Signing of Africa free trade area accord leaves more questions than answers

What you need to know:

  • Forty-four African leaders gathered in Kigali last month and signed a continental free-trade agreement (FTA). By so doing, they laid the foundation stone for the creation of an enormous free-trade area that will likely facilitate regional integration and inspire economic growth across the continent.
  • Intra-Africa trade has always been hindered by lack of good regional infrastructure. Projects like the highway from Cape Town to Cairo, the Mombasa-Lagos-Dakar trans-African highway and the Lamu Port-Southern Sudan-Ethiopia Transport corridor have not been realised.
  • A superiority complex even afflicts nations that are supposed to be equal members in a free-trade zone. A majority of South Africans, owing to their advanced economy, still do not consider themselves African. They consider those from other parts of Africa as coming from the “continent.”
  • The FTA is one strategy with the potential to rescue Africa from the jaws of poverty. As such, we must think big on how to solve infrastructure issues – like extending Kenya’s SGR through Uganda, Rwanda, and Congo into the Pacific, and adding value to our resources by discouraging exportation of raw materials.

Forty-four African leaders gathered in Kigali last month and signed a continental free-trade agreement (FTA).

By so doing, they laid the foundation stone for the creation of an enormous free-trade area that will likely facilitate regional integration and inspire economic growth across the continent.

Although I support this leap of faith, I am not too sure that the negotiations leading up to this treaty have exhausted all points of friction.

Implementing the treaty will certainly require some nurturing of relationships and massive support from citizens of every African country.
This is so because the FTA is a product of pronouncements from top leadership without details that matter in such agreements.

This process first started in October 2008, when the East African Community (EAC), Southern African Development Community, and the Common Market for Eastern and Southern Africa (Comesa) held a summit that birthed the African Free Trade Zone (AFTZ).

In 2012, it was extended to the Economic Community of West African States (Ecowas), the Economic Community of Central African States (ECCAS) and the Arab Maghreb Union (AMU).

MASSIVE MARKET

In June 2015, at the African Union summit in South Africa, negotiations started to create a Continental Free Trade Area (CFTA) with all 55 African Union states by 2017.

A continental free-trade policy means there will be no restrictions on imports from, or exports to, any African country except for South Africa or Nigeria unless they accede at some point in the future.

Nevertheless, even without these two giant states, FTA members already present a massive market.

To succeed, we need major regional infrastructure, a strategy to diversify Africa’s trade away from resources and intensification of adding value to Africa’s enormous resource base.

As it stands today, many countries lack more than three of the commodities that constitute more than 75 per cent of the country’s export revenues. Without intentional manufacturing activities, there will not be much of intra-Africa trade.

There must be deliberate efforts to diversify from over-dependence on agriculture and natural resources to manufacturing and service industries to reduce the risk of relying on highly volatile commodities.

EFFICIENT MICRO PRODUCTIONS

For example, Nigeria and Angola have largely depended on oil. Any disruptions, as in the recent past when oil prices plummeted, impacts the entire economy.

Africa’s primary resources are exported as raw materials and imported as finished goods. This was largely due to lack of heavy capital that needed to process some of the raw materials into finished goods.

However, this is changing as the fourth industrial revolution beckons. We now have efficient micro productions requiring minimal capital expenditure. With time, local investors will be able to build sufficient capital to invest in heavy machinery.

Many of these prospective investors will need support to acquire enabling technology to make them competitive. Governments may have to intervene to deliberately assist small and medium enterprises to scale up their operations to enhance their sustainability.

Intra-Africa trade has always been hindered by lack of good regional infrastructure. Projects like the highway from Cape Town to Cairo, the Mombasa-Lagos-Dakar trans-African highway and the Lamu Port-Southern Sudan-Ethiopia Transport corridor have not been realised.

It is such projects that can stimulate trade between the countries along the corridors, opening up opportunities for Africa’s many land-locked countries to participate in global trade.

COMMUNICATIONS INFRASTRUCTURE

Although the communications infrastructure is well-developed in Africa (see Figure 1 below), through terrestrial fibre-optics networks, the Internet is still not affordable across the continent.
Much of the progress in the information and communications infrastructure was necessitated through deliberate efforts by the African Telecommunications Union, the association of East African regulatory authorities and the New Partnership for Africa's Development (NEPAD) during the negotiations to build a joint undersea cable infrastructure.

Having been a participant in the process, I can confirm that these were not easy negotiations as some countries had their own hidden agendas. The outcome, however, brought Africa closer to integration because we managed to develop intra-Africa telecommunication exchange points. It made it possible for someone sitting in Kigali to call someone in Nairobi without first going through European capitals.

MENTAL ENSLAVEMENT

Several years after independence, African countries were still tied to their respective colonial powers. The affinities of our colonial masters still linger in our minds so much that they can easily derail the FTA if we do not negotiate how to delink from this apparent mental enslavement.

Some Francophone countries would still find it chic to buy some genetically modified eggs from France than import organically farmed eggs from their own neighbours.

It is pointless to hide such realities that we know exist but never get to deal with head-on. Branded products from Europe are still considered superior even in areas where Africa has really caught up.

For instance, local butter is as good if not better than any other butter but you still find people searching for specific imported brands. In textile, it is not uncommon to see people buying shirts in New York, only to discover later the items were made in Kenya.

A superiority complex even afflicts nations that are supposed to be equal members in a free-trade zone. A majority of South Africans, owing to their advanced economy, still do not consider themselves African. They consider those from other parts of Africa as coming from the “continent.”

Although we mostly consider this as a joke, it is a matter of life and death, since it has led to xenophobia that has seen several immigrants killed at the hands of fellow Africans.

MORE QUESTIONS THAN ANSWERS

The signing of the FTA leaves more questions than answers. How do we deal with reclusive Ethiopia that has seen its success attributed to its political and economic philosophy? Is the FTA purely economic in a continent that is bleeding from senseless wars and despots clinging on to power as their own people suffer? Does the FTA nullify regional free-trade blocs? If not, what preferential benefits do members get over those who failed to sign?

In my view, more work on the FTA needs to be done. There is much we must learn from our regional free-trade blocs and even as we try to be independent, we can learn from the European Union that seems to have a comprehensive framework of engagement.

The EU’s detailed negotiation framework has made it possible to remain together, with those opting out finding themselves alone in the wilderness.

I think the FTA is one strategy with the potential to rescue Africa from the jaws of poverty. As such, we must think big on how to solve infrastructure issues – like extending Kenya’s SGR through Uganda, Rwanda, and Congo into the Pacific, adding value to our resources by discouraging exportation of raw materials, diversifying our economies and fostering closer ties between African nations.

The writer is an associate professor at the University of Nairobi’s School of Business. Twitter: @bantigito

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