With the AfCFTA, Africa could become the world's biggest, single free trade zone, creating trade diversification opportunities for Morocco and other African states.
THE AFRICAN CONTINENTAL FREE TRADE AGREEMENT (AfCFTA), which is planned to come into effect by July 2021 (notwithstanding any COVID-19-related delays), will allow for greater economic prosperity for the whole of Africa. And as Morocco’s place as a strong, continental player becomes more cemented, Morocco will be sure to benefit from the AfCFTA. The agreement commits countries to removing tariffs on 90% of goods and addresses other non-tariff barriers. It will turn the continent into the largest free trade area in the world, creating a single market with a total GDP of over USD3 trillion. The agreement’s longterm goals include increasing intra-African exchanges by 60% by 2022, though this remains to be seen with lockdown measures still in place in a number of African countries due to COVID-19. The AfCFTA will also open the door to other initiatives key to taking advantage of open trade borders, including the Protocol on Free Movement of Persons, Right to Residence and Right to Establishment, and the Single African Air Transport Market (SAATM). As things currently stand, Africa’s contribution to international trade does not exceed 2%. Indeed, according to Morocco’s Minister of Industry, Trade and Investment, and the Digital Economy Moulay Hafid Elalamy, intra-African trade does not even exceed 16% of the total volume of trade that the continent does with the rest of the world.
From 2015-2017, African trade reached only USD760 billion, compared to USD4.11 trillion done in trade with the EU. There are currently over 100 land borders between African countries, and many exporters experience difficulty shipping goods between African countries by sea thanks to security concerns and infrastructure issues. According to Elalamy, the continent’s development necessitates the opening and integration of African markets, because “it is the best way to create shared growth, decent employment, and economic opportunities for all social levels.” Not only that, but according to Mohcine Jazouli, Morroco’s delegated minister in charge of African cooperation, the coming of the AfCFTA will also improve the position of the continent globally. According to UNCTAD, even AfCFTA’s transitional phases will generate USD16 billion. Furthermore, according to studies done by the Economic Commission for Africa (ECA), the agreement will increase the value of intra-African exports. By simply removing tariffs, it is projected that intra-African trade value will increase between 15-25% in 2040. Elalamy has estimated that the lifting of both tariff and non-tariff barriers could generate gains of around USD3.6 billion across the continent, thanks to an increase in productivity and a rise in value chains.
Part of the reason for this is that intra-African trade is made up of more manufactured and processed goods: in other words, high value-added products, as opposed to low-value added products that are usually sold to larger, international firms to be refined or processed. Thus, the AfCFTA could be a driver of economic diversification on the whole, especially for those countries that rely on rents from extractive industries to make revenue. More importantly, it will also allow countries to break into new markets and force product diversification in markets by destination and type. This is important for countries like Morocco, which are more economically diverse countries that are in need of new markets in which to sell their products and drive further diversification and sophistication of high value-added products. Agricultural production could be a great potential area, as many African countries spend a great deal on food imports and subsidies. It is estimated the agreement would increase trade in this area by 20-30%, another trade area in which Morocco has strength. But for the AfCFTA to do all the good it has promised to do, effort must be directed toward the development of complementary markets between African regions, according to Elalamy. In addition, African businesses must be strengthened, and partnership projects should allow for an upmarket of export products, he continued. Countries’ industrialization policies must be adapted to creating a “Made in Africa” brand, thus constituting an integrated African market. With the Moroccan government council’s ratification of the agreement in 2019, much remains to be done both in Morocco and on the continent as a whole to get the ball rolling.