The past seven weeks have been extremely rewarding for me and over 200 other learners from the continent who were accepted into the “Making the African Continental Free Trade Area (AfCFTA) Work” programme offered by the United Nations Economic Commission on Africa (ECA). The six-week-six-module course delivered virtually with both English and French as the mediums of instruction was empowering as it took us through the history of the regional integration project.
Passing one module at 60%; three at 70%; and the last at 80%; it was extremely humbling when in my final assessment test I got 95% – pushing my average to 75%. Although I did work doubly harder in the past seven weeks, I was building on a strong foundation built since September 2020 when we first launched Jambo Africa Online as a platform to promote the AfCFTA. So for this reason, let me pay my homage to the editorial team and in particular, Francois Fouche, our Senior Editorial Correspondent and a specialist as a Director at the Growth Diagnostics (in collaboration with the North West University Business School). This sterling performance essentially confirmed to me that we are doing an excellent work as a resource for information on the AfCFTA.
As the title of the course is self-explanatory, it asserted – without any hesitation – that regional integration is important to Africa’s development agenda. It showed us that regional integration can promote economic growth and sustainable development (that include regional infrastructure) through facilitating free flows of investment; goods and services; capital and of people across borders. This also helped me understand the wisdom of the African Union (AU) in arguing that there can never be peace and security until there’s development – therefore, the success of the “silencing the guns” campaign is predicated on the attainment of development. This last point speaks to the dialectical argument of cause and effect. Thus the truth about the trade-growth nexus remains cardinal.
It has been a highly fulfilling journey from 1991 when the AU agreed on the Abuja Treaty which came into effect from May 1994. The Treaty developed a roadmap for achieving an economic and monetary union in Africa through a gradual process of coordination, harmonisation and progressive integration of regional economic communities (RECs) over six stages spanning 34 years. While the Treaty has been criticized for its ambitious targets, it is reassuring to note that significant progress has been achieved to date: the process has been delayed, but not derailed – despite the COVID-19 pandemic.
The first stage has now been completed, with eight RECs officially recognized by the AU. The second stage has not been fully completed because progress by the RECs and by members within the RECs has been uneven. The third stage, which envisaged the full establishment of free trade areas (FTAs) and the customs unions (CUs) at the REC level by 2017 is still work-in-progress in some RECs. Currently, the integration process is somewhere between stages 3 and 4. While a continental free trade area (CFTA) did not feature explicitly in the Abuja Treaty, it was deemed a logical step along the way to a continental Customs Union. and negotiations on it started in June 2015.
Mixed progress so far, due to varying levels of ambition and implementation, all the eight AU-recognised RECs have registered delays in reaching key milestones. However, four of the RECs — East African Community (EAC), Economic Community for the West African States (ECOWAS), Common Market for Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC) — have made important progress at regional integration, while the remaining four are struggling with the very first step in the process. It should be noted that recognition of eight RECs as opposed to the geographically determined five (southern, western, eastern, northern and central) has created a salad bowl as one country may belong to two RECs which may create problems of double dipping.
Even among the more successful initiatives, progress has been slow and erratic. For example, after the launch of the SADC FTA in August 2008, several milestones have been missed, including SADC’s vision to establish a customs union by 2010, a common market by 2015, a monetary union by 2016 and single currency by 2018.
The EAC, on the other hand, has made significant strides in a relatively short period. It launched its customs union in January 2005, within just five years of coming into operation in July 2000. Its Common Market Protocol entered into force in July 2010, and the protocol for the establishment of a monetary union was signed in November 2013. With an intra-regional trade share of about 19 percent in 2017, the EAC is clearly the best performer among Africa’s economic blocs.
We also assessed the socioeconomic impacts of COVID-19 and looked at strategies for recovery after the “pancession” – the pandemic induced economic recession. The course has argued that regional integration has become both more important and more urgent as a means to build back better. In particular, the pandemic has highlighted the need to build self-sufficiency at national and regional levels to reduce dependence on extra-African imports of food and essential products. The availability of these goods became erratic and shortages arose as global supply chains were disrupted by the pandemic.
So regional trade can be an engine of growth in the recovery process and, more generally, it can spur the development of regional value chains, contributing to the structural transformation of Africa and strengthening the continent’s resilience to external shocks, such as COVID-19.
At the cross-country level, there appears to be a robust correlation between growth and trade. Research suggests that this correlation is no coincidence: trade actually causes growth. More specifically for Africa, a recent study using panel data for ECOWAS member states shows that “exports were consistently positively related to growth”.
The underlying hypothesis is that, if trade is good for growth, and growth is good for poverty reduction, then trade must be good for poverty reduction. The evidence generally suggests that opening up to trade is beneficial for poverty reduction in developing countries.
Regional trade offers an easier route to boosting Africa’s trade than external trade, which is subject to greater competitive pressures and more pervasive non-tariff barriers. Even here, the room for improvement is substantial — as research shows that intra-Africa trade is the lowest of all major regions, at approximately 18%, compared to 54% in the North American Free Trade Area, 70% within the European Union and 60% in Asia. Moreover, intra-Africa trade features a larger share of manufactures than Africa’s exports to the rest of the world, which are concentrated in low value-added mineral products, as the IMF study has found. For example, during 2000-2017, manufactured goods represented 36% of intra-Africa exports, compared to 24% of African exports to the rest of the world.
Thus, regional integration can play a vital role — both in increasing Africa’s global trade and in enabling diversification away from dependence on commodity exports and excessive reliance of imports of food and other basic goods from outside of Africa. It can also help in building regional economic infrastructure; in fostering food and energy security; in generating jobs for the increasing number of young people; and in alleviating poverty and delivering shared prosperity.
Linked to trade is the issue of foreign direct investment which can propel industrialization and structural transformation on the continent; support economic growth and alleviate poverty by enabling technology transfer; facilitating export diversification; enhancing the productivity of local enterprises; establishing or reinforcing forward and backward linkages; and supporting regional integration and insertion into regional and global value chains.
Let’s conclude by reiterating to the six key objectives of the AU’s Accelerated Industrial Development of Africa (AIDA), which call on us to:
- Integrate industrialization in national development policies;
- Maximize the use of local productive capacities and inputs;
- Add value to abundant natural resources;
- Develop small-scale and rural industries;
- Take maximum advantage of Africa’s partnerships to enable the transfer of technology; and
- Establish and strengthen financial and capital markets.
These should be what we all strive for as a continent. And I strongly believe these strategic objectives should be fully espoused by the “Rubik Initiative” – a Brandhill Africa (Pty) Ltd’s initiative for structured engagement for the economic development agencies and business – that I introduced three weeks ago on this platform.
Enjoy your weekend.
Saul Molobi
Publisher
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