Changing Lanes: African Union seeks a united trade front

Free trade and free movement of people underpins the goals of Africa’s 55 member states as it works toward Agenda 2063 — a blueprint for socio-economic transformation across the continent. The Africa Continental Free Trade Agreement is central to this framework eliminating trade barriers to allow free access to the African market.

WITH trade tensions between the US and China remaining high and as the European Union digests its recent election results, the African Union is quietly working towards a more united states of Africa among its 55 member nations.

In 2013, the AU defined a framework called Agenda 2063, which set out the principle aspirations and goals of intervention to support the socio-economic transformation of its members during the next 50 years.

Khabele Matlosa, the organisation’s director of political affairs, told CNN that “the goal is to realise the union of an integrated, prosperous and peaceful Africa driven by its own citizens”.

The two main proposals to achieve this aim are geared towards enabling the free movement of people and free movement of goods.

The former involves launching a continental passport, known as the AU passport, which will give visa-free access to every member state and allow Africans to move freely within the continent. The latter proposal is to open the borders to trade to boost the economic growth within the intra-African market.

The Africa Continental Free Trade Agreement is an agreement which, by eliminating trade barriers, will allow free access to the markets in Africa.

Its first endorsement was given by 44 countries that met in Rwanda in 2018.

As it stands, Eritrea remains the only country outside of the free trade deal, after Nigeria and Benin signed the agreement.

A formal ratification 22 countries was concluded at the end of April and the AfCFTA came into effect in May.

However, the AfCFTA is not without its critics. Africa has many countries which are heterogeneous, not just economically, so ensuring co-operation among them will require a big effort. Alongside this, the poor state of the infrastructure in Africa is a potential barrier to integration.

One measure of the potential for trading between African countries and with the rest of the world is the UNCTAD Country Liner Shipping Connectivity Index (Country LSCI), based on MDS Transmodal data.

The Country LSCI is a measure of comparative container shipping connectivity at a country level worldwide. It compares the container shipping connectivity of each country against China, using the second quarter of 2006 as a benchmark. China was the best-connected country at that time and has remained so through to 2019 with an index level of 189 points.

This index reflects major changes in demand as well as decisions adopted by shipping lines on vessel deployment. These decisions are a response to port investments and to the reforms at the container ports.

The Country LSCI, excluding Morocco and Egypt, which are mainly transhipment ports serving the European market, suggests that in 2019 almost all African countries have seen their LSCI improve against the 2006 benchmark. The only countries to show a decline during this period are Madagascar (from 10 to nine), Tunisia (from nine to eight) and Guinea-Bissau, with its LSCI unchanged at five points.

In the second quarter of the year, the size of vessel that the five major African countries can accommodate has improved markedly climbing to 10,000 teu compared with around 1,700 teu in 2006.

In percentage terms, exhibiting the biggest increase in annual deployed capacity is Mauritius, estimated to have attracted more than 2.5m teu of capacity this year, up 234% compared with 2006.

First published on Lloyd's List website July 2019