On 1st January 2021, the African Union launched the Africa Continental Free Trade Area (AfCFTA), the world’s biggest free trade area and Africa’s most ambitious and recent effort to liberalise trade. The World Economic Forum’s Connecting Countries and Cities for Regional Value Chain Integration – Operationalizing the African Continental Free Trade Area (AfCFTA) analyses the impact that COVID-19 has had on Africa’s supply chains.
Developed by the World Economic Forum’s Regional Action Group for Africa, in partnership with Deloitte, the report provides policy advice for accelerating the expansion of regional value chains in emerging manufacturing economies such as the automotive industry.
The paper is part of a series investigating five ways to drive economic recovery and build resilience in the context of the AfCFTA Agreement, namely:
- New financing models for rapid recovery
- Unlocking manufacturing to mitigate global supply chain risks
- Leveraging integration and regional value chains
- Revitalizing infrastructure and connectivity
- Scaling up digital transformation and inclusive innovation
“The African Continental Free Trade Area holds immense potential for the social and economic development of Africa. Renewing the rules of trading will facilitate better cooperation to boost growth, reduce poverty and broaden economic inclusion,” said Børge Brende, President of the World Economic Forum. “This timely report of the Regional Action Group for Africa presents detailed insights and recommendations on how to advance public-private collaboration on regional integration, with a view of deepening and strengthening regional value chains.”
“It is perhaps the most ambitious free trade project since the creation of the World Trade Organization itself. Actively promoting trade liberalization to encourage new areas of growth is a pragmatic response to the reduction in global trade due to the COVID-19 pandemic and will position Africa as an enhanced destination for investment from multinationals,” said Martyn Davies, Managing Director of Emerging Markets at Deloitte Africa. “Although the continent can do little to counter the global forces inclining towards deglobalization, it can embrace a self-supportive regionalism through enhanced intra-African trade.”
Insufficient and inert inter-linkages between African economies have exacerbated the impact of the COVID-19 pandemic on the continent’s supply chains. Yet, from local production of essential products to improving port and customs efficiencies – often flagged as a challenge in Africa – the response to the pandemic illustrated how meaningful impact is created through collaborative efforts. Successfully implemented, current efforts by the African Union will stimulate trade as well as deepen and create new regional value chains in Africa. Lessons learned should be applied to improving production capabilities in other industries so that economic and trade benefits can be realised.
The paper places emphasis on the automotive sector as a case study as advances in that industry have the potential to set the tone and pace for other sectors to mobilize and create stronger integrated regional value chains. The industry is on the cusp of an evolution, with advances in electric and autonomous vehicles and transformations in mobility, but as Africa builds its automotive industry, it should focus on development that promotes innovation and drives adoptions that will be sustainable for the growth and development of the sector.
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