28 March 2018

Africa: The African Continental Free Trade Area - Another Significant Milestone Towards Africa's Integration

Photo: © NEPAD
Ibrahim Assane Mayaki, CEO of the NEPAD

As a relatively young Minister in the mid-nineteen nineties sitting within my Organisation of African Union (OAU) peers, I pondered deeply if Africa will pull itself together and forge ahead.

At that time, Rwanda was coming out of its genocide and most of West Africa was still experiencing military coups. Central Africa was somewhat calm but some countries there had subtle political tensions, with what is termed the "first Congo war" taking place in the former Zaire now Democratic Republic of the Congo (DRC). Whilst Somali's civil war intensified, Ethiopia in Eastern Africa commenced the developmental-state experiment under Prime-Minister Meles Zanawi and Eritrea gained independence.

Norther Africa, pretty much intact with "strong" leaders steering the affairs of state and some of whom played a prominent role in the Israel-Palestinian peace process which resulted into the creation of the Palestinian National Authority. The end of apartheid and the ushering in of a democratic South Africa was the most positive highlight during this period for the OAU as it demonstrated that the OAU; as a Continental liberation movement, had achieved its ultimate goal of politically liberating Africa.

Globally the mid-1990s also saw the rise of alternative and new media, multiculturalism and strengthening of democratic principles; thanks to the internet and satellite television. The world was indeed changing but Africa was still branded as the hopeless continent.

Fast forward, this month in Kigali, at the 10th Extraordinary Session of the AU Assembly, Africa's Leaders came together to append their signature on the establishment of an African Continental Free Trade Area agreement (AfCFTA).

Upon implementation, the agreement will make the continent the world's largest trade zone where goods and services can be traded freely among African Union member states. Of the 55 African Union member states, 44 appended their signatures on the AfCFTA agreement, 43 countries signed the Kigali Declaration and 27 signed the Protocol on Free Movement of Persons, Right to Residence and Right to Establishment.

Following the ratification of the AfCFTA by countries its implementation would increase intra-African trade by 52% by the year 2022. In addition, the agreement helps bring about the removal of tariffs on 90% of goods and also liberalise services and tackle other barriers which hamper trade between African countries, such as long delays at border posts.

I must say it was a proud moment for Africa and for me in particular being in the plenary hall of the Kigali Convention Centre and observing an emotional yet joyous and enthusiastic signing of each African Leader or their Minister taking turns to append their signature on the Agreement, Protocol and Declaration, all under the able leadership of the President of Niger, H.E Mahamadou Issoufou of Niger as the Leader of the AfCFTA, flanked by President Paul Kagame of Rwanda current AU Chairperson and H.E Moussa Faki Mahamat, Chairperson of the African Union Commission.

Africa a land that is characterised by diverse rich cultures and ethnicities, with a multitude of civilisations, has for the past 60 to 50 years strived to become integrated and relevant. In their book titled the Power of Babel, Ali and Alamin Mazrui noted that "Africa's ethnic heterogeneity is reflected in language.

Per capita there is a wider range of languages in Africa than in any other continent in the world. By a strange twist of destiny, there are also more French-speaking, English-speaking and Portuguese-speaking countries in Africa than anywhere else in the world".

Interesting, one of the fastest growing languages in the world is also found in Africa- Kiswahili a Bantu language, has spread across Eastern Africa into the Congo and southwards into Southern Africa. Hence, such a complex continent has since its post-colonial era seen the need to integrate so it can globally and economically become relevant and influence global geopolitics.

The gradual end of colonialism in the 1960s and 70s now proves to have brought mixed blessings to Africa. We now have 55 countries; 47 of which are on the African continent and the remaining are island nations. Thus, the end of colonialism gave birth to new multiple states cutting across people's ethnicity, cultures, traditional norms and value-systems.

In 1963 the newly "independent" African countries came together to form an organisation (OAU) that would promote the unity and solidarity of the new African countries and act as a collective voice for the African continent.

Notwithstanding this aspirational desire, the same countries also emphasised the importance of the territorial sovereignty of their respective countries and therefore the OAU remained neutral in terms of internal country specific affairs. By the mid-1970s regional economic blocks (now referred to as the Regional Economic Communities) started to emerge.

With the introduction of Regional Economic Communities; RECs as commonly known, African integration began to take two very different paths. The first being a somewhat political path which focused on the eradication of all forms of colonial ways of life and notions by defending the interests of independent countries and helping to pursue those territories that were still-colonised- the OAU path.

The second, focused on regional economic integration with the 2 most advanced; Economic Community of West African States (ECOWAS) and the East African Community (EAC), signing a number of protocols that called for free movement of goods, services and its peoples within the respective regions. Africa now has 8 African Union recognised Regional Economic Communities, but there are also a number of sub-regional bodies that are actively pursuing Africa's integration agenda.

Although the two identified integration paths that Africa underwent were formal and voluntary in nature, they were both influenced by geographical location and proximity of nation states that were influenced by cultural and linguistic commonalities.

There was also other historic integration attempts that were involuntary in nature and a good example was the French commune system in West Africa during colonialism. Another form of small-scale "circumstantial" and loose integration can be seen in the Mali Federation, the Ghana-Guinea-Mali Union, the Federation of Rhodesia and Nyasaland the Senegambia Confederation- all these federations and confederations unfortunately collapsed within a short space of time.

On the other hand, countries that were integrated just after independence attempted to disintegrate or even became separate nation states.

So despite the forms of integration that Africa or parts of Africa experimented with, by 1991 the Abuja Treaty established the African Economic Community (AEC), the Abuja Treaty proposed that the regional economic communities (RECs) as the building blocks of Africa's integration.

Ten years later, in 2001 at the OAU Summit, the New Partnership for Africa's Development (NEPAD) was adopted by African Heads of States and Government as the socio-economic programme that ought to accelerate economic co-operation and integration among African countries.

The same OAU Summit recognised the need for close involvement in the formulation and implementation of all programmes of the RECs within the African Union. Additionally, the OAU/AEC Summit in Lomé, Togo adopted the Constitutive Act of the African Union, which formally replaced the OAU in 2002.

Following these important milestones of the African integration discussion and agenda, came the reform process for a vibrant African architecture. And the architecture has re-introduced the integration agenda. The discussion has generally concluded that due to economies of scale and tiny economies of most African countries, a regional dimension and approach to Africa's transformation is the best way forward.

The sequence of Africa's path to integration as I have underlined, amongst others, place a demand on an urgent need to re-think Africa's priorities and therefore a coherent and consolidated strategy was launched at the 50th Anniversary of African Unity.

In 2013 the African Heads of State and Government adopted Agenda 2063 as an expression of the political intentions and aspirations of the Continent, guided by a new vision of an integrated and prosperous continent. The Agenda enunciates Africa's renewed resolve and commitment to pursue sustained socio-economic growth and development.

The 1st Ten Year Implementation Plan, running from 2013 to 2023, draws heavily from the experiences in the implementation of the NEPAD programme. While the Plan outlines broad development priorities and programmes, there is need to translate Africa's development vision further into concrete actions.

In order to respond to the 10 year implementation plan of Agenda 2063, the NEPAD Agency is re-shaping it's structure in order to strengthen its effectiveness through standards setting, enhanced governance, and efficient delivery with diligent oversight and sound management of a collection of projects.

This allows the Agency to anticipate and provide a strategic added value both on the Continent and at the global level.  Our main focus would be to serve as a Think Tank body providing not only strategic input on Development issues at the continental level, but also focused on implementation through regional approaches.

Our key role would also be to serve in a Fund Management structure creating the conditions for the efficient implementation of the continental initiatives and programmes. NEPAD Agency has been reoriented to deliver its work through 4 broad programmes namely: (i) Industrialisation, science, technology and innovations (ii) Regional Integration, Infrastructure and Trade (iii) Natural Resources Governance; and (iv) Skills and Employment for Youth.

Globally, most developed economies are beginning to look inwards and to strengthening their respective financial systems so as to prepare for the 4th Industrial Revolution- the age of wisdom.

Europe is reaching a point of saturation in-terms of consumer spending, and continues to turn inward grappling with internal political challenges which has culminated into a right-wing ideological political shift buttressed by the increasing immigration and emigration crisis. Terrorism has intensified sharply over recent years in conflict areas and poses increasing risk to major economies around the world.

The OECD forecasts a Global GDP growth of a modest 3 and half percent in 2018 from just under 3% in 2016. Despite the projected average growth in 2018 the impact that Africa will have on the Global economy will remain very marginal due to the fact that the Continent does not add-value in the production process and this is purely because of the lack of Africa to industrialise and compete internationally.

When compared to China with 1.3 billion people and Africa with 1.1 billion people- similar population seizes, China contributes some 15% to the global economy- and this is a result of China's recent history of consistent investments in mass-industrial production through its well-articulated and executed industrial policy stemming from the 1970s.

Let me quickly stress that these figures should not be understood as just numbers being thrown around but it paints the sad state of Africa's reality on the one hand, and on the other hand it amplifies the opportunities that Africa can exploit through leapfrogging with technology to rapidly industrialise and lift our people from poverty to prosperity .

It is viewed globally that business and consumer confidence has improved generally, but investment, trade and productivity have not strengthened as excepted. And this has a direct impact on both foreign and domestic investments into Africa's development, particularly into Africa's infrastructure.

With growth rates in the developed world more-or-less stagnating, Africa although not significant to make a registered impact still reminds the 2nd fastest growing region . Therefore, Africa holds much promise to those investors willing to invest time in understanding our local economies, and identifying opportunities presented by the booming middle class who have an endless appetite for consumables.

It is worth noting that the Africa Report titled Africa in 2017, almost all 55 countries end their forecast by anticipating to implement or commission energy, transportation and other infrastructure projects like seaport-terminals and airports.

Our countries continue to appreciate the irreversible need to industrialize by streamlining trans-boundary infrastructure projects as indicted in the Africa Report 2017 . However, if Africa is to be successful in increasing the number of regional and domestic infrastructure projects and show impact in advancing sustainable inclusive development, wholesale changes are needed in mind-set and perceptions on the issue of "Investment Risk" in Africa.

The period between 2010 and 2020, the continent is set to add 122 million people to its labour force promising significant economic activity in key sectors on the condition that political stability becomes the norm and demographic dividend of a youthful and employed population with adequate spending power becomes a reality.

Thus, a great opportunity for investment and trade exist for Africa, and this decade can certainly become Africa's decade of inclusive growth and prosperity.

Whilst we take due note of the registered implementation successes of major infrastructure projects on the African continent, the issue of Africa being an investment risk destination continues to hinder project development and implementation.

Although, risk mitigation mechanisms as well as policy and regulation reform strategies are being put in place to address some of the challenges faced in funding infrastructure projects in Africa. The risk issue still presents challenges to the institutional investment community in their determination to be more actively engaged in funding African infrastructure.

The NEPAD Agency, under the guidance of the African Union is uniquely placed to spearhead its MoveAfrica initiative through linking the Programme for Infrastructure Development in Africa (PIDA) and the One-Stop Boarder Post project, with Trade Facilitation initiatives like the African Union's programme- Boosting Intra-African Trade (BAIT) and the framework on Accelerating Industrial Development of Africa (AIDA).

The African continent cannot hope for industrialisation without functional transport infrastructure. Industrialisation will require quantitative improvement in infrastructure and a radical simplification and harmonization of regulatory conditions and procedures for companies and firms to trade significantly across borders.

The AU-NEPAD Continental Business Network (CBN) is continuing its agenda towards de-risking infrastructure projects as a key element to attract financing. Pension and Sovereign Wealth Funds emerged as the key catalyst to close this financing gap. In September 2017, NEPAD under the guidance of the CBN, has initiated a revolutionary campaign that is Africa-led and Africa-owned, aimed at increasing the allocations of African asset owners to African infrastructure from its currently low base of approximately 1.5% of their assets under management (AUM) to an impactful 5% of AUM.

The CBN has called for a more strategic engagement with domestic institutional investors in support of this campaign. The purpose of the 5% Agenda campaign is to work with Pension and Sovereign Wealth Funds including Ministers of Finance to gradually increase infrastructure investments, using financial resources available on the continent and strengthen public-private partnerships to mobilize financial and global institutional investments.

In conclusion, the AfCTA, is a monumental step for Africa; another significant milestone in Africa's integration process. I have to however aptly point out that the AfCFTA was signed in Kigali the capital that experienced complete turmoil some 24 years ago but is now poised to become the futuristic "Wakanda".

This article is from the New Partnership for Africa's Development

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