Updated: Jan 21, 2020
Under a keen, watchful, eye of Paul Kagame, African nations made a bold move at the end of March 2018 by taking to sign the historical African Continental Free Trade Area (AfCFTA) Agreement in Kigali, Rwanda. Since this website’s publication of Mr. Kagame’s nomination into the Africa Union Chair in 2017 (access the article on this link), the signing of the Agreement, also known as the Kigali Declaration, by 44 countries may actually signal the feasibility of a new path charted for the continent’s economy and sovereignty.
The AfCFTA loosens up some tight ends that were holding back the free-flow of goods, services and capital between one African country and another, a condition believed to have been a key constraint to the development of many of the countries on our poor continent. Now the FTA, signed, promises to unleash an unobstructed movement of goods and services over longer and, hopefully, more lucrative value chains. With it, African workers and talent will easily head toward wherever on the continent the lure of a profit will beckon. As for the continent’s citizens, a strain of hope for the long-elusive better life may just finally come within reach. A similar reckoning of anticipated dynamism and vibrancy is bringing smiles on governments whose coffers are readied for unprecedented tax revenues.
Four years ago, in 2014, intra-continental trade in Africa stood at approximately US$150 billion, about 10% of the continent’s GDP. In 2016, UNCTAD, the United Nations trade watchdog, pegged all trade that Africa engaged in at almost US$450 billion, slightly more than 10% of its US3.3 trillion nominal economy, which values the average African at just about $346 in trade terms. This is still very low, and perhaps supports the need for more vigorous trade in Africa that would push up the intra-African trade value, a gap that the AfCFTA may very well help to fill. And, shared among Africa’s more than 50 nations, the current per country trade value is still too low to affect development in a meaningful way, particularly when one considers that the volume of trade includes both exports and imports, and that there are countries to whose GDP trade is much more important than to others.
Among the many benevolent intentions of the AfCFTA, if it has to succeed, it must disrupt a much bigger monster that has kept its grip on almost every country on the continent for as long as many of them have traded even as independent nations: Africa’s trade with non-African parties. Although in 2000, Sino-African trade was valued at only US$10 billion, Chinese firms’ revenues from Africa today are well in excess of US$180 billion. China is not ready to let these figures falter. According to the United States Census Bureau, 2017 US-Africa trade exceeded $55 billion (January and February 2018, alone, closed at almost US$10 billion). Eurostat, the European Union’s (EU) statistics gateway, reported that 2016 exports from the EU to Africa were EUR 144 billion while the Union imported goods and services worth about EUR 116.7 billion from Africa; this summed up Africa’s trade with Europe’s 28 countries at almost EUR 261 billion. And, finally, the volume of trade between Africa and one of the continent’s greatest colonizers, the United Kingdom, was valued at over GBP 4 billion at the end of September 2017 for that year. In spite of the economic effects that Brexit brought to the UK, the forecast on UK-Africa trade beyond 2017 showed only inclination towards increase.
These key global trade players, in relation to Africa, will not watch and wait on the AfCFTA to take shape and alter the rules on which trade with and by Africa will take place. While these states have little power to influence what 44 heads of State can put on paper, their authority over the at least US$520 billion of trade with Africa – larger than the continent’s own – retains the power in their hands on what really the fate of trade by and for Africans should be. Subtle changes in favour of foreign trade will make their way into new agreements with individual African governments that will find them too sweet to refuse. With a large portion of the quarter-trillion Euro trade with Africa accounted for by trade with only three countries, i.e., Algeria, Morocco and South Africa, changing the game with these three countries could easily tip the tables in Europe’s favour for a really long time. The US-Nigeria US$6.1 billion trade, mainly anchored in Nigeria’s oil, can change any time the US looks inward to exploit its ever-growing oil reserve endowment.
This means Africa must implement the AfCFTA in the smartest way. Its dreams and hopes to create jobs, especially for its large army of youths, will dissipate if the folly of present leaders maintains its character over rationality. No single country on the continent can boast the muscle to employ highly skilled labour at scale, with much of its cream already trolling foreign lands where wages are more agreeable. So, the ease with which the AfCFTA provisions in terms of labour and capital movements will endogenously cancel itself out. The continent’s collective infrastructure remains weak and has to muster a courage to forego the growth of other sectors so that long-term benefits from concrete, tar and cable can bring positive multiplier effects on business. More than infrastructure growth in-country, Africa must now craft continent-wide programs that connect countries to favour cross-border trade.
A fluid AfCFTA will need more lubricants beyond political will. African States want to harmonize business systems so that the FTA works. This will take a long time to materialize, although it should never, at any point, think this is impossible. While the United States provides an ideal example of how a Union can jelly together across so much diversity, it is not the best example to learn from unless Africa wants to operate under unified fiscal and monetary authorities all countries can bow to. The lessons from the EU, on the other hand, may be useful to point out how a limited harmonization approach can work under a particularly complex recipe of interests. Furthermore, Africa’s value chains must improve not only in terms of quality and international standards to orchestrate the crossing of borders, but should interact with other advances in transport, transport infrastructure and technology such as in telecommunications to make value addition an efficient endeavour. This must have the ability to repeat several times, over time. And Africa’s eye on inward-flowing FDI should not be its only focus, so that its sprawling conglomerates can also look to foreign lands where investments can be made with a view to gain the continent a stronger political position in the world.
Finally, Africa’s politics should be geared to bringing about real change. The inner demons that bind progress in many of the continent’s countries lie not in the ability to develop themselves, in spite of endowment, but rather the willingness to make politics a formidable vehicle to allocate resources in progressive ways. With the leadership of the AU, the continent must learn the politics that its major trading partners are playing to tilt trade benefits away from Africa’s people. Some of the AfCFTA's competition will come from within – at least for a while – as major economies like Nigeria are opting to stay on the sidelines by not signing the Agreement. And, the wiretapping scandal with China that broke at the beginning of 2018 shows the possible extents to which political decisions by the bloc can be important to foreign competition. And, indeed, although heavily denied, a demonstrated propensity of the Chinese government to build public infrastructure such as parliament buildings (Gabon, Malawi, Guinea Bissau, Zimbabwe and the African Union Building itself) and stadiums (Malawi, for example) is a curious case in itself.
The AfCFTA is a great show of unity and heroic continentalism. It can reinforce the collective strength of Africa’s 1.3 billion people, among them a market large enough to keep the continent on a steady growth path and livelihoods improvements. But the myriad of responsibilities that African countries must take to make this happen is much larger, considering the systemic barriers the continent has to deal with internally and externally. And, as the likelihood of encountering clueless African leaders remains high, and that of chancing fragile political regimes even higher, many African leaders will coil back in fear of the monster contained in the FTA.
However, African leaders have this as an opportunity to tell a different African story. They should not have made this the same ol’ tendency to making a big show of signing documents for the sake of it.