The potential for the African Continental Free Trade Area (AfCFTA) to become a powerful tool for driving industrialisation, economic diversification and development was highlighted at the start of the UN Economic Commission for Africa’s (ECA) Conference of Ministers in Addis Ababa (Ethiopia) last May.
The 4-day event aimed 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.
Addressing the gathering, Vera Songwe, executive secretary of the ECA, said that 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,” she told the 51st session of the Conference of Ministers.
The executive secretary also observed that 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.
Her address also acknowledged concerns that the AfCTA may cause tariff revenue 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 Ms Songwe who said that “These tariff revenue losses may be outweighed by the additional revenues from growth to be generated by AfCFTA.”
Africa’s governments were also urged to take a 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,” she said.
The conference followed 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 May 11 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.
In addition to the ministerial proceedings, expert sessions and parallel side events addressed the conference theme; ‘Creating fiscal space for jobs and economic diversification’, highlighting the importance of accompanying taxation measures to support and fully take advantage of the AfCFTA while also strengthening fiscal sustainability in Africa. Other topics included agriculture’s role in economic growth; financing infrastructure; tackling illicit financial flows; and an integrated strategy for the Sahel.