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African Trade Liberalization: Prospects And Challenges

African Trade Liberalization: Prospects And ChallengesBy Kenneth Jukpor

Although trade facilitation has been central to the growth and development of many thriving economies around the world; it has been grossly under-exploited in Africa, whose population of over 1.2billion has combined Gross Domestic Product (GDP) of $2 trillion.

As part of efforts to correct this economic disadvantage in the continent, talks started in 2012 among African Heads of State and Governments and they resolved to establish the African Continental Free Trade Area (AfCTA) treaty to create a single continental market for goods and services in member nations of the African Union, with free movement of business persons and investments.

The objectives of the AfCTA include; to create a single continental market for goods and services, with free movement of business persons and investments, and thus pave the way for accelerating the establishment of the Continental Customs Union and the African customs union, expand intra-African trade through better harmonization and coordination of trade liberalization and facilitation regimes and instruments across Africa.

Other goals are; to resolve the challenges of multiple and overlapping memberships and expedite the regional and continental integration processes and enhance competitiveness at the industry and enterprise level through exploiting opportunities for scale production, continental market access and better reallocation of resources.

Consultations and negotiations for establishing the treaty commenced in June 2015 during the 26th Ordinary Session of the AU Assembly Heads of State and Government in Johannesburg, South Africa. However, the draft agreement was finally signed on March 21, 2018 during the 18th Extraordinary Session of the Assembly of AU Heads of State and Governments in Kigali, Rwanda but 44 of the 55 African countries initially signed the treaty, while nine others opted not to sign.

The 44 initial signatories included host Rwanda, Niger, Angola, Central African Republic, Chad, Comoros, Congo, Djibouti, The Gambia, Gabon, Ghana, Kenya, Mauritania, Mozambique, Cote D’Ivoire, Seychelles, Algeria, Saharawi Republic, Senegal and Equatorial Guinea.

Others include Morocco, Swaziland, Benin, Burkina Faso, Cameroon, Cape Verde, Democratic Republic of Congo, Guinea, Liberia, Libya, Rwanda, Madagascar, Malawi, Mali, Mauritius, South Sudan, Uganda, Egypt, Ethiopia, Sao Tome and Principle, Togo, Zimbabwe, Sudan and Tunisia.

Nine others that did not sign the agreement included Nigeria, South Africa, Zambia, Tanzania, Burundi, Eritrea, Botswana, Lesotho and Namibia; however South Africa, Zambia, Namibia and Botswana later signed.

As Nigeria, the leading African economies by nominal GDP refused to sign the treaty, several questions have been raised as to the benefits, challenges and feasibility of the lofty agreement tipped to boost Africa’s intra-regional trade.

Commendably, the recent African Women in Maritime (WIMAFRICA) 2018 Continental Conference on the theme; “Trade Facilitation for African Integration- Prospects and Challenges” was set-up to address some of the underlying issues and the newly sworn-in WIMAFRICA President, Barr. (Mrs.) Jean-Chiazor Anishere aptly provided some recommendation.

Anishere noted in her paper that it was important to support a non-tariff policy initiative to enable firms to take advantage of the CFTA, even as she called for the establishment of a Continental Customs Union (CCU) supportive of structural transformation.

According to her, such initiatives would guarantee regional opportunities through smart trade industrialization and go a long way towards generating trade reforms that could contribute more effectively to poverty reduction and the achievement of the 2030 Agenda in Africa.

She aptly noted that global markets offer immense opportunities for companies in developing countries, but such companies must overcome severe hurdles before being able to export to global markets and regional exports could be the learning curve for these companies.

“Barriers to accessing markets in the region are often lower than those for accessing global markets; neighboring countries’ markets are often similar in taste, standards, distance, and culture. Creating regional markets can thus allow companies to expand operations and create economies of scale, making them more competitive”

“Gaining access to regional markets also increases incentives for more investment flows, and permits suppliers to specialize and integrate into regional supply chains that ultimately cater to both domestic and international markets” she said.

Speaking further on the strategic role of women in the facilitation of intra-African trade, she said; “From the participation of this Continental Conference, you can see that we have nineteen African states represented with over foreign 192 delegates. Many of these delegates are Chief Executive Officers (CEOs) and top managerial officers in government agencies and they would be able to put in a voice to encourage their governments to appreciate why trade facilitation should be given preference with respect to the emphasis on integration of trade in Africa”

Despite these lofty objectives and postulations about AfCTA, there are also concerns that the initiative may not yield the intended results and the Nigerian government has said it was delaying its signature to the agreement to widen and deepen domestic consultations and ensure all concerns were addressed, as it would not sign any agreement that would not fairly and equitably represent the interest of Nigeria.

Since Nigeria’s population of 180million is about 15% of the entire African populace, some experts argue that the treaty would impact on government revenue and social welfare, as elimination of all tariffs among African countries would erode the trading states’ treasury by up to $4.1billion annually and deepen poverty, with millions of Africans potentially exposed to starvation and death.

It is also important to note that several similar initiatives like the Economic Community of West African States (ECOWAS) Trade Liberalization Scheme, ECOWAS Common External Tariff (CET), East African Community’s (EAC) Trade and Markets East Africa (TradeMark East Africa – TMEA), among haven’t addressed the challenges limiting trade among nations in various sub-regions.

Speaking to MMS Plus newspaper on his concerns about AfCTA, the President of Manufacturers Association of Nigeria (MAN), Engr. Mansur Ahmed revealed that MAN was part of a Presidential committee currently studying the agreement.

Mansur noted that the committee which had delegates from the Nigerian Shippers’ Council (NSC), Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), among other relevant agencies, was yet to conclude its study.

“We want to make sure that we have every opportunity for our manufacturers to export. We need to look at the Rule of Origin which states that if a nation is going to participate in the agreement and share the free trade Custom arrangement, there must be a clear justification that the product is produced in an African country” he said.

He argued that since Nigeria had an advantage by virtue of its large population and an already advanced manufacturing sector, the country should take advantage of this trade agreement to promote export but the nation must first ensure that the local environment is competitive and regulation and rules are all supportive and maximize the use of local materials.

He noted that the ECOWAS Trade Liberalization Scheme hasn’t worked effectively due to lack of sufficient consultation and collaboration among stakeholders and the governments in the member states.

“To a large extent some of these agreements were signed without full understanding of the key issues. The execution of the agreement has also suffered tremendously and most members of MAN have complained bitterly that the transit countries aren’t complying with the ECOWAS Trade Liberalization arrangement. This explains why it is so important that when we go into the Continental Free Trade agreement, we recognize that it isn’t just signing the agreement that matters but to ensure that the terms in the agreement are complied with by all parties and particularly by all governments” he said.

Meanwhile, the Former Chief Executive Officer of Ghana Shippers Council, Dr. Kofi Mbiah told our correspondent that the problems in regional trade would persist among African nations because the countries do not adhere to the dictates of the rules and regulations.

Mbiah who was speaking to MMS Plus on the sidelines at the recent WIMAFRICA Continental Conference, explained that the way to adhere to these rules was to do monitoring and evaluating of how the respective nations were faring with respect to the agreement they entered.

“There is need to create enforcement mechanisms and if people aren’t enforcing these rules; we must come back to the table and think of how we can develop sanctions to ensure compliance. Unfortunately, that is an area we are lacking. The monitoring isn’t there and the evaluation of performance with respect to these agreements isn’t there and the enforcement mechanisms are very weak” he posited.

Indeed, to strengthen trade in Africa, existing commitments should be fully implemented and laws will have to be applied; while transparency and better complaint mechanisms will have to be at the heart of any initiative.

Overcoming these challenges wouldn’t be easy; however, enhancing regional integration should be a top priority for Africa as well as the timely implementation of an inclusive AfCTA. Can Africa get it right with this agreement? Would the overzealous customs officers and corrupt border officials shed their corrupt skin? Would African nations shelve unhealthy rivalry for the good of the entire region? Would they continue to patronize goods and services from other continents when good alternative lie within Africa? Well, Africa may never know the gains of AfCTA if it doesn’t give it a shot! Albeit, Africa should approach the trade agreement headlong, determined to overcome the challenges and maintain the political will to triumph.

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