The Prepaid Economy: African Edition

African Head of States and Governments will convene in Addis Ababa, Ethiopia later this month to launch a continent-wide free trade agreement (CFTA). The summit will focus on solutions to the numerous impediments that hinder intra-African trade: inefficient transit regimes and border crossings procedures for goods, services and people; poor implementation of regional integration commitments. The priority should be on this domestic agenda.

However, the differences in — and uncertainty of — access to major markets outside Africa could become a distraction and undermine the CFTA.

African Governments and the international community should ensure that this doesn’t happen, that attention is focused on fostering regional integration and boosting intra-regional trade.

Effective regional integration in Africa would not only enhance trade within Africa but it would also attract investment in manufacturing. Experience in many countries has demonstrated that light manufacturing can be a major source of job creation and economic growth. African countries remain highly fragmented, preventing investment by firms in the development of efficient supply chains on the continent. During the next decade China will be off-shoring some of its more labour-intensive manufacturing, creating a unique opportunity for producers in lower-income countries to break in. Market access programs in OECD and emerging market economies’ towards promoting African trade need to support greater exports of manufactured goods.

Of particular importance are the inclusion of all products, rules of origin that are consistent with global sourcing of inputs, and eligibility criterion that support cross-border production networks in Africa.