AfCFTA provides opportunity for Africa to completely integrate into global economy – Addison

Dr. Ernest Addison is the Governor of the Bank of Ghana
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Governor of the Bank of Ghana (BoG), Dr Ernest Addison has said broadly, the African Continental Free Trade Area (AfCFTA) aims to eliminate or reduce tariff and non-tariff barriers among the 54 African countries to speed up intra-African trade and improve Africa’s trade performance in the global market.

He indicated that there is a view that African countries can only be competitive globally if they are competitive regionally.

Therefore, he said, the AfCFTA by the creation of single large market for goods and services, creates opportunities to promote industrial development through diversification and regional value chain development.

The Agreement is expected to enhance diversification of industrial products, develop regional value chains, and facilitate regional integration as well as cross border payments,” Dr Addison said while speaking at the Ghana Academy of Arts and Sciences on the topic “Boosting the AfCFTA: The Role of Payment and Settlement Systems.”

He said “Regarding the expected benefits, AfCFTA, with its continent-wide vantage point and enhancing competition, provides opportunity for Africa to competitively integrate into the global economy, reduce poverty and promote economic inclusion. The World Bank, for
instance, estimates that implementation of AfCFTA would provide impetus for lifting an additional 30 million Africans from extreme poverty and 60 million from moderate poverty.

“Real income could also increase by 7 percent or almost US$450 billion and there would be a boost in African trade, especially intraregional trade in manufacturing. The volume of total exports is projected to increase by nearly 29 percent by 2035. Intra-African exports are also estimated to increase by almost 81 percent, while exports to nonAfrican countries are expected to increase by 19 percent.”

Dr Addison further explained that an efficient and resilient payment and settlement systems infrastructure is fundamental to the promotion of intra-African trade.

A supportive payment and settlement system, he said, can be used as a strategic tool to enhance and facilitate the African regional integration drive, increase competitiveness, and improve Africa’s position in the international financial system.

“A strong and well-regulated African financial infrastructure could deepen the benefits of intra-regional trade, eliminate use of third currency for settlement, improve liquidity management of firms, and reduce transaction costs.

“Beyond the improved speed and lowering of cost of transactions, an integrated African payment and settlement systems would support
AfCFTA by mitigating risks associated with intra-African trade payments and facilitate efficient functioning of African financial markets. A safe, reliable and efficient national and cross-border payments system would, therefore, support African regional trade, foster development and promote financial stability.

“Thus, to boost intra-African trade within AfCFTA, there is the need to invest in robust payment and settlement system infrastructure,” he said.

The AfCFTA is a free trade area founded in 2018, with trade commencing as of 1 January 2021. It was created by the African Continental Free Trade Agreement among 54 of the 55 African Union nations.

The free-trade area is the largest in the world in terms of the number of participating countries since the formation of the World Trade Organization. Accra, Ghana serves as the Secretariat of AfCFTA and was commissioned and handed over to the AU by the President of Ghana Nana Akufo-Addo on August 17, 2020 in Accra.

The agreement was brokered by the African Union (AU) and was signed by 44 of its 55 member states in Kigali, Rwanda on March 21, 2018. The agreement initially requires members to remove tariffs from 90% of goods, allowing free access to commodities, goods, and services across the continent. The United Nations Economic Commission for Africa estimates that the agreement will boost intra-African trade by 52 percent by 2022. The proposal was set to come into force 30 days after ratification by 22 of the signatory states.

 On April 2, 2019, The Gambia became the 22nd state to ratify the agreement, and on April 29 the Saharawi Republic made the 22nd deposit of instruments of ratification; the agreement came into force on May 30 and entered its operational phase following a summit on July 7, 2019.

The general objectives of the agreement are to create a single market, deepening the economic integration of the continent; establish a liberalised market through multiple rounds of negotiations; aid the movement of capital and people, facilitating investment; move towards the establishment of a future continental customs union; achieve sustainable and inclusive socioeconomic development, gender equality and structural transformations within member states; enhance competitiveness of member states within Africa and in the global market; encourage industrial development through diversification and regional value chain development, agricultural development and food security; resolve challenges of multiple and overlapping memberships

By Laud Nartey|3news.com|Ghana

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