The Impact and contributions of the African Continental Free Trade Area (ACFTA) to the Aviation sector in Africa.
- Published on September 16, 2019
Group Commercial and Ground Operations Director – ASKY AIRLINES
There is an old Swahili adage, which goes as: “Umoja ni nguvu, utengano ni udhaifu”. Meaning “United we stand, divided we fall”.
The African Union is gradually making great strides towards achieving and making sense of the wisdom behind this famous adage in its efforts to liberate Africa from colonial demarcations.
Apart from the physical barriers put in place by Africa’s colonizers, there are other intangible barriers, which have been existing and still continue to be of great hindrance to Africa’s emergence if not brought down.
The African Union’s recent actions of putting into place an African Continental Free Trade Area – ACFTA and the Single African Air Transport Market – SAATM are giant steps towards recognizing the over 1.3 billion inhabitants in the continent as one people, one market, one geographical space and one nation, provided Africans see and reason into this together.
According to the United Nations Economic Commission for Africa, the African Continental Free Trade Area goes beyond free trade in a broader sphere to establish free movement and investments across Africa.
In March 2018, at the historic meeting of the African Union in Kigali, Rwanda, member states agreed to create an African Continental Free Trade Area. Subsequently, 52 of 54 African Union member States signed up to the agreement, representing a remarkable degree of consensus across the continent.
Following an opinion poll survey carried out in November 2018 by the Rockefeller Foundation, over 2000 citizens across the continent confirmed that an impressive 77% of Africans believe that the Continental Free Trade Area Agreement represented an important step forward.
But what does this agreement exactly mean in practice and how will it affect us, especially with regards to the aviation sector in Africa?
The first thing to point out is, it isn’t simply a ‘Free Trade Agreement’ it’s actually much more than that. It is about establishing a unified continental market, including the free movement of labor and investments.
To make this happen, physical movement of people and goods can’t be ignored. In fact, it is the principal catalyst that will act as evidence to the existence of a free trade zone. Therefore, aviation practitioners and the sector as a whole cannot be ignored. Serious considerations have to be given and put in place by governments, civil society and regional institutions to assist and resolve all aspects hindering the aviation sector to thrive for full and better implementation of ACFTA and SAATM.
Let us focus on three major benefits of the Continental Free Trade Area. Africa is a big continent. You could fit the US, China and Europe into the continent and still have space to spare. But in economic terms, individual countries are still very small. Take Ghana and Rwanda for instance, these are one of the fastest growing economies in the world. But in terms of size they’re ranked 82nd and 139th respectively, out of 211 economies in the world following the IMF rankings this 2019. This matter because small economies often struggle to attract the must needed investments.
Collectively, the story is very different. The African continent all 54 economies together have a collective GDP of $2.5 trillion USD that makes it the 8th largest economy in the world, just behind India. With 1.3 billion potential customers, it makes the continent much more attractive to investment, both from within and from outside the continent. This will encourage businesspeople to make the required investments necessary to sustain economic growth and create the job opportunities the continent badly needs.
However, for this to transcend into tangible physical actions on ground, going beyond paper agreements, we need to absolutely improve the conditions and means of intra-Africa connectivity to enable for smooth and seamless movements amongst these economies for business to happen and thrive, hence the unavoidable contribution of the aviation sector.
The second argument in favor of the Continental Free Trade Area is that it includes protocol on the Free Movement of people. This seriously matters because, at present, traveling between African countries for Africans currently can be very challenging. Sometimes it is easier to obtain a visa into certain European, Asian, Middle East countries than acquiring as an African a visa to travel into another African country, worst still within same regional economic bloc. I still vividly remember Africa’s richest man Aliko Dangote’s experience after being awarded an African passport by the African Union, still required a visa to enter an African country using an African passport as he described in his interview with his colleague Mo Ibrahim early this year 2019.
Visas, expensive air tickets, custom clearances and border controls make it difficult to travel for pleasure and even more difficult to do business across borders. Currently, there are a lot of trained and skilled people across the continent coming out of schools, universities and colleges who cannot find work. If free movement is endorsed, people will be able to use their talents anywhere in the continent where there is a demand for those talents. The continent will be your oyster.
A third powerful argument in favor of the Continental Free Trade Area and its contributions and impact to the aviation sector, is that it will increase trade between African countries, especially as we strive to put in place the right airlines to enable movements.
SAATWith the enormous wealth in the continent, when combined, it makes the continent the wealthiest in the world. Yet, less than one fifth of all exports are currently from one African country to another. Take Kenya for instance, following the UNECA Eastern African office report of 2018, the largest economy in the East African Community, each year Kenya exports $1.2 billion USD to Europe, and around $550 million USD worth of products. Kenya’s total exports amounts to $6.3 billion USD. How much do you think Kenya exports to its neighbor for example Ethiopia? In 2017 it exported just $68.9 million UDS to Ethiopia. Why? One of the main reasons is the high level of trade taxes. Same example can be used for other countries like the Republic Democratic of Congo endowed with great wealth of natural resources and also Ivory Coast. However, how much trade do they carry out with their neighboring countries not to talk of other African countries. The Republic of Benin’s local cement factory doesn’t produce sufficient cement that meets local demand, the country imports tons of cubic of cement from China, yet Dangote Cement factory is a few kilometers away, but they don’t import cement from neighboring Nigeria.
The Continental Free Trade Area Agreement is proposing to remove trade taxes on at least 90% of all trade between African countries. That will provide a big incentive to regional trade. The Economic commission for Africa estimates that in Eastern Africa, the Continental Free Trade Area could boost regional trade by nearly $1 billion USD. And the principal sectors that will benefit much will be precisely the ones that create much employment like light manufacturing, processed foods, and textiles, creating as many as two million new jobs. Several other examples can be provided within other regional blocs such as ECOWAS, CEMAC, UEMOA, SADC and so on. It is high time we improve on intra Africa movements, trade and tourism amongst each economy.
African economies will find it hard to become strong economies unless they trade more amongst each other. Trading amongst each other will improve balance of payment, improve GDP, promote domestic products hence growth of local industries, more consumption of African relatable products and all of these will strengthen the use of a single currency eliminating currency exchange rate discrepancies, which affects cash flow in business.
The aviation sector is present to make ends meet and see the physical materialization of the existence of a single area through free movements. With over 1.3 billion inhabitants, there is sufficient room for the establishment of many other aviation hubs to cater for the movement of people and goods.
Despite all efforts, traveling is still a nightmare within Africa and there is still much to be done to improve this. We see the opportunities every day, but we lack the means, resources, support, infrastructure and qualified manpower to explore. Unless we stand up as one, we will continue to fall divided.
Written by: Nowel Ngala