Conflicts in Ukraine and the Middle East have disrupted global supply chains and are affecting food security in Africa.
The inflationary pressure brought about by these wars means the continent needs to boost food production and ramp up intra-Africa trade, says Wamkele Mene, secretary-general of the African Continental Free Trade Area (AfCFTA).
Mene, who was re-elected to the post last month, told Business Times from AfCFTA headquarters in Accra, Ghana that the disruption shows African countries must develop productive self-sufficiency, boost their industrial capacity and eliminate barriers to trade.
Russia's invasion of Ukraine has hit grain exports from that country, while the Israel-Hamas war has seen Yemen's Houthi rebels attack international shipping in the Red Sea.
“The upward inflationary pressures on food on the continent are because we are over-reliant on grain imports,” said Mene.
“It does not suggest for a moment that Africa does not have the capacity to feed itself. Zimbabwe has massive metric tons of grain per year. The constraints have been the trade routes that make it hard to trade in products, and that must be addressed in the long term to unlock potential.”
Established in 2018, AfCFTA aims to convert the African continent into the largest free-trade area in the world, benefiting more than a billion people. Of the 55 countries on the continent, 47 are party to the agreement, and 35 are already trading under it.
Mene said the focus would now shift from signed accords to implementation. Development finance institutions have committed $70bn (about R1.3-trillion) in investments to develop the continent's infrastructure and industries to prepare them for increased intra-Africa trade.
The constraints have been the trade routes that make it hard to trade in products, and that must be addressed in the long term to unlock potential
— Secretary-general of the African Continental Free Trade Area, Wamkele Mene
The African Development Bank (AfDB) invested $45bn in infrastructure, while the African Export-Import Bank (Afreximbank) has spent $25bn.
But the continent needs more funding of this nature and more private equity, he said.
“[One] challenge is the differentials in African industrial development capacity. Some [countries] can take immediate advantage of the industrial capacity. But the focus must be on those that don’t have the industrial development to ensure that they export and import goods.”
By 2022 the AfCFTA secretariat had raised $10bn through Afreximbank to create a fund to help develop industries in African economies. However, Mene said the secretariat was under no illusion about the challenges that prevented the ratification of the agreement in some markets.
About $150m was disbursed to small, medium and micro enterprises (SMMEs) across Africa through institutions such as Equity Bank, Ecobank and Standard Bank, which intervened to lower cross-border trade and finance costs for SMMEs.
Mene said 35 countries will now trade under the AfCFTA, including South Africa, while the secretariat waits for more signatory countries to ratify the agreement. He said President Cyril Ramaphosa's January meeting with African trade ministers showed the continent's readiness to boost intra-Africa trade.
However, there were still major impediments to full implementation of the agreement.
Benin and Liberia have signed but not ratified it, but Liberia is in the process of doing so. South Sudan and Sudan have not ratified due to conflicts in the region, while Madagascar and Libya are planning to ratify. Eritrea has not signed.
It does not suggest for a moment that Africa does not have the capacity to feed itself. Zimbabwe has massive metric tons of grain per year
— Secretary-general of the African Continental Free Trade Area, Wamkele Mene
“The challenges really fall in two categories. The first is peace, stability and security. Whether civil war or low-intensity conflict, it means that you cannot access that market for import or export. Smallholder farmers are shut out of markets and our border communities’ informal traders suffer the most," Mene said.
“The second challenge is macroeconomic in nature. The infrastructure deficit is estimated to be over $150bn annually. If there continues to be a wide deficit in infrastructure that supports trade, we will not see this growth in infrastructure that we need.”
Asked how the AfCFTA sought to redefine Africa’s trade relationship with the developed world, Mene said the continental free trade area was the centre of discussions at the 2022 US-Africa Leaders Summit in Washington DC because the US understood that Africa was a significant market and producer of goods.
The chief director for Africa's multilateral economic relations at the department of trade, industry & competition, Sandile Tyini, announced on Wednesday that South Africa’s special economic zones will be recognised by the AfCFTA agreement.
“The agreement offers legal certainty and predictability of market access and will enhance the investor climate in Africa as well as offer new market access opportunities," Tyini said.
“It will also enhance intra-African trade through progressive elimination of tariffs, rules to manage non-tariff barriers, and facilitate co-operation on customs, trade facilitation and transit. The AfCFTA will also provide enhanced co-operation on technical barriers to trade and sanitary and phytosanitary measures.”
The successful implementation of AfCFTA would boost exports, increase productivity, accelerate growth, increase investment and create job opportunities, he said. African government officials were using every platform they could to announce investor-friendly policies to attract capital.
At the Investing in Africa Mining Indaba last month, Zambian minister of mines & minerals Paul Kabuswe said the realisation of value from raw materials must be beneficial for investors as well as the economies and people of the African region.
“The world must tread carefully and cautiously with that in mind. We are focusing on a continent that is massively endowed with all of the critical minerals. But when you look at the African continent, the poverty is amazing and very embarrassing,” he said.
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