University of Johannesburg: African Continental Free Trade Agreement: Lovely on paper, probably dead in the water, writes Dr Sizo Nkala

Dr Sizo Nkala, a postdoctoral research Fellow at the Centre for Africa-China Studies (CACS) at the University of Johannesburg, recently penned an opinion article published on the Daily Maverick, 29 March 2021.

On a continent dominated by autocratic regimes run by rapacious cronies and cartels who thrive on the status quo, the African Continental Free Trade Agreement is more likely to be honoured in the breach. The trade pact is everything these regimes so passionately and violently despise, yet they are the ones to be counted on to implement it.

It could be that the framers and authors of the African Continental Free Trade Agreement (AfCFTA) are upstanding men and women with abundant and unyielding confidence in Africa’s potential.

However, in a continent populated by equally unyielding autocratic and cartel-driven regimes, compounded by the inherent weaknesses of the African Union, the implementation of the pact will be an uphill task.

The AfCFTA was signed by African heads of state and government on 21 March 2018 in Kigali, Rwanda, with the exception of Eritrea. It came into effect on 1 January 2021 upon ratification by more than 22 states (36 states have deposited their ratification instruments thus far) in rather dampening circumstances of the Covid-19 pandemic on the rampage.

The AfCFTA represents an ambitious plan which seeks to create a single, liberalised market for goods, services and capital in a 55-nation bloc of 1.3 billion people with a combined gross domestic product (GDP) of $2.5-trillion. Through the gradual elimination of tariffs and non-tariff barriers to trade, the AfCFTA endeavours to create a borderless continent with free-flowing trade and seamless movement of people and capital.

The potential economic benefits are astounding. The World Bank estimates that the new trade regime could unlock growth in income of up to $450-billion, while lifting 30 million people out of poverty by 2035. Moreover, the free trade area, which is also the largest in the world, would place Africa on a sound footing in the global economy through efficiency gains, the emergence of new value chains and industrial diversification. It is expected to boost intra-African trade, which currently stands at 15% compared with 60% in Asia and 68% in Europe. This means that more value will be created in Africa generating millions of jobs for the continent’s youthful population.

The AfCFTA is fundamentally underpinned by values of economic inclusiveness, broad-based empowerment, property rights and the rule of law. Therein lies part of the problem.

On a continent dominated by autocratic regimes run by rapacious cronies and cartels who thrive on the status quo, the AfCFTA is more likely to be honoured in the breach. The trade pact is everything these regimes so passionately and violently despise, yet they are the ones to be counted on to implement it.

According to the 2020 Freedom House Report on democracy in the world, only 14% of Africa’s 55 countries are designated as free, 49% as partly free and a staggering 37% as unfree. A tiny and fortunate 9% of its 1.3 billion people are said to be free, 52% partly free and 39% unfree. Of the 10 worst performing countries in the world in terms of democracy and freedom, five are in Africa.

Thus, most of Africa’s population and territories are lorded over by dictators who have anchored their regimes on tight and exclusive patronage networks protected by trigger-happy militias that hold no brief for human rights. In countries such as Nigeria, Sudan, Togo, Uganda and Zimbabwe, democratic forces, consisting of their mostly young populations, have been literally beaten and shot out of politics.

In the Ugandan elections earlier this year, the prominent young opposition leader Bobi Wine, who mounted a formidable challenge against the country’s long-time dictator Yoweri Museveni, was placed under illegal house arrest, which saw his home being surrounded by security forces for almost two weeks. His supporters have been brutalised in the most egregious of ways as the country underwent a violent election process.

Recently in Senegal, protests were violently suppressed and the internet disrupted following the arrest of the opposition leader, Ousmane Sonko.

Niger and Chad have also been rocked by violent protests in which hundreds of opposition supporters have been beaten and jailed, and the internet shut down.

In Zimbabwe, the Zanu-PF-dominated Parliament is on the verge of passing what it calls a “Patriotic Bill”. The bill bans people from talking to foreign governments without government clearance or criticising the government which may put the country in a bad light in the international community. This as opposition leaders have been illegally recalled from Parliament, and many subjected to arbitrary arrests and torture.

Thus, the AfCFTA comes amidst widespread political decay in Africa, which has stunted institutions and disenfranchised the majority of the people. As democratic spaces continue to shrink, economic exclusion is the logical consequence.

It is in these autocracies that corruption, looting and plunder of the national resources become the order of the day. According to the United Nations, Africa lost $830-billion due to illicit financial flows connected to the illegal sales of valuable minerals such as gold, diamonds and platinum in the first 15 years of this century. This amounts to over $50-billion lost annually to corruption facilitated by the same cartels that run most of Africa’s regimes.

A report released to Daily Maverick recently estimated that Zimbabwe loses $3-billion annually due to the smuggling of diamonds and gold out of the country by economic cartels linked to political heavyweights. The report estimated that the country could be losing half of its $21.4-billion GDP to corrupt activities facilitated by the country’s elite.

In Angola, about $600-billion was earned from exports since the end of the civil war in 2002. However, reports suggest that 15% ($90-billion) of those earnings went to private accounts. The daughter of the country’s former president Eduardo dos Santos amassed billions of dollars in personal wealth while running the country’s oil company Sonangol and has become the face of the country’s entrenched patronage system.

In 2020, Equatorial Guinea’s vice-president Teodorin Obiang Nguema, who is also the son of the country’s long-time ruler Teodoro Obiang Nguema, was fined $32-million by a French court for corrupt activities and had his $127-million mansion in Paris seized.

Even in comparatively well-governed South Africa, the Judicial Commission of Inquiry into Allegations of State Capture has revealed one scandal after another related to the abuse of office and the looting of billions of rands. According to some reports, State Capture may have cost South Africa R1.5-trillion, almost a third of its R4.9-trillion GDP.

It is no surprise that African countries make up seven out of 10 countries with the highest income inequality in the world as measured by the Gini index. Moreover, the International Property Rights Index shows that African countries make up six of the 10 countries with the worst property rights record, including Africa’s biggest economy, Nigeria, which features at number 123 out of 129 countries. One wonders just how in God’s name will property rights suddenly be respected, or competition tolerated under the AfCFTA Protocol on Intellectual Property, Competition Policy and Property Rights.

Another challenge, which partly reinforces the scourge of autocratic rule and corruption in Africa just described, is the weakness of continental bodies such as the African Union (AU), under whose auspices the AfCFTA will be implemented. Autocracy, corruption and human rights abuses continue to deteriorate despite the existence of such instruments as the AU Convention on Preventing and Combating Corruption (2003), the African Charter on Democracy, Elections and Governance (2007), and the African Charter on Human and People’s Rights (1981).

One of the main reasons for the failure of the AU to implement these decrees, and there is no reason to believe the AfCFTA will be spared, is the lack of financial resources. The AU depends for its budget support on member states and external donors such as the UN, International Monetary Fund (IMF), the World Bank and the European Union. For example, as recently as 2019, the EU funded AU projects to the tune of €320-million, which was almost half of the entire AU budget.

African countries are at various levels of development, with 23 classified in the low-income category, 21 as low middle income, six in the middle income and two in the high-income categories. Such diverse development profiles and some countries’ reliance on import duties as both instruments of domestic industrialisation and a source of revenue may result in non-complementary tariff schedules, thus slowing down intraregional trade.

According to the AU, more than 40% of its member states do not pay their annual membership fees. As of October 2020, 18 countries (a third of the AU members) were penalised under the AU sanctions regime for failing to pay their membership fees. The lack of a sustainable financing mechanism not only undermines the AU’s independence but also starves it of resources for capacity- and institution-building.

The AfCFTA as an institution will require a substantial budget to establish its presence across the continent to ensure the implementation of and compliance with the new trade regime. This will be a resource-intensive process that can only materialise with adequate financial support. China has already promised cash assistance for the AfCFTA and this opens up the institution to possible undue external influence.

The AU’s lack of capacity-building resources also has serious implications for the composition of the AfCFTA’s Secretariat. It means the AU cannot train its own human resources, forcing it to rely on expatriates or the African diaspora with requisite skills but who at times possess dual citizenship which may divide their loyalties. As such, the AU needs to urgently find effective mechanisms for sourcing resources that would enhance self-reliance and protect its institutional integrity.

Moreover, the tension between national and territorial sovereignty over supranational authority has hampered the effectiveness of the continental institutions. Member states are likely to comply with the AfCFTA regulations only to the extent that they align with their national interests, especially if the AfCFTA compliance monitoring mechanism is not robust enough.

African countries are at various levels of development, with 23 classified in the low-income category, 21 as low middle income, six in the middle income and two in the high-income categories. Such diverse development profiles and some countries’ reliance on import duties as both instruments of domestic industrialisation and a source of revenue may result in non-complementary tariff schedules, thus slowing down intraregional trade.

Also, the AfCFTA has not adopted common external tariffs for trade to be applied to trade with non-member states. This means that countries can enter into bilateral trade ties with major external actors such as China, the US and the EU, which can provide products more efficiently at lower cost, thus offsetting African competition. Due to the length of time it will take for the elimination of non-tariff barriers and the building of sufficient infrastructure before efficiency gains in intraregional trade kick in, sourcing products from external actors will always make sense for most African countries.

However, the lessons from the Covid-19 pandemic have demonstrated that global supply chains are vulnerable to external shocks like the pandemic wreaking havoc in the least developed economies. Their strategic interests cannot be confined to short-term narrow national interests. Rather, they are tied ever more tightly to continental initiatives like the AfCFTA building systems for withstanding future shocks.

Hence, the full realisation of the AfCFTA will be an uphill task. The scourge of autocracy and the domination of cartels in most African countries represent serious obstacles to its implementation. The inherent weaknesses of the AU, such as its lack of financial independence and subordination to the interests of the diverse member states, do not help the prospects of the AfCFTA.

The AU must have a substantial war chest to see through the resource-intensive process of establishing a functional free trade area, especially one of the scope and magnitude of the AfCFTA. Accommodating the diverse interests of 55 countries under a single trade regime will be a difficult undertaking. However, the Covid-19 pandemic has shown that Africa’s future survival lies within the success of continental integration. Without more secure regional value chains, every country will fall victim to global shocks like the pandemic and no one knows when they will occur.

One hopes that countries’ disposition towards the AfCFTA will be informed more by a continental rather than national interest calculus.

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