Steering Africa towards realising the free-trade pact
As the civil war in Sudan that has claimed more than 400 lives raged on over the past fortnight, Africa’s chief trade diplomat, Wamkele Mene, was in his native SA trying to sell the benefits of intra-African trade to governments and businesspeople.
Mene, a young trade lawyer from the Eastern Cape who leads the African Continental Free Trade Area (AfCFTA) as its secretary-general, was offered two premium platforms to address leading business people, diplomats and investors.
In Johannesburg, he addressed a plenary of President Cyril Ramaphosa’s fifth edition of the SA Investment Conference, which has raised R1.4-trillion in investment commitments in the past five years, and in Cape Town, he addressed the first AfCFTA Business Forum conference.
These are among the first high-profile engagements, certainly in the southern part of the continent, that Mene has undertaken since the end of the Covid-19 pandemic and the start in 2020 of the arduous implementation of this ambitious pact.
The promise of the AfCFTA is simple, but difficult to attain. It promises to scrap tariff and non-tariff barriers to all goods and services that are traded in Africa in a decade; and it promises a consumer market of 1.3-billion mostly young Africans and a GDP of $3.4-trillion.
Mene’s story was encouraging. He reported that some trade was already occurring due to the AfCFTA; that signatories have agreed to resolve their trade disputes among themselves instead of at international institutions such as the NY Convention; that rules of origin have been agreed on the bulk of goods traded in the continent; and that tariff books for most countries have been compiled.
Only Eritrea has yet to sign the agreement; protocols on trade in investment, services and intellectual property have been concluded; and agreements with the African ExportImport Bank (Afreximbank) are in place to facilitate intra-African trade, which has languished for decades at about 18%.
Mene told his Johannesburg audience that “last year the first trade took place … we piloted trading under AfCFTA rules with seven countries that are in different trade arrangements of the continent, for example, Kenya tea to Ghana”.
One more aspirational protocol, aimed at facilitating trade by women and youth-owned small and medium-sized enterprises, is outstanding and due for finalisation soon. Mene also highlighted a range of opportunities arising from the low level of intra-African trade. These include the area of pharmaceuticals and vehicle production. Though holding so much potential, the latter — including the production of electric vehicles — is likely to prove trickier to realise.
The reason for this difficulty is two-fold: such as clothing and textiles, the auto industry enjoys much state protection, especially in SA (a contentious area in international trade); and that the continent’s competitive strength in vehicles (not to be confused with parts for electric vehicles such as lithium batteries) resides in SA, which still largely enjoys a love-hate relationship with the rest of the continent.
In SA, trade, industry & competition minister Ebrahim Patel is fighting with business over localisation policies, the centrepiece of his reindustrialisation strategy, which in theory at least could bolster production capacity if implemented continent-wide.
The Covid-19 pandemic has exposed Africa’s reliance on external supply chains. African countries were low on the list of countries supplied with Covid-19 vaccines, and the continent’s food security was nearly endangered when Western countries adopted protectionist policies on food production.
At the conferences, AfCFTA officials sought to position the RussiaUkraine conflict as an opportunity for Africa to turn inward and replace the imports that are not making it to Africa due to Russia’s invasion of Ukraine. Easier said than done.
Talk of a continental free trade zone is not new. Most postcolonial African leaders have committed themselves to this project, but failed to get it realised in their lifetimes. The AfCFTA is the first major step towards realisation.
But it faces formidable challenges. For a start, despite the brotherly solidarity and ritual anti-West rants by African leaders, very little has been done by African leaders, including the postcolonial leaders, to ease the movement of people and goods across borders, even in regions that have political, economic and defence co-operation arrangements.
The only exception is the Southern African Customs Union (Sacu) — Botswana, Eswatini, Lesotho, Namibia and SA — one of the world’s oldest customs unions. The five countries have common external tariffs and, save for Botswana, the union is also a common monetary union.
But as Mene knows, modernisation of existing trade arrangements such as Sacu, let alone negotiation of new ones, is tedious and tortuous, and requires patience and skill. Most seasoned trade & industry diplomats have left for lucrative jobs in the private sector, and the new politicians lack experience in trade diplomacy.
Critically, it is expensive for Africa to trade with itself: with more than 40 national currencies and smaller markets, only third-party currencies such as the beleaguered US dollar enjoy dominance and profit from conversion. That is until the Afreximbank project starts yielding fruit.
Mene may be unable to silence the guns in the Sudanese civil war or to stop Paul Kagame’s provocative war games in neighbouring Democratic Republic of the Congo, but he can help steer Africa towards the dream that has eluded the continent for so long.
THE PROMISE OF THE AFRICAN CONTINENTAL FREE TRADE AREA IS SIMPLE, BUT DIFFICULT TO ATTAIN