Happenings in the global economy are conspiring to provide Zambian manufacturing the opportunity to actualize its long-held aspirations. This has the potential to set aside decades of below-par performance and stagnation. Over the years, several similar opportunities have come and gone, with little sustained benefit to the local economy. Cases in point are the two copper booms, the first coming in the 60s and most recently prior to the 2009 Global financial crisis. The present potential, however, is centred around three phenomena, namely, the Africa Continental Free Trade Area (AfCFTA), the Green Energy Transition, and The Russia-Ukraine War. This piece will focus on the Free Trade Area. Subsequent articles will discuss the remaining two.
What is AFCFTA
The AfCFTA is rooted in Agenda 2063, which is the African Union’s blueprint for creating a prosperous and industrialized Africa. Broadly, a Free Trade Area is a group of countries that have agreed to a Free Trade Agreement; implying little or no barriers to trade such as through tariffs and quotas. The Africa Continental Free Trade Area represents what would be the largest common market for goods and services, linking a total of 1.3 billion people in an economy worth $3.4 billion. Brokered in Kigali, Rwanda in 2018; the arrangement intends to create a single market for goods and services in Africa, facilitate the free movement of people across borders, and otherwise increase economic growth. Specifically, AfCFTA was birthed out of a desire to remedy the low levels of Intra-African trade, whereAfrica ranks least in terms of the amount of trade it does within itself.
What the AfCFTA Promises
The Free Trade Area is projected to raise the African continent’s GDP to roughly $29 trillion by 2050 and increase intra-Africa trade by over 50%. According to the World Bank, this could lift 50 million Africans out of extreme poverty. The bulk of these returns will come through greater trade and the removal of other impediments such as costly and lengthy border processes. One only needs to look at the problems at Kasumbalesa to bear witness to the cumbersome nature of border processes, where trucks have been reported to spend weeks in having their goods cleared.
Secondly, owing to the creation of what will be the largest unified market in terms of number of countries, population, and geographic size; Foreign Direct Investment is sure to be attracted to the continent. Large markets attract capital. This is one of the reasons China has received large amounts of FDI inflows and experienced the growth it has. A large market foretells high demand for products. Magnifying this is the youthful dividend of the African population, which speaks to greater spending on goods and services given young people are not only more consumeristic but also more likely to have incomes than their elderly counterparts.
What the FTA will do for Zambian Manufacturing
Manufacturing stands to benefit through a more integrated Africa and a larger target market. It will become less costly for Zambian manufacturers to export their goods across the region. This will allow Zambian firms to tap into the continental market. The Zambian market is quite constrained due to several factors, amongst which is the narrow middle class. This ability of African countries to look beyond their domestic markets will be the primary cause of increased incomes on the continent.
The FTA will also enable Zambian manufacturers to look beyond the continent and become more integrated in global value chains. The formation of clusters, such as that which is being mooted between Zambia and the DRC for the EV market, will increase competencies in select industries. This will help Africa transition from being a source of primary products and progress along global value chains. Tying in well with the diversification of supply chains currently underway, with AfCFTA, Africa is positioning herself to be an investment destination for onward supply to the continent and the world.
Beyond having this agreement at a continental level, individual states must take steps to overcome domestic challenges and institute local policy reforms. Though the FTA is showing significant promise, individual gains will not be automatic. As is the case with globalization, some countries will lose out. It is thus imperative that the Zambian Government monitors the program’s distributional impacts, across different sectors, so as to provide safety nets, where necessary. This notwithstanding, AfCFTA is a landmark initiative that will be crucial to transforming the African continent. As the fragmentation narrative gains traction in other parts of the world, Africa stands out in its drive to go against the grain and advance the cause of not only a more integrated Africa but a more integrated world.
