Opening borders will be a marathon
Understanding what the real effects of an African free trade zone might be is a bit like waiting for Godot. World trade is at least as complex as quantum mechanics and the road is very rocky.
This might be why the Department of Trade and Industry has not yet sent out a detailed press release on the benefits this would bring to the continent of Africa. No doubt this is also, in part, because it does not know.
South African President Cyril Ramaphosa on Wednesday said that his government needed more time to consult relevant stakeholders about the continental free trade area treaty before signing it.
Ramaphosa has so far only signed a declaration on the establishment of the African Continental Free Trade Area (AfCFTA) and not a treaty on free trade.
The AfCFTA concept aims to promote agricultural development and food security through the free movement of persons, capital, goods and services.
The idea of a free trade area has been in the making for some time — at least since the New Partnership for Africa’s Development (Nepad) started codifying its thoughts on regional integration, infrastructure and trade. This ties in strongly with the Department of Trade and Industry’s industrial policies, but there are all sorts of hurdles to implementation.
To this end Nepad said in mid-2016: “We cannot hope for the industrialisation of our continent without functional transport infrastructure. This requires not only a quantitative improvement of our infrastructure but also a radical simplification and harmonisation of regulatory conditions and procedures of business on the continent.”
What Ramaphosa signed up to on Wednesday in Rwanda’s capital, Kigali, is apparently still quite a long way from that and includes negotiating vexing issues such as customs clearance and quarantine.
News reports say Nigerian President Muhammad Buhari did not even attend the signing after stating his government needed to consult further despite his cabinet adopting the concept of free trade last week.
Many questions remain, such as what will happen to revenues disbursed within the Southern Africa Customs Union (Sacu). This dates back to the 1889 customs union convention between the British colony of the Cape of Good Hope and the Orange Free State Boer Republic, encompassing what are now called Lesotho, Botswana, Swaziland and Namibia.
The goal here is to promote economic development through regional co-ordination of trade. Sacu’s website says that as early as 1925, SA adopted import substitution policies, backed by common external tariffs on non-Sacu products.
There is a revenue-sharing formula for the distribution of customs and excise revenues collected by the union.
The measures guaranteed a regional market for South African manufacturers, while relegating the former British High Commission Territories to primary commodities production. But details are scarce on how these countries will benefit under a free trade regime that includes the entire continent. Trade and Industry Minister Rob Davies and Deputy Minister Bulelani Magwanishe attended the AU ministers of trade meeting in Kigali earlier in March.
The ministers approved for submission to the extraordinary summit of the AU heads of state and government the agreement establishing the AfCFTA as well as the protocols on trade in goods and trade in services that will form part of the agreement.
The ministers also approved a work programme for concluding the outstanding issues for implementation that are now taking place.
The authors of the plan claim it has the potential to create a single market from about $2.6-trillion worth of collective GDP of 54 countries.
So far, 44 countries have signed the AfCFTA, while 27 among them have signed a protocol to the treaty establishing the African economic community relating to the free movement of persons.
However, whatever Nigeria’s and SA’s misgiving are about signing up for the real deal, they are probably as labyrinthine and tortuous as Brexit negotiations.
There is little doubt, too, that they will be affected by the EU’s broad economic partnership agreements with African countries, and US President Donald Trump’s new isolationist trade vision.
IT INCLUDES VEXING ISSUES SUCH AS CUSTOMS CLEARANCE AND QUARANTINE