Kenya and other African countries have been urged to tap on the new Africa trade pact to increase intra-Africa trade beyond the current 13 percent and cut reliance on overseas imports.
The African Continental Free Trade Area (AfCFTA), which aims to bring together 1.3 billion people in a $3.4 trillion (Sh397.8 trillion) economic bloc, will boost trade among African neighbours while allowing the continent to develop its own value chains, said the African Export-Import Bank (Afreximbank).
The managing director of Afreximbank’s Intra-African Trade Initiative, Kanayo Awani, said in a statement, that the Covid-19 crisis and the Russian-Ukraine war fallout which has choked supplies for Kenya and other African countries has demonstrated that Africa is “overly reliant” on global supply chains.
“The Covid-19 pandemic and now the Ukraine crisis have both revealed the economically devastating impact of Africa’s continued dependence on external markets, even for basic agricultural commodities,” Mrs Awani said.
“The AfCFTA which creates a single continental market for goods and services, with free movement of business persons and investments, provides an opportunity for Africa…, to take a strategic approach to wean itself of the dependence on external partners for its development ambitions,” said Mrs Awani.
The AfCFTA, the largest trading bloc since the creation of the World Trade Organisation (WTO), is expected to increase intra-Africa trade beyond the current 13 per cent and improve the prospects of the African continent to attract huge investments.
Kenya has already embraced the free trade pact with President Uhuru Kenyatta indicating the creation of the AfCFTA provides new export opportunities for Kenyan products.
“The AfCFTA, which seeks to bring together 55 African countries and create an integrated market of 1.3 billion people, with a combined GDP of over $3 trillion, holds enormous potential for Africa’s trade-led development,” said Mrs Awani.
“Already the region is facing acute price shocks and supply chain disruptions. This is compounded by concerns of fertilizer shortages which could potentially disrupt agricultural production and place further pressures on food security.”
Costlier imports have piled pressure on the shilling which weakened to an all-time low of 117.32 to the dollar Friday from 113.14 at the beginning of the year.
The shilling’s depreciation to record lows has come on the back of a fast-rising import bill that has outstripped earnings from exports, diaspora remittances and the tourism sector.
In the first quarter, imports rose by 17 percent to Sh591.6 billion from Sh507.5 billion last year, while exports were up by nine percent to Sh207.7 billion from Sh191.4 billion.
Fuel, food and industrial goods have been the biggest contributors to the jump in import costs, reflecting the higher global prices of crude oil, wheat, and cooking oil largely linked to the Russia-Ukraine conflict.
Supply chain constraints as global economies contend with pent-up demand have also raised shipping costs, fuelling higher inflation.
“With 60 percent of the world’s arable land, the fastest growing population and an integrated market under the AfCFTA the opportunity exists for Africa to take the necessary steps to ensure food security through greater intra-African trade and reduce reliance on imports from outside the continent,” said Mrs Awani.
“Just as Covid-19 catalyzed collective African action and a united response, the current geopolitical crisis must be viewed as an opportunity.”