Africa’s free trade fairy tale

On Wednesday, 44 African countries committed themselves to eliminating cross-border tariffs and making border posts more efficient (John McCann/M&G)

On Wednesday, 44 African countries committed themselves to eliminating cross-border tariffs and making border posts more efficient (John McCann/M&G)

Simon Allison in Kigali

A cross section of Africa’s most powerful people gathered in Kigali this week to sell a dream - and sell it hard.

Rwandan President Paul Kagame, who revelled in his role as host of this extraordinary African Union (AU) summit, described this dream as “among the most consequential actions that this Assembly has ever taken”. Former Nigerian President Olusegun Obasanjo said that anyone who did not support it was a “criminal”. South Africa’s Cyril Ramaphosa invoked not one but three liberation heroes to underscore the significance of the moment:

“This is probably just as important as the formation of Organisation of African Unity (OAU).
This is what Kwame Nkrumah dreamt of, what Julius Nyerere wanted to see, what Nelson Mandela wanted to see realised. It’s truly a new dawn for Africa,” he said.

The presidents were speaking, of course, about the signing of the African Continental Free Trade Agreement, a landmark trade deal that would create a single market from the Cape to Cairo, and from Djibouti to Dakar.

On Wednesday, 44 African countries committed themselves to eliminating cross-border tariffs and making border posts more efficient. 27 countries signed an additional protocol to allow for the free movement of people across those borders.

If fully realised, this agreement would revolutionise trade in Africa. For the first time, Kenyan manufacturers would be able to sell their products in Nigeria without paying tax at every border crossing; a Ghanaian PR firm could open an office in Namibia without going through any regulatory hoops; and all African citizens would have the right to live and work in any African country.

“The border gates are now going to fall apart,” said Ramaphosa.

Better together

The dream of continental integration has long been a cornerstone of the AU, and the OAU before it. The AU’s long-term strategy document, Agenda 2063, paints a utopian vision of a continent effectively without borders, where citizens travel on an African passport and spend their afros, the proposed single currency.

The logic is simple: if Africa wants to compete economically with the big boys, it must play as a team. Africa’s entire population is roughly the size of India’s, but Africa is 55 countries, with 55-odd currencies and 55 regulatory environments and 55 different sets of red tape. Doing business on the African continent is a nightmare, both for foreign investors and for African businesses who want to expand.

In fact, it’s easier for African businesses to trade outside the continent. The statistics don’t lie: as of 2016, intra-African trade accounted for just 17.6% of Africa’s total exports. In Europe that figure is 70%.

“Economic integration thus responds not only to aspirations born out of Pan-Africanism, but also to a practical imperative linked to the economic viability of the continent,” said Moussa Faki Mahamat, chair of the African Union Commission. “Our peoples, our business community and our youth, in particular, cannot wait any longer to see the lifting of the barriers that divide our continent, hinder its economic take-off and perpetuate misery, even though Africa is abundantly endowed with wealth.”

But Mahamat, who replaced Nkosazana Dlamini-Zuma last year, also sounded a note of caution. He is more familiar than most with the disconnect between the AU’s noble ideals and its no-can-do record when it comes to implementation - and he knows that the continental free trade dream is still some distance from becoming reality. He pleaded with his fellow leaders to this time prove the doubters wrong.

“...some actors, but also our own peoples, have seen so many proclamations remain a dead letter, so many commitments without practical execution that they have come to doubt the strength of our commitment. This summit must, therefore, mark a break…It must confound those who, outside Africa, continue to think, with barely concealed condescension, that our decisions will never materialise.” said Mahamat.

Unfair trade?

Obstacles to a full, continent-wide implementation of the free trade area are large and many. The most serious, for now, is the reluctance of Nigeria, the continent’s biggest economy, to join the integration club.

Muhammadu Buhari so nearly signed on the dotted line. Summit gossip had it that the Nigerian President was already on his way to the airport in Abuja when he abruptly cancelled his trip, apparently swayed at the last minute by vocal opposition from trade unions - a constituency he cannot afford to alienate in the run-up to next year’s election.

“We at the Nigeria Labour Congress are shocked by the sheer impunity or blatant lack of consultation in the process that has led to this,” said Ayuba Wabba, who heads the labour movement. “We have no doubt this policy initiative will spell the death knell of the Nigerian economy.”

These fears are not unfounded. Although all economists seem united in predicting that greater economic integration will lead to greater prosperity - potentially increasing intra-African trade by 52% in the next four years - there may also be a shake up of the established economic order. So while the continent as a whole will win, there will be individuals, companies and maybe even countries who will lose out in the short to medium term. Persuading them to act for the greater good regardless of the personal cost will be a major political challenge.

Another challenge, of course, is to get the free trade agreement ratified. It now goes to parliaments all over the continent who must rubber-stamp the text, a process which could take years. The bureaucratic hurdles have already claimed a major scalp: South Africa, which in Ramaphosa has one of the agreement’s most vocal cheerleaders, did not actually sign the agreement. Ramaphosa said that although he was committed to doing so, legal requirements meant that local stakeholders must be consulted first.

But even should all this red tape be cleared, more torturous negotiations lie ahead. As much as African leaders deserve credit for taking just two years to thrash out this agreement, to make the self-imposed deadline - encouraged by Kagame, who was desperate to conclude the deal during his term as AU chair - they postponed dealing with some of the most contentious issues.

The protocols on competition policy and intellectual policy have yet to be agreed; nor is there any accord on rules of origin, the criteria to determine where a product is actually from. These are usually among the most contentious areas of any free trade negotiation, so expect plenty of contention to come.

For all the fine words and noble ideals expressed at the Kigali summit, and for all the undoubted progress that has been made, a fully-functional African Continental Free Trade Area is still many years - and lots of compromise - away.

So put away your afros, because you won’t be spending them quite yet. And don’t bank on disappearing borders any time soon.

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