Afreximbank on COVID-19 opportunities & challenges for intra-Africa trade

The COVID-19 pandemic has presented both challenges and opportunities for intra-Africa trade, particularly in the context of the African Free Trade Area Agreement. Originally set to be operationalized on July 1, the implementation of the agreement has been postponed due to the pandemic, leaving experts to ponder if this delay could actually pave the way for an improved intra-trade situation on the continent. Dr. Hippolyte Fofack, Chief Economist at Afreximbank, has emphasized the importance of intra-Africa trade and the potential it holds for the continent's economic growth. Remittances have traditionally served as a stable source of inflows into Africa, surpassing foreign direct investment in recent years. However, the pandemic has taken a toll on remittances worldwide, with a reported 20 percent decline in 2020. The economic downturn in countries like the United States, a significant source of remittances to Africa, has further exacerbated the situation. Despite the challenges faced in 2020, Dr. Fofack remains optimistic about a rebound in remittances in 2021, aligned with the global economic recovery post-COVID-19. This resurgence in remittances is expected to support consumption and investment within African regions, offering a glimmer of hope amid the current economic turmoil. Intra-Africa trade has long been identified as a critical area for growth and development on the continent. Dr. Fofack highlights that Africa trades with itself the least compared to other regions globally, making it particularly susceptible to external shocks such as global crises. The low level of intra-Africa trade exposes African economies to the direct impact of these shocks through trade channels and commodity prices. By increasing the share of intra-Africa trade to 30 or 50 percent, the continent can serve as a buffer against global shocks, reducing the vulnerability of African economies. This shift towards intra-Africa trade can contribute to sustaining long-term growth and stability in Africa while mitigating the volatility in trade and economic growth. The African Free Trade Area Agreement, signed in Kigali in 2018 and supported by Afreximbank, is seen as a significant opportunity to boost intra-Africa trade and enhance the continent's integration into the global economy. Dr. Fofack describes the agreement as a 'game changer' with the potential to double intra-Africa trade within a decade of implementation. The successful realization of the AFCFTA hinges on addressing non-tariff barriers and implementing rules of origin effectively to promote domestic manufacturing and trade within the region. The prospects for intra-Africa trade are promising, provided that the continent takes the necessary steps to ensure the successful implementation of the agreement and capitalize on the opportunities it presents. In conclusion, the COVID-19 pandemic may have disrupted the timeline for the African Free Trade Area Agreement, but it has also shed light on the importance of intra-Africa trade for the continent's economic resilience. As Africa navigates the challenges brought about by the pandemic, strengthening intra-Africa trade can serve as a catalyst for sustainable growth and economic stability in the region.