ZLEC, Continental Free Trade Zone. The largest free trade agreement after the WTO (World Trade Organization) by territorial extent, covering the entire African continent, is finally ready to take off. After the accession of Nigeria and Benin, on 7.7.19 in Niamey (Niger). Brief news to follow.
ZLEC, the African Economic Union
In just 3 years from the start of negotiations, to the 25th ordinary session of the African Union (African Union, AU) – in Johannesburg (South Africa), on 14-15.6.15 – the pan-African agreement was defined. And it came into force on 23.3.18, following the 10th extraordinary meeting of the AU, in Kigali (Rwanda). With the accession of Nigeria and Benin – at the 12th extraordinary meeting of the Heads of State and governments of the AU, on 7.7.19 in Niamey (Niger). 54 out of 55 countries have joined the agreement, 27 have already ratified it. Eritrea is awaited, which only on 8.7.18, after 30 years of conflicts, finally reached a peace agreement with Ethiopia.
The Free Trade Agreement (ZLECAf, Agreement establishing an African Continental Free Trade Area, or AfCFTA, African Continental Free Trade Agreement) aims to boost the African economy through the liberalization of intra- and inter-continental trade. The progressive reduction of customs barriers – both tariff and non-tariff, on 90% of goods – must be completed within 10 years from its entry into force, by 23.3.28. Member states can exclude at most 3% of product categories. They may also decide to identify sensitive products, no more than 7%, to liberalize over a longer time frame.
ZLEC, the prospects for the African continent
The 'African Schengen', once completed, will create the largest free trade area territorially on a global scale. Hopefully benefiting over 1.2 billion people. With a substantial projected increase in trade between African countries (+52.3% by 2022, compared to the current modest 17% of the total), as well as between these and the rest of the world (+2.8% in the same period).
The entry of Nigeria radically innovates the scenario and prospects. Because it is the largest economy and also the most populous country on the continent. With 200 million inhabitants, expected to increase to become the third largest globally, after China and India, by 2050. The re-elected Nigerian president, Muhammadu Buhari, had so far justified his resistance with the need to protect local businesses.
Nigeria itself will probably also be one of the biggest beneficiaries of the ZLEC. With a GDP of 450 billion US dollars (just under a quarter of Italy's, 2,084 billion US$), which is 17% of the entire continent. Followed by Egypt (332 billion US$) and South Africa (295 billion US$).
ZLEC, operational phase
The operational phase of the ZLEC agreement was decided on 7.7.19 in Niamey. According to the defined schedule, by 1.2.20 the member states must submit to the African Union Conference the list of tariff concessions and ‘rules of origin’. And by 1.7.20 the dismantling of the customs tariff system must begin.
The Conference of State representatives emphasized the commitment to strengthen the manufacturing industry, especially in the agri-food sector, the construction of suitable infrastructure, and the need to implement the Protocol to ensure the free movement of people, drafted together with the ZLEC Agreement.
Challenges and critical issues
Industries and infrastructures represent the sectors where investments should be focused. The African continent's market appears undiversified to the point that African countries tend to import most finished products from other continents, often favored by advantageous customs tariffs that nonetheless hinder the competitiveness of local production chains. For this same reason, exports almost exclusively concern raw materials.
The growth of the continent's economy cannot therefore disregard the development of the various industrial sectors, including at the technological level. Only in this way can an effective synergy and complementarity be realized among the member countries of theAfrican Union. Furthermore, communication networks must be strengthened, bureaucratic procedures currently regulating exchanges simplified, technical standards and commercial norms harmonized. And tackle the endemic neo-colonial corruption that still characterizes political and economic systems.
The fight against inequalities unfortunately escapes the priorities of the African Union. As is the case for the G7 countries, where social injustice is also worsening. Neoliberal policies inspired by crony capitalism jeopardize democracies and economic systems, as well as the dignity of individuals. African states will also have to deal with this, considering that tariff reductions will also result in revenue losses amounting to 4.1 billion dollars, presumably to the detriment of the more fragile economies.
ZLEC, EU support and prospects for Italy
The European Union is one of the main supporters of the African integration process. Through contributions from the European Investment Bank (EIB), European Development Fund (2014-2020) and the EU-Africa Trust Fund for infrastructure and development programs of the Economic Partnership Agreement. In September 2018, the President of the European Commission Jean Claude Juncker then launched theAfrica-Europe Alliance for Sustainable Investment and Jobs. An action plan aimed at increasing trade relations, stimulating investments and creating job opportunities in Africa.
50 million euros have already been allocated by the EU, for the 2018-2020 biennium, to support the CFTA. In December 2018, an agreement was signed with UNECA, with the disbursement of a first funding of 3 million euros, to develop implementation strategies for the agreement. In February 2019, 4 million euros were allocated by the EU for the creation of a Trade Observatory within the African Union, under PANAF (Pan-African Programme).
Italy can in turn benefit from the AfCFTA agreement. Even now Nigeria is our second partner commercial partner, after South Africa, in sub-Saharan Africa. Trade currently involves the import of raw materials (oil and gas primarily) and the construction of infrastructure (mainly electricity production and distribution). But surely new opportunities can open up for Made in Italy, also in the food sector, so far dominated in each country by the respective (former) colonial powers.
Italian agri-food has not yet achieved significant presence on supermarket shelves, unlike the home-furnishing sector, already much sought after especially in Nigeria. Nevertheless, alongside the economic growth, there will also be a demand for food and beverages Made in Italy. And even before that, demand for machinery for the food industry in which the Bel Paese excels.
Dario Dongo and Marina De Nobili
Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT – Food Times) and Égalité.
Graduated in law in Trento, doing a master's in food law at Roma Tre. Passionate about food and wine, between culture and tradition.
