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I confess, I am an AfCFTA sceptic

The Africa Report | 15 February 2022

I confess, I am an AfCFTA sceptic

By Kasirim Nwuke

Economist with more than 25 years of experience at the national and international levels. He works and writes on economics, science, technology and innovation, and society with special focus on the digital economy.

Last year, I was asked to speak about the benefits of the African Continental Free Trade Area (AfCFTA), the ambitious trading agreement that supporters believe will deepen African integration and transform the continent in fundamental ways.

My response was that I am sceptical about the AfCFTA, and the cut-and-paste EU-style regional integration that the continent has been pursuing since the AU treaty came into force in 2002.

I do not share the view that the AfCFTA is the solution to Africa’s low level of intra-Africa trade. Neither do I believe that it will trigger the great transformation of Africa’s economies that its advocates assert it will.

For me, the timing was wrong – transboundary infrastructure is expensive to build and costly to maintain, and there is no financing for them now. Furthermore, building integrated domestic markets is more important for the continent’s economic growth than imposing a continental free trade area from above.

Growing intra-African trade is important. However, it is not a compelling reason to establish a new Regional Integration Arrangement (RIA) atop the many Regional Economic Communities (RECs) that already exist. The topmost priority should be boosting productive capacities and economic diversification to increase Africa’s capacity not only to trade more with itself but also with the world.

I recognise that an integrated African economic space is a long-sought aspiration of generations of African leaders and formalised by treaty in the 1991 Abuja Treaty establishing the African Economic Community (AEC) that identified RECs as the building blocks and drivers of the AEC.

It also established monitorable indicators of progress towards the AEC. Judged against the indicators, progress towards integration in the RECs has been slow and varied, raising concerns about whether the AEC will ever eventualise.

The AfCFTA is designed to accelerate the speed of integration. However, I do not believe that a forced, poorly timed continental free trade area imposed from the top is the right response to the slow pace of integration at the REC level, or to the low level of intra-Africa trade, reported by UNCTAD to have averaged, excluding informal cross-border trade (ICBT), two per cent between 2015 and 2017.

There is no requirement that African countries must trade with each other. Indeed, countries may be better off increasing and diversifying their trade with the rest of the world than increasing trade with other African countries.

Progress has been made in integrating African economies at the REC level. According to UNCTAD, intra-regional trade has been growing in all of Africa’s RECs. The AfCFTA could erode all this progress. Industries that have survived behind REC walls may collapse if opened to Africa-wide competition.

Little is discussed about the economic and national security risks that the AfCFTA presents. Unlike EU countries, most African countries are weak and depend highly on external aid and technical assistance, which leaves them vulnerable to external influence.

The AfCFTA could become a Trojan Horse through which external actors infiltrate the whole continent via the weakest or most opportunistic countries, to wreak havoc on the continent’s development possibilities.

Finally, a continental free trade area is one step towards the creation of a continent-wide currency union and eventually a “United States of Africa”, for which I believe there is little if any enthusiasm on the continent.

Africa continues to cut and paste from the EU model of integration as if the drivers of integration are the same for both continents. Africa’s circumstances are different. The colonial borders that separate Africans today are not meaningless as some argue.

Citizens have socialised into identities derived from and defined by these borders. National interests have emerged from them that cannot easily be extinguished by appeals to African solidarity. How open a country should be to intra-Africa trade should be a matter of domestic policy, with the political costs, especially in ethnically fragmented countries, fully in view.

Yet there is seldom any discussion of AfCFTA’s possible political costs. Trade and regional integration treaties are seldom matters of election campaigns in the few African countries with some semblance of competitive democracy.

It is thus not correct for African governments to act as though they have the mandate of their citizens to enter into trade treaties that could be adversely consequential for them. African countries do not have economic independence comparable to that of EU member states; they are without EU-level infrastructure, bureaucratic competence, human capital, and financial resources.

The AfCFTA is being oversold. It is being presented as the solution to all of Africa’s problems – from inadequate pharmaceuticals and vaccine manufacturing capacity to poor transport and logistics infrastructure to poverty.

External actors are actively participating in this oversell. The IMF in 2018 predicted that the AfCFTA will trigger a 52.3% increase in intra-Africa trade in 2022. Yet more than 12 months on since it came into effect in January 2021, no trading under its provisions has been reported.

Way forward

The AfCFTA, a premature birth, is now a fait accompli. Like all premature births, it is struggling to survive as an idea whose time has come and as a project. To survive several things must be done.

First, advocates must stop overselling the AfCFTA and presenting it as the panacea to Africa’s development challenges. The temptation for big programmes should be resisted as a failure at them will reinforce AfCFTA scepticism.

Second, address AfCFTA scepticism. The AfCFTA is off to a slow start, not because of lack of political will as some have asserted but because, I argue, of growing scepticism about it in government bureaucracies in many member states.

Third, build trust to address policies such as tax and investment policies to avoid a race to the bottom as countries try to out-compete each other in the race to attract foreign direct investment to take advantage of the agreement.

Fourth, retain the RECs as building blocks for Africa’s regional integration and strengthen them. They are natural experiments and incubators of integration. They have support in the regions which could be leveraged to help AfCFTA could gain credibility at the regional level

Fifth, encourage countries to up their productive capacities. The low level of intra-Africa trade reflects low levels of productive capacities in countries. Countries cannot trade without production

Finally, recognise that national interests matter. The borders separating countries matter no matter how much their origins and existence may offend.

Bottom line

Until sceptics are reassured, the implementation of the AfCFTA may be measured in annual and conference reports, not in volume and value of trade among its signatories.

 source: The Africa Report