Interview: Michael Oquaye Jr
What key reforms need to be implemented to meet the full potential of the African Continental Free Trade Area (AfCFTA)?
MICHAEL OQUAYE: The implementation of the AfCFTA agreement is crucial to the continent’s economic development. Launching commercial exchanges is an important step towards the economic integration of what will be the world’s largest economic zone, with 1.2bn consumers in 2021 and nearly 2.5bn by 2050. Opening these markets will facilitate strategic access to a broader base of potential consumers, and one of the key measures that can be implemented to ensure that countries can benefit from this free trade area is the simplification of Customs regulations. This will reduce barriers to trade in a way that benefits all countries.
Moreover, the creation of a centralised banking system would help facilitate the movement of capital and goods, and provide reassurance to international investors regarding macroeconomic risks. Such a move would also provide countries with improved traceability of capital flows.
Naturally, many challenges remain – particularly the choice of currency to be used for these transactions. This can help to minimise the impact of exchange rate fluctuations, which affects exporters’ profitability. There are also political challenges associated with the free movement of people.
How do special economic zones (SEZs) increase industrial added value?
OQUAYE: The main purpose of SEZs is to create a large, integrated value chain on the continent that can serve a large market. Continental free trade is extremely important for industrial development, especially when it comes to SEZs. Given that African countries do not have a critical mass of middle- and upper-class consumers of all types of products, free zones allow production to be oriented largely towards export. This has helped to increase the added value of companies that export industrial products. Looking to the future, it will be important for countries on the continent to develop their own inputs to reduce dependence on more costly options. However, to take the industrialisation process to the next level, we need to overcome challenges related to transforming and giving value to raw materials. Such a shift will necessitate technology transfer, especially in equipment and processes, and African economies would greatly benefit from localising knowledge and technology.
In what ways do SEZs impact job creation?
OQUAYE: One of the main objectives behind the creation of SEZs is to create the maximum number of jobs for the local population. These jobs tend to be in sectors with high value added, which in the long term will facilitate the transfer of knowledge and technology from international firms to their domestic partners. It will also enhance young people’s specialised skills, setting them up for future employment opportunities. Ghana has prioritised the employability of our youth, and has worked to ensure that people are equipped with the skills they need to succeed. To help meet these goals, the government has developed partnerships with international institutions that focus on training and education. We believe that broadening the skills of our workforce is the most important investment to ensure the medium- and long-term development of the economy, and this model has been used successfully in Asian countries such as Singapore.
At the same time, the government has focused on securing jobs while working to attract investment through regulations and well-defined standards. These measures will help lower the poverty rate, ensure a better standard of living for the general population and in turn boost economic growth.
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