As Africa celebrated AU Day last week, it is time to ask if the recently signed African Continental Free Trade Area agreement stands a chance of solving the continent’s problems asks Kafui Gale-Zoyiku
On March 21, 2018, 44 African countries gathered in Kigali, Rwanda and signed a historic agreement, which established a free trade area – the world’s largest in terms of participating countries – and seen as vital to the continent’s economic development.
This agreement which is a culmination of two years of negotiations and meant to be one of the AU’s flagship projects for greater African integration has also seen 27 countries agree to the free movement of people across their borders, allowing nationals from other signatory nations to stay in their countries for up to 90 days.
“We have come here to fulfil the aspiration of our peoples for integration and unity,” said Moussa Faki Mahamat, chairman of the AU commission.
Though the pact will eliminate tariffs on 90% of products, liberalise services and reduce non-tariff barriers, a second phase of negotiations will focus on investment, competition and intellectual property rights. But 11 African countries including Nigeria and South Africa opted out.
According to experts, Nigeria and South Africa, two of the largest economies and population groups on the continent are pussy-footing with Nigeria’s President Muhammadu Buhari being the most hesitant and was therefore not in Kigali.
They reported that a strong lobby from both the Manufacturing Association of Nigeria (MAN) and the umbrella body for local unions, Nigerian Labour Council (NLC) raised concerns over their fears that certain measures within the AfCFTA agreement would collapse local industries and create job losses while the reduction of trade tariffs by 90 percent would encourage importation of consumer goods, which will ultimately undermine local manufacturers and the markets.
The West African economic giant also believed that joining AfCFTA must involve the whole value chain including agricultural producers in the rice and poultry sectors along with the Governors’ Forum. Other key elements to be involved in further consultations are the National Association of Chambers of Commerce, Industry, Mines and Agriculture; Federal Inland Revenue Service; Nigeria Ports Authority; Nigeria Customs Service and Nigeria Immigration Service, according to reports.
South Africa has indicated as well that, there needs to be more negotiations and evaluations by national interests. President Cyril Ramaphosa did attend the conference and pledged support in principle for the idea of a free trade zone in Africa.
Nevertheless, he emphasised in Kigali “all that holds us back from signing the actual agreement is our own consultation process. We still need to consult at home, to consult in Cabinet, to consult our various partners at Nedlac (the body comprising government, business, labour and community organisations), but also to finally consult our parliamentarians, so we are really just going through what you would call the ‘clean-up process,” he was quoted as saying.
Nigeria most especially must be worried. It has experienced imported rice, repackaged as Thai rice, smuggled into the country through the Republic of Benin.
Nevertheless, what does the signatories stand to gain? The 55 AU members have created a trade bloc worth 2 trillion Euros with a population of 1.2 billion people, doing only about 16 percent of their business with each other and with average tariffs of 6.1 per cent, businesses currently pay higher tariffs when they export within Africa than when they export outside it, according to the AU.
“If we remove customs and duties by 2022, the level of intra-African trade will increase by 60 percent, which is very, very significant,” Muchanga told AFP in an interview before the summit.
But the biggest impediments to the success of AfCFTA are more related to the inability of Africa to have created her own trading currency. As it is now, the international finance capital will continue to hold sway as it will determine the value of goods and services and exchange rates. This will make the so-called phenomenal growth in the fortunes of the continent in the past two decades will pale into insignificance and irrelevancy.
Africa being an exporter of primary products will not benefit from this arrangement no matter how beautiful it sounds especially when viewed against the backdrop of creating a prosperous Africa. The decline in commodity prices and sometimes their fluctuating prices all have culminated in the erosion of the little gains made under foreign direct investment (FDI) in recent years.
Oil and gas exportation which has boosted the economies of the likes Algeria, Angola, Nigeria, Gabon and Equatorial Guinea is no more lucrative as there is a glut on the international market due to the exploration of shale gas and oil by the United States. It is only during crises times that the prices of some of these commodities rise, giving the producing economies some respite.
South Africa and Nigeria are just emerging from recession while others like Mozambique are going through a period they are being compelled to renegotiate their loans and bonds.
Despite new oil and gas finds, all over the continent along with other minerals, the prognosis does not look like the AfCFTA will perform any magic in the immediate terms.
Basic questions relating to the existing structural barriers are not being addressed while no-one has given a clue as to how the treaty will inure to the long-term benefit of the farmers, the youth and workers by improving their living standards.
It is an answer to these crucial questions that will determine the long-term relevance of the African Continental Free Trade Area agreement.