As Africa Free Trade Deal is Set to Take off…

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Recently, at the 7th Africa CEO Forum in Kigali, Rwanda, African countries agreed to implement a landmark trade policy, the African Continental Free Trade Area Agreement (AfCFTA), which is expected to make the continent the largest free trade area in the world. But the proposed take-off of the AfCFTA in May 2019 has generated a debate among policy makers, corporate giants and analysts as to whether or not the deal will achieve its laudable goals, reports Bamidele Famoofo

The plan to deepen trade among the 55 countries in the African continent, which is expected to eventually make the continent the largest free trade area in the world with over a billion consumers, and generate a total Gross Domestic Product (GDP) of over $3trillion, is ordinarily seen as the best thing to happen to the continent, only if the pros and cons to the deal are carefully considered.

Aliko Dangote, richest man in Africa and President of Dangote Industries Limited, whose investment in cement cuts across the continent has some reservations over the implementation of the deal as he believes that regional markets must first be made to work well before the deal goes live.

Dangote, responding to questions from British-Sudanese Billionaire, Mo Ibrahim, recently, seems to justify the reasons why Nigeria is yet to join the other countries to ratify the deal. He said African government needs to work on regional trade to promote economic ties and development before swinging fully into the continental trade agreement.

Citing the case of West Africa region where cement from Nigeria would not be allowed to enter a neigbouring country like Benin Republic, he argued that free movement within regional markets is still lacking. His words: “Benin Republic which is Africa does not allow Dangote Cement product but will rather import from China”.

Besides free movement at the regional level, Dangote lamented implementation of AfCFTA. He said the key issue was not about the signatories, but implementation by African governments. “My issue is when we signed, what about implementation – which is key and missing. “I think the CFTA will help, but we need to make regional markets work very well.

Aliko Dangote said there was a need for more collaboration from other African nations in areas on economic integration and open border. “This is one of the areas that I always keep discussing with my good friend Vera (Vera Songwe, Executive Secretary – Economic Commission on Africa (ECA), focused on the AfCTA). “I’m sure she’s somewhat and I always tell Vera, you know please can you make the regional market in Africa to work before we go to AfCTA,” he said.

Another issue raised by the richest man in Africa as touching the free trade agreement, is the African passport. He asserted that the passport is not working. (The African Union passport is a document set to replace existing nationally-issued passports and exempt bearers from having to obtain any visas for all 55 states in Africa.)

He cited an example of how Angola stamped an AU passport because he was allowed free entrance into the country. “The ugly situation was when I was invited by the President of Angola and …. when I went there, I was issued visa on African Union passport.”

“I had to apply for visa, and intentionally, when I applied for the visa, I also applied on the African Union passport and I gave them that too to stamp on it.”

He queried: “If African countries can grant British, America and European citizens’ visa on arrival why can’t they grant free entrance to African citizens”. A public affairs analyst, Ridwan Sorunke, is in agreement with Dangote as he told Business Insider Sub-Saharan Africa recently that without political will, the AfCTA may suffer a similar fate to the AU passport.

But Executive Secretary, Economic Commission on Africa (ECA), Vera Songwe, believed AfCFTA was workable in spite of the reservations expressed in some quarters. She argued that what was less known about the AfCFTA was that its scope exceeded that of a traditional free trade area, which generally focus on trade in goods, to include trade in services, investment, intellectual property rights and competition policy, and possibly e-commerce.

“The AfCFTA is complemented by other continental initiatives, including the Protocol on Free Movement of Persons, Right to Residence and Right to Establishment, and the Single African Air Transport Market (SAATM). The scale of AfCFTA’s potential impact makes it vital to understand the main drivers of the agreement and the best methods to harness its opportunities and overcome its risks and challenges”, she said.

Songwe believed that the signing of the AfCFTA in Kigali came at a time when the benefits of trade were actively contested, and global powers that traditionally promoted trade as a crucial driver of growth are now calling into question its very tenets. “This apprehension is not without cause. It is broadly recognised that, while globalisation and trade produced the impressive economic expansion of the past three decades, the gains have not been fairly distributed. The World Bank population-weighted Gini index shows that inequality rose steeply between 1988 and 1998 and declined only moderately by 2013. Although global poverty has fallen, prosperity has not been fully shared.”

There are insinuations that the deal could scale through without the participation of big oil producers like Nigeria and Angola who are yet to subscribe to it. “At the regional level, Southern African economies have, on average, the most sophisticated exports. Botswana and South Africa export the most sophisticated goods while Rwanda and Uganda have made the greatest improvements over the past three decades. However, quality improvement of the export basket has been sluggish elsewhere, with some reversals, and there is considerable cross-country heterogeneity within regions”, Songwe disclosed.

To further drive home her argument, she said, “Analysis of sectoral quality shows that some richer and more open countries have well established manufacturing exports, such as South Africa and Morocco. Like the East Asian economies, they may have reached a saturation point to quality improvement within existing sectors and may need to target new geographic markets that can provide greater scope for growth and innovation to improve their competitive advantage. Other countries, such as Botswana and Mali, have successfully moved up the value chain within their natural resource sectors. In these countries, knowledge transfers to other export sectors can unlock the potential of established or emerging industries”.

Songwe’s optimism notwithstanding, she submitted that AfCFTA could only fulfill its potential in diversifying and transforming African economies in an inclusive manner. “African countries must develop effective policies and strategies for exports, and identify new opportunities for diversification, industrialisation, and value chain development. Furthermore, although the AfCFTA can address many important demand-side constraints to trade, particularly those linked to market size, supply-side constraints must also be addressed.”

The Gambia recently joined as the 22nd member nation to internally ratify the agreement constituting the number needed to move the agreement forward. Meanwhile, the continent’s oil biggest producer, Nigeria and Angola are yet to sign ahead of May kick-off date of the economic ties.

AfCFTA will commence in May 2019 as leaders across the continent said they had received enough signatories to forge ahead with the trade pact. But it would appear that the non-participation of Nigeria in the deal denies it the endorsement it needs to fly.

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