The Belt and Road Initiative, BRI, was established to connect China to other countries in Europe, Asia, and Africa. Most African countries are using this opportunity to develop their infrastructure and economy at large. AfCFTA was created to ensure the free flow of goods in Africa. It is yet to embark on its purpose. How feasible and beneficial is the integration of these organizations?
Introduction to AfCFTA
The African Continental Free Trade Area (AfCFTA) is a flagship project of the African Union. The AfCFTA is expected to bring together 54 African countries and their people under the banner of economic growth and autonomy. As the largest free trade area since the establishment of the World Trade Organisation (WTO), AfCFTA has the potential to boost intra-African trade by 52.3% through the elimination of import duties, and by over 100% through the elimination of non-tariff barriers.
Intra-African trade is currently very low. In goods, trade between African countries accounts for only 10% of total trade. It is limited by high applied tariff protection rates which average 8.7%. Other inhibitors are the low development of African economies and their excessive dependence on commodity production and exports, weak transport infrastructure, poor trade logistics, and high-security risks.
If achieved, the AfCFTA will contribute to economic growth, job creation, food security, and poverty reduction. It will empower Africa to better finance its own development and reduce its dependence on fluctuating oil and mineral prices. In Paul Kagame’s words, Rwanda’s current president, AfCFTA would deliver the endpoint of the AU reform, an Africa that is cooperating, developing, and independent from Western assistance.
Due to the tariff issue, countries are looking at the odds before getting rectified. 54 out of 55 countries have signed, but only 34 are ratified. The agreement does not prevent countries from adopting measures that are necessary to protect public morals or to maintain public order. This also includes measures necessary to protect human, animal or plant life or health or essential security interests. Managing, monitoring, and dispute settlement bodies and panels will be crafted to these ends. AfCFTA will create new opportunities for Africa – China cooperation.
BRI and AfCFTA
With China’s Belt and Road Initiative (BRI) and the African Continental Free Trade Area (AfCFTA), the BRI initiative’s primary aim is to build economic infrastructure in the transport, energy, and telecommunications sectors in the countries through which the BRI will pass.
The objective of the AfCFTA is to deepen economic integration amongst African countries by creating a unified market for goods and services and, in the process, propel Africa’s industrialization and structural transformation. Although looking independent, these initiatives converge and present two economic diplomacy instruments that can be leveraged to address Africa’s industrialization challenge and the bottlenecks to intra-African trade for inclusive and sustainable development.
From the side of Africa, leveraging the integration is essential to achieve its aim and grow a strong Africa that is a good ally and partner for China.
First, promoting projects that can be implemented through BRI, the aim of BRI coincides with AfCFTA. This is a headstart that should be seized as an opportunity. Projects that are hindered by infrastructure should be at the top list, taking the BRI establishment into consideration. In no time both parties would be benefiting from each other and the initiative would be achieving its aim.
Second, arrangements leading to international imports & exports, with the reduction/removal of traffic within the African countries in AfCFTA international transportation can be a little tactical. These should be some of the problems BRI can help Africa deal with to ensure free flow. The major hindrance Africa is centered on is infrastructure. With BRI on our side, Africa had nothing to worry about.
Regarding BRI and the increase in trade, the initial Africa – China relationship was on economic terms before other cooperation terms tagged along. Most trade barriers would be dealt with, then goods can flow freely between Africa and China.
Moving on, BRI is estimated to lift close to 8 million people from poverty. The outbreak of the pandemic affected some economic sectors drastically, leading the poverty rate to increase. The integration of this initiative can create employment opportunities for both parties, thereby reducing the poverty level and nuisance in the society.
Also, reduction of transportation cost, due to bad road connection, goods are transported over a long distance to avoid the dilemma of bad roads. In the long run, this will increase the prices of goods and lower GDP. Repairing the roads will have an effect on many sides.
Challenges of BRI and AfCFTA
As there are two sides of a coin, so it is to this relationship. The major challenges include policy barriers. Countries under BRI are restricted on a policy basis for the transportation of goods. Certain measures might disrupt the free flow of products. With the risk of infrastructural projects, some problems can be encountered that will delay the progress and overall aim of the initiatives.
Tax revenue reduction here can be deduced with the after-effects of AfCFTA goal. This is the revenue derived by the government used in developing the economy and meeting long-term goals.
Finally, the establishment of AfCFTA has clearly shown that Africa is ready to stand up and face its problem squarely. With all the countries coming together, we all are yet to see the changes in development and strategy. With the coming together of AfCFTA and BRI, it is a win – win situation both parties should seize. Many would like AfCFTA to stand and fight on its own, but it does not have enough ammunition for that battle.
What do you think?
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Orire Agbaje, studies Economics at the University of Ibadan, Nigeria. She love crunching digits. She is very cheerful, assertive and hard-working.