Creating African Free Trade Zone is a milestone
THE SIGNING of the Africa Free Trade Zone by heads in Kigali last week was a milestone achievement. This despite Nigeria deciding not to sign and South African President Cyril Ramaphosa’s acceptance of the deal. Ramaphosa signed the declaration on the establishment of the African Continental Free Trade Area, but said he would consult before signing the treaty.
Ramaphosa referred the matter to Parliament, which points to the importance of South Africa’s democratic dispensation and that decisions of this nature have to be made by elected people’s representatives.
Ramaphosa’s acceptance speech reinforces that South Africa is an integral part of the continent and shares in the historic mission that Africa has to traverse as it resolves its development challenges. The posture Nigeria took is indeed worrisome.
It is the biggest nation on the continent with a population four times that of South Africa and the biggest economy on the continent in terms of the Purchasing Power Parity indexed gross domestic product (GDP) of the International Comparisons Programme (ICP).
The ICP is a five-yearly global statistical programme of the UN Statistics Commission. It delivers real GDPs across the world on a standardised country product level expenditure.
This eliminates effects of currency fluctuations whereby, say, a dollar-rand exchange rate fluctuation, even when severe, does not mean that people have suddenly got poorer or richer in countries affected by these changes.
ICP compares equivalent commodities across countries as though they were in a barter economy. The International Monetary Fund and the World Bank and other financial institutions use it for drawing rights of sovereigns. The civil services of the world use it to determine the per diems when they are on international travel.
The charts that show the most expensive and the least expensive city in the world are largely based on the ICP.
At the 1999 UN Statistics Commission in New York, which I attended for the very first time, I recall listening attentively to a presentation by the second in charge of Statistics Canada, Jacob Ryten, of a rendition of the ICP and dangers on the integrity of scientific measurement posed by the likes of the Big Mac index. One of the central criticisms was whether the ICP was put to good use by nations. Regional development banks play a crucial part in participating as lead agents in this endeavour.
Globally the ICP is led by the World Bank and on the African continent it is led by the African Development Bank, which also carries a substantial part of the costs of enabling the statisticians-general of Africa to collate this information.
Lamentation Once again a major lamentation that the data emanating from this critical exercise is not used by African countries, despite Ryten imploring us in 1999 to this important aspect of the ICP.
The ICP is not used in Africa to determine industrialisation and trade policies – not by African technocracies and their political leadership, not by pan-African institutions be they the UN Economic Commission for Africa, not the AU and not the African Development Bank, who are responsible for managing this enormous and crucial statistical operation.
In contrast the EU, among its foundational elements, is the ICP information, which is now mounted annually, albeit on a thinner scale and scales up to a bigger universe of products at five-yearly interval.
Another country that set its eyes on the ICP is China and in the post 2011 ICP release the Chinese set their eyes on the ICP for their economic programme and poverty elimination, driven by the decision of the politburo in 2012 of heightened domestic consumption that is sustained by the reversal of the one child policy to a two child one, while continuing with exports as fundamental to this development.
The ICP for China and Europe for example forms a clear basis on how intraregional and international trade policies are informed.
In Africa it really remains guesswork from disjointed information systems, despite the existence of a rich history of data as regards the ICP. Little wonder why Nigeria decided the way it did.
According to the 2005 ICP and the 2011, southern Africa and especially South Africa on a weighted scale has a very high price level index, as shown on the Africa Map price level index for 2005 and 2011.
Thus despite its very sophisticated infrastructure, which would put it in good stead to manufacturing, including of rudimentary products and speed to markets both abroad and on the continent, South Africa fails to attract foreign direct investment commensurate to its sophistication.
Angola and Zimbabwe have had significantly higher price level indices and all three have not blessed the Southern African Development Community with a competitive edge.
On the other hand, the East African Community have low price level indices.
Ethiopia and Egypt, two of the biggest countries after Nigeria, enjoy the lowest price indices.
Food expenditure When it comes to food expenditure the ICP tells us that Africans at times use up to 40 percent of their hard-earned and meagre income on food that is not even enough and nutritious.
Turning the question upside down, we could ask the question: if, say, Africans were to use only 12 percent of their income on food and be well fed, what would be the trade arrangements and industrialisation strategies we should apply in Africa?
The answer is in ICP results, which every five years collates consumption expenditure on a thousand equivalent products in countries, including gross capital formation per capita, where Nigeria, the sleeping African giant, fares very poorly.
In addition, put very bluntly, in West Africa the price of bread correlates well with who the colonial master was – whether French or British, and this has nothing to do with ecology and economy of agriculture. It is a startling statistic.
Pixley ka Isaka Seme stood on the grounds of the prestigious Columbia University on April 5, 1906 to give an address titled The Regeneration of Africa.
At the adoption of the South African constitution, President Thabo Mbeki presented an iconic rendition of “I am an African” and just a few days ago President Cyril Ramaphosa addressed his counterparts in Rwanda, and in this regard inched us closer to realising the dream of the regeneration of Africa and I am an African.
But this is achievable if and only if the technocracies and political leadership get their retinas and earlobes close to the ICP to witness its powerful dimensions and its beautiful lyrics.
The discussion on ICP can be viewed on Stats SA to African Union 2015 – YouTube.