Business

Africa’s free trade agreement will uplift the continent

2019-07-25 00:04

The ratification by 54 countries of the African Continental Free Trade Area is an uplifting experience, write Paul Tembe and Jeff Sehume.

It is true that getting the finances and economics right invariably influences everything else.

More than 60 years after postcolonial political independence, Africa is activating this commonsensical maxim.

We have now realised that a combination of pragmatic leadership and a fitting economic architecture is a route to securing elemental Maslow’s hierarchy of needs.

The ratification of the African Continental Agreement on Free Trade Area (AfCFTA) by Africa’s 54 countries – excluding Eritrea – is an uplifting experience.

The agreement, meant to formalise inter-Africa trade and boost continental business spending, could be the genesis of realistic continental economic autonomy.

Such economic sovereignty is urgent since, by 2014 estimates, trade among African countries averaged 16% and the successful implementation of the agreement would generate a combined trading of $6 trillion by 2030.

Those of a more retrospective optimistic bent might even say the agreement is the beginning of the realisation of Kwame Nkrumah’s vision of linking political independence to economic self-sufficiency.

Of course, the real measure of Africa’s economic growth has not been quantifiable because GDP projections rely on unreliable data and most of Africa’s economic activity takes place in the informal sectors.

As such, Africa’s value is yet to be unlocked and maximally exploited for its citizens and communities.

There is no doubt that postcolonial Africa’s development and transformation have been hobbled by the lack of a framework to capitalise on its abundant natural resources.

Instead, its resources have been extracted and exploited unceasingly and unethically by external third-party agents.

For these phenomenon to have been sustained for more than 60 years, arguably Africans have themselves to blame for countenancing the divide et impera long after independence.

This is not to deny the fact that the external extraction of resources was also not under the control of most African countries which relied on using an inherited colonial infrastructure.

Carving out a two-way trade system, beyond mere extraction for beneficiation elsewhere, has remained an elusive dream as seen in the lack of functional oil refineries in oil-producing Nigeria and Angola.

Hopefully then the new free trade agreement will enable Africa’s resource curse to be transcended and allow its natural endowments for public welfare to fulfil the “Africa Rising” narrative.

Fortunately, there are several countries that have established a foundation – in decisive leadership, knowledge economies and moral rectitude in governance – to make possible the African agreement.

Countries leading the way in these foundational areas include Rwanda in its zero-tolerance of corruption, Kenya in the information and communications technology incubation sector and Mauritius in its business process outsourcing.

Needless to say, the free trade agreement will depend largely on a more streamlined and non-bureaucratic African Union (AU) to achieve its targeted objectives.

This will require peer countries to cooperate better in building up the collective capacity instead of having pockets of excellence in the continent.

Hence the need for the AU to effectively implement Rwandan President Paul Kagame’s The Africa Report, aimed at institutional reform of the AU, to be financially self-sufficient through, for instance, a 0.2% levy on exports from member states.

The thinking here is to arrive – soonest – at a point where Africans can fund their own peacekeeping missions and finance their own institutions.

As to perennial accusations that Kagame is authoritarian, in response, the expression that people in glass houses should not throw stones applies here.

The liberal democratic model has its own structural weaknesses in being a system abused by oligarchs (Donald Trump’s chaotic billionaire Cabinet) and failing to deliver, for the many, material human rights such as healthcare, education and safety.

It is not a coincidence that student debt in North America now far exceeds consumer debt, pegged this year at $1.5 trillion.

Let us also remember that Muammar Gaddafi’s Libya, before his death by Nato forces in 2011, is an example of a benign dictatorship that managed to provide for all its citizens the highest human development index on the continent.

In the final analysis, Maslow’s hierarchy of needs is still relevant.

People’s physiological needs – food, water, jobs, safety – remain paramount and any leader able to deliver these by any sensible standard deserves support.

The embarrassing case in Zimbabwe of armed thieves stealing 500 loaves of bread is a source of eternal shame for a country that was once the region’s breadbasket.

Quite obviously, there is much riding on this free trade agreement to unite Africa’s 1.3 billion inhabitants and set up a punted $3 billion economic zone that would finally join the community of nations on its own terms and reliant on its own resources.

Marcus Garvey was right: “If you have no confidence in self, you are twice defeated in the race of life.”

To this end, one hopes there is active will to disengage, soonest, from foreign donor and aid dependence that stifles Africa’s resolve to determine its own destiny.

In extolling the symbolism of the new free trade agreement, we should not ignore the evident structural problems such as economic disparities in the 54 countries, the different income and GDP levels –dominated by South Africa, Nigeria and Egypt – and regulatory discrepancies.

Still, maximising our natural resources through the AfCFTA mechanism, will achieve two additional objectives.

First, it will capitalise on Africa’s demographic dividend by addressing the skills shortages, unemployment and bureaucratic bottlenecks that hinder entrepreneurism among young people.

This is important since the youth are aware that the job security and accompanying benefits (car, house, free tertiary education) enjoyed by baby boomers and Generation X will no longer be easily attained.

Instead, in the precariat age, millennials are aware that what is required in the 21st century is life-long learning and moving towards start-ups that are in line with the demands of the fourth industrial revolution.

Second, the AfCFTA and the Kagame Report follow in the footsteps of the intervention to stem illicit capital outflows from Africa.

It is concerning that the Mbeki commission tasked with appraising this matter concluded that, in the past 50 years, Africa has lost more than $1 trillion in illicit outflows.

At present, more than $50 billion is lost through illicit financial outflows which could have been used to address the Sustainable Development Goals and empower Africa to have commendable human development index levels such as China post-1978.

The AfCFTA then, to enable relatively free trade of goods, services, capital, and investments, is certainly a game changer for rising from a hopeless continent to a prosperous place for all of its people.

Tembe is a senior researcher at the Thabo Mbeki African Leadership Institute and Sehume is a contracted civil servant


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October 13 2019