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What Future For African CONTINENTAL FREE TRADE ZONE?

Some seeming roadblocks not withstanding, the African Continental Free Trade Area (ACFTA) agreement signed March 21, in Kigali, the Rwandan capital represents a bold step towards launching the African continent to the next level of economic development.

I hasten to welcome the agreement signed by the African countries under the auspices of the African Union(AU). This, in my view is yet another continental initiative intended to speed up Africa’s development as was the New Partnership for African Development(NEPAD), which was signed at the dawn of this century.

Last week’s ceremony in Kigali was a culmination of an initiative which started since 2012 when the African countries agreed to work towards the emergence of the continental-wide free trade zone.

Following the agreement, negotiations started in 2015 under the coordination of the United Nations Economic Commission for Africa (UNECA), leading to the agreement last week in Kigali.

The Meaning of Africa Free Trade Zone:

For a long time, trade between fellow African countries has been at a low ebb due to a number of factors.

According to the United Nations Council on Trade and Development(UNCTAD), which oversees international trade matters, intra-African trade accounted for a miserable 10.2 per cent  of the continent’s total trade volume in 2010.

The colonial history of the continent has made most African countries establish trade agreements with their erstwhile colonial masters at the expense of intra-African trade.

Thus, Francophone countries found trading with France easier than the Anglophone countries on the continent. For a long time, Nigeria also had Britain as her largest trading partner until recent increases in trade volumes with US, China and india which seem to challenge Britain’s stronghold of trade relations with Nigeria.   Other countries colonized by Portugal, Germany, the Netherlands and Spain similarly engaged  in favourable bilateral trade terms with their former colonial masters in like manner. 

The second factor has been absence of critical infrastructure that support trade especially sea ports, ships, security, and expertise among others. One example is that goods meant for shipment  between  some African countries ended up going to some Western Sea Ports before landing at the final African destination.

Against this background therefore, African Heads of States and governments had conceived the idea of the African Free Trade Zone to promote intra-African trade among the 55 countries of the continent with the view to bringing about the desired economic development.

Taking in cognizance,  Africa’s current population estimated at about 1.2billion people and a Gross Domestic Product(GDP) of about $2.5trillion, the African Free Trade Zone becomes the largest anywhere around the World since 1995, when the World Trade Organisation(WTO) came into being as the successor organization to the defunct – General Agreement on Tariffs and Trade (GATT), one of the Bretton Woods institutions formed at the end of the second World War to oversee matters of international trade.

The agreement signed in Kigali provides for signatory – countries to remove “trade barriers” which  tend to hamper trade between and amongst African countries. It is thus envisaged that the coming into force of the African Free Trade Zone will resolve such issues as delays encountered by business people at borders of African countries on issues relating to  assessment and payment of tariffs.

The free trade zone would initially cover 90 per cent of goods while 10 per cent of products identified as “sensitive” would still be under the tariffs regime.

A major target of the free trade regime is to eventually promote free movement of people as already practiced in the West African sub-region under the Economic Community of West African States (ECOWAS) protocol on free movement of people and goods and ultimately enthrone a regime of single currency in the long run. The single currency initiative is one the  ECOWAS member countries have pursued for  about two decades without success in the sub-region. It will be interesting to see how AU will achieve this at the continental level.

Before the free trade zone takes effect,  at least 15 or 22 countries will have to ratify the the Kigali document in their respective countries. Although there is no consensus on the minimum number of countries required for take-off, this would be followed by further negotiations on some issues including a list of the “sensitive” goods that would still attract tariffs. The negotiations would also cover areas like investment and competition policy and intellectual property among others.

Blurred Future for the Free Trade Zone

An excellent idea, at least viewed against the progress made by the European Union which operates a free trade zone, the ACFTA faces a bleak future given the attitude of two leading members of the AU-Nigeria and South Africa.

At the Kigali Summit, South Africa, the second largest economy on the continent was conspicuously absent, so was Nigeria, currently Africa’s largest economy.

South Africa’s new President, Cyril Ramaphosa said his country would sign the agreement after the national government would have secured approval of the various governmental organs including the regional governments, the central parliament and other stakeholders.

Just like South Africa, Nigeria on her own part backed down from attending the conference at the last minute after it was confirmed that President Muhammadu Buhari would attend the Kigali meeting.  Nigerian officials said President Buhari’s last minuet change of mind was to enable him “do more consultations” on the matter. The official statement in Abuja was not explicit on who the President wanted to further consult on the issue.

The sudden change of mind by both South Africa and Nigeria has raised doubts about the success of the free trade zone. The fears stem from the fact that for a process that has been on since 2015, one wonders why South Africa did not get the necessary approvals from its governmental system prior to the Kigali meeting. And for Nigeria, why was it impossible to do all consultations since 2015 when the negotiations started? This is the question, that perhaps, the Nigerian authorities would address in due course.

Viewed critically, the actions of the two most important countries is a major set back to the free trade zone. Although the free trade zone could take off without the two economic giants on the continent, it would not achieve the desired results.

But what are the fears of the two-giant economies?

Analysts have argued that since the free trade agreement has a provision for ratification by each country before its effective take-off, the countries still have a chance to accept or reject their participation in the free trade zone.

Secondly, if any country should fear economic domination, it should be the smaller African countries since South Africa and Nigeria even under the current arrangement dominate trade in their various sub-regions(West Africa and Southern Africa) respectively.

Giving the leadership of the two regional influentials, it is feared that some of the small countries in their sub-regions might excise caution in the final ratification of the treaty, thereby delaying the effective take-off  of the free trade area.

Experts at the UNECA have posited that on its take-off, African countries are likely to loose about $4billion in annual incomes derivable from tariffs hitherto charged on imported goods within the continent. The experts however, project that a whopping $16billion could be earned by the people of the continent annually,  through enhanced economic activities across the continent, thereby, boosting the overall wellbeing of the people.

Against this background therefore, there is a school of thought that says it would have been more strategic for South Africa and Nigeria to quickly take advantage of the new dispensation and move speedily towards substantial control of emerging opportunities in a barrier-free trading environment by leveraging on the strength of their national economies. It is left to be seen how the two countries react to this school of thought.

Whatever the misgivings at the moment, pundits envisage that the African Union will soon establish a secretariat for coordination of all activities of the ACFTA. If and when this is done, any gray areas that may have made Nigeria and South Africa to with hold their signatures from the Treaty will be expeditiously addressed for the ACFTA to deliver its full benefits to Africa and her peoples. 

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