 to 13.7 per cent in 2022.
Over the same period, intra-African exports declined as a percentage of total exports from 18.22 per cent to 17.89 per cent, and intra-African imports declined from 12.81 per cent to 12.09 per cent.
