Free trade in Africa will need more than an agreement – WEF panel

When it comes to successfully implementing a free trade plan across Africa, it will take more than just having heads of state sign an agreement, delegates at the World Economic Forum on Africa heard.

The forum, which launched on Wednesday, sees business leaders from across the continent converge in Cape Town over three days to hold discussions on economy-related matters.

A key topic under discussion is the African Continental Free Trade Agreement (AfCTDA), which aims to create the world's largest free trade area once operational. It will establish a single continental market for goods and services, allow the free movement of business travellers and investments, and possibly quicken the establishment a continental customs union.

At a panel discussion held on the free trade plan for the continent, the African Union's Commissioner for Trade and Industry, Albert Muchanga, shared his views on why the free trade plan has come into focus alongside a global rise in populism.

Historically, when African countries came to independence, following an era of colonialism, the various nations' economies were very fragmented, small and uncompetitive, Chumanga said. Leaders who founded the AU then established a vision for a common market for Africa.

Trade difficult between neighbours

The free trade plan opens up possibilities of large economies of scale which is attractive to businesses, he added. 

But to make free trade possible means the agreement must actually be implemented and that is not so simple, according to another panel participant – Arancha Gonzales Laya, executive director of the International Trade Centre. "It is easier for Africa to trade with the rest of the world than to trade with its neighbour. This cannot be," she said.

"You need more ingredients than just a trade agreement," she said, adding that some countries just stop after having reached an agreement. Africa needs to consider what else it needs to do besides just having the agreement, she argued.

For example, countries need to work on developing entrepreneurship skills, as this will be necessary for creating value-added goods.

Entrepreneurs, in turn, need access to credit and capital. Countries should also consider the digital economy, which must be connected to the free trade agreement, according to Gonzales Laya.

Credibility at stake

Gonzales Laya believes the agreement is "perfectly implementable".

"We now have leaders of 54 countries putting their necks on the line for the agreement," she said. Leaders have publicly signed the agreement, which means if they do not take it forward, they will lose credibility among investors, she said.

"There is now more political energy today than there has ever been for integration in Africa."

Patrick Dlamini, CEO of the Development Bank of South Africa, believes that for regional integration to happen successfully, the continent must facilitate trade through infrastructure. "Network infrastructure is needed to ensure easy facilitation of the movement of goods and people [across borders]," he said.

Martyn Davies, Deloitte's managing director of emerging markets, told Fin24 during an interview on the sidelines of the forum that for the free trade agreement to work successfully, governments should create an enabling environment for businesses to thrive.

"Countries don’t trade, companies trade. Companies will move the needle," he said. It is up to each country to see how best to enable free trade and having multinationals in their country should be integral in their strategy, he noted.