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China Promises To Finance Africa Free-Trade Zone AfCFTA

China Africa Trade African Currency
Credit: China Briefing

Over the past years, China’s engagement with Africa has not only been limited to the bilateral front but on multilateral platforms as well. Beijing’s $200m financial assistance for the construction of the African Union Secretariat in Addis Ababa readily comes to mind. Now, China continues to support the new free trade zone for Africa by pledging to finance AfCFTA.

Once again, Beijing has promised to finance Africa’s unprecedented and the world’s largest free-trade zone, the African Continental Free Trade Area (AfCFTA). This was revealed by China’s Foreign Minister, Wang Yi at an event to mark the 20th anniversary of the Forum on China-Africa Cooperation (FOCAC).  Spanning 55 nations with a combined economy of US$3.4 trillion and 1.3 billion consumers, the AfCFTA is set to open for business next year. 

Welcoming the development of Africa’s continent-wide free trade area, Wang Yi said China “will provide cash assistance and capacity-building training to its secretariat.” Speaking to more than 150 guests, including several African Ambassadors to China, the Foreign Minister also revealed that “China would also continue to invest in infrastructure and industrial projects in Africa via its Belt and Road Initiative, and open up its market of 1.4 billion consumers to African products,” South China Morning Post reported. 

However, according to SCMP, David Shinn, a professor at The George Washington University’s Elliott School of International Affairs and a former American diplomat, said China’s apparent commitment to the AfCFTA was a positive development, but the devil was in the details. “What exactly will China offer to support AfCFTA and how does it compare to what other countries may provide?” Shinn quizzed. 

The AfCFTA And Africa’s Opportunities

With its secretariat headquartered in Ghana’s capital, Accra, the AfCFTA is the first African free trade agreement, signed by 54 African countries and ratified by 30 of them. A World Bank report said the agreement will reduce tariffs among member countries and cover policy areas, such as trade facilitation and services, as well as regu­latory measures, such as sanitary standards and technical barriers to trade. The full implementation of AfCFTA would reshape markets and economies across the region and boost output in the services, manufacturing, and natural resources sectors. 

Caroline Freund, Global Director of Trade, Investment, and Competitiveness at the World Bank, commented that “creating a single, continent-wide market for goods and services, business and investment would reshape African economies. The implementation of AfCFTA would be a huge step forward for Africa, demonstrating to the world that it is emerging as a leader on the global trade agenda.”

In a similar vein, Albert Zeufack, World Bank’s Chief Economist for Africa, noted that “the African Continental Free Trade Area has the potential to increase employment opportunities and incomes, helping to expand opportunities for all Africans. The AfCFTA is expected to lift around 68 million people out of moderate poverty and make African countries more competitive. But successful implementation will be key, including careful monitoring of impacts on all workers—women and men, skilled and unskilled—across all countries and sectors, ensuring the agreement’s full benefit.”

The Relevance Of China In Africa’s Novel Free Trade Agreement

The AfCFTA has come at a time when Africa-China relations are in a ‘new era’ of cooperation and relations. According to SCMP, Wang Yi mentioned in his speech at the FOCAC meeting that, since the creation of  FOCAC, China had helped build and finance more than 6,000km (3,700 miles) of railways, a similar amount of roads, nearly 20 ports, more than 80 large-scale power plants, 130-plus medical facilities, 45 stadiums, and about 170 schools. Two-way trade between the two hit US$208.7 billion in 2019, with Beijing advancing US$148 billion worth of loans to Africa between 2000 and 2018.

Away from the figures and promises, one question worth stressing is which significant ways can China’s presence in Africa contribute to the success of the free trade agreement? 

In an Op-ed titled AfCFTA Meets BRI: Can Africa Take Advantage Of This Opportunity, a former Africans on China Campus Ambassador, Amodani Gariba opined that China’s Belt and Road Initiative (BRI) could help AfCFTA succeed if Africa is prepared. Amodani stated in the op-ed that “the railway connecting Lagos to Kano, for instance, could cater for much of the transportation needs of local traders in West Africa under the AfCFTA, giving the size of Nigeria’s market. It could also serve as the gateway for Nigerian exports into markets of surrounding countries like Niger, Cameroon, and Benin. China-funded roads and railways in Ghana would make access to Ghanaian markets cheaper and easier. Likewise, Ghanaian traders will have it easier to access markets of surrounding nations like Burkina Faso, Cote D’Ivoire, and Togo.

Amodani further stated in the op-ed that “by helping to link Africa together, the BRI has unquestionably become a vital ingredient for the success of the AfCFTA. The problem is African countries do not look ready. Nigeria and South Africa, two of Africa’s largest economies, due to some reason, developed cold feet for the program. 

To take advantage of the BRI to make the AfCFTA work, African leaders must demonstrate the political will to commit to AfCFTA; otherwise, BRI projects may become loss-making ventures. African leaders must also ensure efficient management of BRI projects to make them sustainable, the young China-watchers said. 

Beyond BRI, and Beijing’s promises, which other significant and sustainable ways can China be relevant in realizing the aims and objectives of Africa’s first continental free-trade zone?

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