5 Reasons why Infrastructure is key to realisation of the African Continental Free Trade Area

Date07 Jun 2022

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According to the United Nations, Africa still faces serious infrastructure shortcomings across all sectors, both in terms of access and quality, despite the gains registered in improving regional infrastructure connectivity across the continent since the establishment of the African Union along with NEPAD.

This has been a major set-back for the African Continental Free Trade Area, a free trade area established to boost intra-African trade, progress across the African continent, and the quality of life of the people. Closing this infrastructure gap will aid the realisation of the AfCFTA, and also be a critical enabler for productivity and sustainable economic growth.

This article by Brickstone, reviews some institutional reports on the need for Infrastructure Development in Africa, a key solution to unlocking the potential of Africa’s services trade for growth and development.

Infrastructure in the realisation of the African Continental Free Trade Area

The African Continental Free Trade Area (AfCFTA) is one of the Flagship Projects of Agenda 2063 Africa’s development framework. It aims at accelerating intra-African trade, and boosting Africa’s trading position in the global market by strengthening Africa’s common voice and policy space in global trade negotiations.

Realisation of this goal will help create jobs, reduce poverty rate, and boost Africa’s economic status at the world stage.

However, the African Continental Free Trade Area has not been able to fully deliver to the continent due to limited domestic factors such as low agricultural productivity and investment, poor transport and communications infrastructure, and inefficient customs procedures, and global trade barriers. In this regard, a report published by Nairametrics asserts that the AfCFTA is expected to open up businesses to a market of over 1.2 billion people and a GDP of $2.5 trillion. This reflects that the AfCFTA houses enormous potential for Africa growth and development if implemented effectively.

Hence, lack of adequate and resilient infrastructure, as a major domestic barrier, needs to be tackled for the realisation of the AfCFTA.

Improved infrastructure services regulation is needed to tap the potential of Africa’s services sector – UNCTAD

UNCTAD further asserts that, Africa has not been able to deliver the kind of structural transformation required to tap fully into the potentials of the service sector, a dynamic driver of growth in Africa in recent years, as a result of the suboptimal and costly nature of the Infrastructure provisions required.

5 Reasons why Infrastructure is key to realization of the African Continental Free Trade Area

In summary, here are 5 reasons why Infrastructure is key to the realisation of the African Continental Free Trade Area:

Infrastructure services are critical to achieving the sustainable development goals being set by the United Nations for 2016–2030 and AU’s Agenda 2063 vision, and creating a platform for broad-based growth in Africa.

Africa accounts for 15 percent of the world’s population but only 2.2 per cent of global services exports, indicating tremendous untapped potential for the sector. With quality and availability of infrastructure, exploring this sector will enhance trade and decrease trade deficit in selected South Asian countries.

Africa’s infrastructure services, particularly road freight, are more expensive and of lower quality than in any other region of the world. This raises the cost of doing business, impedes private investment, and serves as an additional barrier to African countries’ benefiting from the rapid growth in world trade.

The free movement of people will boost intra-African trade under the African Continental Free Trade Area, and enable African countries to proactively and swiftly respond to the twin green and digital transitions Africa faces in the 2020s.

Resilient Infrastructures are needed to withstand climate change as the adverse effects of climate change on Africa are frequent and serious, with Africa being the most vulnerable to these effects.

Conclusion

The African Continental Free Trade Area is a noble concept that would boost growth, intra-African trade, and productivity if fully maximized. However, Africa facing serious infrastructure gaps remains a hindrance for the realisation of this concept, and thereby calls for the need for quality and sustainable infrastructure transformation.

Also, as the utilities sector transforms, it is crucial for regulation and traditional business models of supply and operation to move towards being capable of adapting to new technological and consumer demands.

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