Why Africa must ensure AfCFTA succeeds
The AfCFTA is vital for Africa’s future but it is launching in a difficult global environment. Gyude Moore highlights two essential points on which its success will depend
On October 29, 2020, the WTO nominations committee advanced Ngozi OkonjoIweala to the group’s 164 members as the next head of the organisation. She would be the first woman and first African to head the trade body. It was a culmination of months of lobbying and campaigning by African governments and institutions – including Cyril Ramaphosa, the South African president and current chair of the African Union.
Just one member country did not support OkonjoIweala’s appointment at the delegates’ meeting – the US. This was as much a demonstration of America’s power as it was a display of the weakness of the African bloc.
In a global economy dominated by continent-sized economies like the US, China, India and the European Union, Africa’s 54 small, balkanised individual units will continue to reap sub-optimal results in global economics and politics. The African Continental Free Trade Area (AfCFTA) presents an opportunity to both bolster intra-regional trade and increase Africa’s negotiating position on the international stage.
But Africa’s perennial position on the bottom rung of the global economic ladder remains a paradox. The continent is home to 17% of the world’s population and the largest share of youth in the world, with 30% of the world’s oil and mineral endowment. Yet Africa is also home to 70% of the world’s poor. Around 30% of the continent’s population lives in landlocked, resource-poor countries, and intra-African trade is the lowest of all regions of the world.
As a part of its response to this quandary, Africa’s leaders have elected to pool their economic resources and create a single market out of the 54 nations that comprise the African Union. On completion, this would become the largest free trade area in the world. The AfCFTA will cover a market of more than 1.2bn people and up to $3 trillion in combined GDP, with the potential to increase intraAfrican trade by over 50%. With Nigeria’s ratification of the agreement it is gaining legitimacy and is well on its way to implementation.
Three challenges
But the world into which the AfCFTA takes its first step is changing in radical ways that portend a turbulent future.
First is the impact of the coronavirus: according to the IMF the crisis “threatens to throw the region off its stride, reversing the development progress of recent years and slow the region’s growth prospects in the years to come.”
Secondly, there’s the unfolding debt crisis, with Zambia as the canary in the coal mine. Debt levels were already elevated before Covid-19 and the pandemic has heightened the crisis. Seventy-three countries (low and middle income) at risk of debt distress qualify for the G20’s Debt Service Suspension Initiative (DSSI), which was approved in April. More than a third of those countries are in Africa.
African countries that have not signed up, including Benin, Kenya, Ghana and Nigeria, are concerned that joining the DSSI would affect their credit ratings and close off access to capital markets. Writing in the Financial Times on 11 October, Ghanaian finance minister Ken Ofori-Atta noted that African finance ministers had requested a debt standstill of two years and $300bn in concessional financing over three years. Even though this is less than 3% of the over $12 trillion that OECD countries have spent shoring up their economies, it is still not available for Africa.
Finally, we are witnessing a partial unwinding of globalisation and the emergence of a world characterised by rivalry and protectionism.
A recent Pew Research survey showed a majority in most industrialised countries hold a negative opinion of China, the highest levels measured in over a decade. US officials have succeeded in convincing industrialised counterparts in Europe to eschew Chinese hardware in their communication systems.
The campaign has extended to Egypt and Brazil as the US seeks to build a “clean network”. As the US and China ramp up restrictions and bans on firms from the other country, the trade war will soon reach Africa’s shores – and it could not have picked a worse moment.
Two essential commitments
The three challenges described above make the African economic integration project significantly harder than it already was. But they also drive home the economic exigency and political imperative of seeing the project through. There are currently eight regional economic communities on the continent that range from completely useless to only partially functional. I therefore have two recommendations going forward.
Despite the rhetoric of Africa’s external partners, the continent’s prosperity has never been the true objective of their policies and we cannot expect that to change now.
1. Commitment to making the project succeed
This is an African project that will require African commitment to succeed. It must proceed regardless of what happens elsewhere. We can expect external actors to continue to pursue policies that run counter to Africa’s objectives as long as such policies benefit them. Even as we have made clear our intent to move trade along a multilateral track, Africa’s largest partners may seek to pursue a bilateral one.
For example, the UK will continue to pursue bilateral trade deals with individual African countries as it exits the European Union. The US remains committed to negotiating a bilateral trade deal to use as a model in Africa, and China recently completed a bilateral agreement with Mauritius.
None of these actions preclude moving forward with the AfCFTA. Despite the rhetoric of Africa’s external partners, the continent’s prosperity has never been the true objective of their policies and we cannot expect that to change now.
2. Commitment to better governance
Africa’s massive infrastructure gap cannot be closed by borrowing alone. With about $89 trillion in assets under management, Africa needs to attract private finance, but capital is a coward. In the first four months of the pandemic over $100bn fled emerging markets.
African states where the rule of law remains capricious and whimsical do not inspire confidence. Whether is the Ethiopian government bombing its own people in the north, Nigeria’s SARS police unit kidnapping, extorting, torturing and killing its citizens with abandon or the Tanzanian government constricting the democratic space, we are our own enemies. Altering constitutions after term limits have expired or capture of the state by narrow interests all undermine any chance of a successful regional integration plan.
Unless we commit to better governance, the AfCFTA will be submerged by continental-level dysfunction – a shame given that it holds such promise. n
Gyude Moore is a senior policy fellow at the Center for Global Development. He previously served as Liberia’s minister of public works.