BY SHADRACK KAVILU
African states have been advised to make effective plans to mitigate against challenges that will be brought about by the African Continental Free Trade Area (AfCFTA) if they want to reap maximum benefits from the protocol.
According to UN ECA Executive Secretary, Vera Songwe the Continental Free Trade Area protocol signed by 44 states earlier this year is a powerful tool for driving industrialisation, economic diversification and development.
Speaking when she opened UN ECA Conference of Ministers in Addis Ababa (Ethiopia) the commission’s executive secretary said realising the promise of the AfCFTA and its development goals required the continent to take ‘bold actions’ on many fronts.
“Now we must seize the momentum at hand, to focus on how to operationalize the agreement in a manner that realises its potential to the benefit of the average African,” said Songwe.
In her remarks, Songwe acknowledged concerns that the AfCTA may cause tariff revenues losses leading to ‘holes‘ in national budgets. The AFCFTA’s impact upon taxes applied to imported and exported goods, however, would be ‘small and gradual‘ according to the Executive Secretary who explained:
“These tariff revenue losses may be outweighed by the additional revenues from growth to be generated by AfCFTA,” said Songwe.
One of the measures that African states could take to mitigate against challenges of free trade area according to Songwe is to undertake broader review of macroeconomic policies, especially fiscal measures, in order to ensure they are ‘fit for purpose‘ to make the most of the AfCFTA.
“We need to improve our levels of fiscal space. This includes boosting tax revenues, improving the efficiency of public expenditure management, tackling illicit financial flows and making use of private finance for public projects,” said Songwe.
The 51st session of the conference which started on (11-15 May) aims to advance the ambitious initiative to form a regional common market which the ECA believes could boost intra-African trade from its current level of 16% to 52% by 2022.
The Executive Secretary also observed the most important and urgent action is to create the ‘fiscal space‘ to foster public and private investment, while ensuring economic diversification with the view to creating jobs.
This year’s conference follows the signing of the AfCFTA by 44 countries earlier this year, while a total of 50 signed either the agreement or the Kigali declaration underscoring their commitment to the visionary, pan-African project.
On Thursday (11 May) Kenya and Ghana handed over to the African Union Commission the documents ratifying the continental free trade, becoming the first two countries to do so.