THE ROLE OF AFCFTA IN POSITIONING AFRICA IN GLOBAL AFFAIRS

Written by: Princess Sekyere Bih

It is a known fact that global governance was well structured, administered and controlled by institutions created without Africa’s inclusion at a time when they were under colonial bondage (Uhomoibhi, 2019).

Therefore, as late actors, their influence was challenged given that their interests were not taken into account in the policies and programmes that were developed by these bodies.

Also, neither were African countries’ perspectives and views reflected in such international legal and human rights instruments as the Universal Declaration on Human Rights adopted in 1948 by which the entire international community, including African States, are today assessed and measured. This created an unfair playing ground for Africa and developing countries.

Furthermore, Africa’s underrepresentation and voting power in these global institutions at the time impacted the level of influence Africa had. The dominance of the big powers in the United Nations Security Council as well as leadership of these same powers in institutions especially the World Bank and IMF, generated and formulated broad economic perspectives and ideas in their favour to the detriment of African countries. The lack of representation and weighty voting power, allowed the US and its cronies to shape and impose global economic governance policies (Oloo, 2016).

In spite of these constraints, Africa has participated and made some contributions in global affairs in several areas. A major area in which independent Africa made its mark from the early 1960s was in the advancement of political freedom and commitment to the entire liberation of the continent from imperial and colonial rule.

African states rallied global support in the United Nations, the Commonwealth and the Non Aligned Movement to defeat the scourge of colonial domination, racism and oppression. This formed the basis for the formation of the Organization of African Unity (OAU) which was created in May 1963, with the key reason being the Liberation Committee of the Organization which had the most interest, attention and resources of the continent. Oloo (2016) maintains that the defeat of the apartheid regime of South Africa in 1994 was in every respect the climax of Africa’s success in the struggle for liberation and a defining moment in its involvement in global affairs.

The Security Council’s five permanent members―China, France, Russia, the United Kingdom and the United States―were designated in 1945 and have since remained unchanged. While 10 non-permanent members have been added, including South Africa and Nigeria, these members do not have veto power and can only serve non-concurrent two-year terms. To date, both Africa and Latin America lack representation among the Security Council’s powerful permanent members.

Africa made its contributions to global peace and security by discharging these tasks either through its continental or sub-regional organizations such as ECOMOG or through the mechanism of the United Nations.

After the first UN Peacekeeping in Congo whose leadership was provided by Nigeria, the UN was instrumental in other countries such as Tanganyika (now Tanzania) in 1964, Rwanda, Liberia and Sierra Leone. The involvement of Africa in UN peacekeeping was not limited only to Africa: African countries were also actively involved in global peacekeeping operations in Lebanon, Iran, Iraq, the former Federal Republic of Yugoslavia, East Timor and other conflict areas.

Though Africa, along with other Non-Alignment Movement members campaigned for a new international economic order and, most notably, pushed for a UN conference on trade and development, among other such initiatives it ceded the power to change economic order to its chief benefactors.

A typical historical illustration of this concession of power to economic change, was the so-called Washington Consensus or IMF “prescriptions”, the Structural Adjustment Programmes which turned out to be perhaps the greatest factor that undermined Africa’s takeoff in the early 1980s.

For example, in Nigeria, the harshly iniquitous IMF conditionalities undermined industrialization projects, unrealistically devalued the national currency and halted growth. By the time the flaws and contradictions of the imposition became manifest in much of Africa, considerable damage had been done to their economies, setting back their growth and development by decades.

African States have not been able to establish self-activated and productive economic systems to generate prosperity and power as the Asians. With the continent’s status as primary producer of raw materials and net importer of manufactured products still very much unaltered, intra-African trade has also largely remained marginal in the context of global trade. Africa has been unable to develop and achieve prosperity and power, defend itself and advocate its own causes independently. This has greatly affected Africa’s role and position in global affairs.

The African Continental Free Trade Agreement & AU Agenda 2063

The African Continental Free Trade Agreement (AfCFTA) can be traced to the Lagos Plan of Action in 1980 and the Abuja Treaty of 1991, where the then Organization of African Unity established an Economic Community for Africa. In January of 2012, 44 heads of state met in Addis Ababa and agreed to establish a Continental Free Trade Area – CFTA (Nwafor, 2019).

The CFTA is aimed at helping African countries to boost economic and trade growth, transform their economies and achieve Sustainable Development Goals and African Union Agenda 2063. The AfCFTA is one of several AU frameworks supporting the Abuja Treaty’s end goal, the establishment of an African Economic Community (Parshotam , 2018).

The African Union’s Agenda 2063 aims to accelerate Africa’s economic growth and development as well as promote a common identity by celebrating its shared history and culture.

According to the African Union Agenda 2063, AfCFTA is “Africa’s blueprint and master plan for transforming Africa into the global powerhouse of the future. It is the continent’s strategic framework that aims to deliver on its goal for inclusive and sustainable development and is a concrete manifestation of the pan-African drive for unity, self-determination, freedom, progress and collective prosperity pursued under Pan-Africanism and African Renaissance.”

What is AfCFTA?

In 2018, member countries of the African Union took a major step to boost regional trade and economic integration by establishing the African Continental Free Trade Area (AfCFTA). They agreed to eliminate tariffs on most goods, liberalize trade of key services, address non-tariff obstacles to intraregional trade, and eventually create a continental single market with free movement of labor and capital.

The AfCFTA has been ratified by 29 countries and was scheduled to take effect in 2019, although negotiations on specific features of the agreement are ongoing. Once operational, the AfCFTA will establish a market of 1.2 billion people with a combined GDP of US$2.5 trillion. This could be an economic game changer for the continent (African Union, 2017).

The AfCFTA has been described by experts as a possible game-changer if implemented successfully because the AfCFTA is about creating a larger market. It aims to liberalize trade among African countries, significantly accelerate the growth of intra-Africa trade and use trade more effectively as an engine of growth and sustainable development by doubling intra-Africa trade, strengthening Africa’s common voice and policy space in global trade negotiations (Nwafor, 2019).

The AfCFTA will make Africa the world’s largest free trade area with a gross domestic product (GDP) worth about US$2.14 trillion dollars. This is key because the population of Africa is expected to grow to about 2.6 billion by 2050.

The AfCFTA seeks to remove tariffs on 90 percent of goods. According to the UN Economic Commission for Africa (ECA), the removal of tariff and non-tariff barriers will increase intra-African trade by 52.3 percent by 2020. This increment will then lead to a generation of more employment opportunities. It will also facilitate better use of local resources for manufacturing and agriculture and increase access to cheaper products.

According to economists, free tariff access to a market as huge as Africa would encourage service providers and manufacturers to leverage economies of scale. Hence, the increase in demand will lead to an increase in production and a decrease in unit costs. This would mean consumers will pay less for products and services and businesses will expand operations.

The AfCFTA will also help diversify trade and encourage a move away from extractive commodities, such as oil and minerals, which have traditionally accounted for most of Africa’s exports.

The impact of AfCfTA in Africa

By the year 2050, the AfCFTA would clearly be exerting the greatest impact on GDP per capita and reduce extreme poverty. For example, in lower-middle-income countries it would be boosting annual GDP per capita by over US$1 500, compared to the next biggest factor, technology leapfrogging, which would be adding just over US$900. By 2050 also, the AfCFTA would have reduced extreme poverty by over 6%, versus the next most effective driver, revolutionized agriculture, which would do so by about 5.5% (African Union, 2017).

The most recent estimates from the United Nations Economic Commission for Africa (ECA) suggest that the removal of tariffs on goods alone would contribute to increasing intra African trade with most gains accruing to the industrial sector (Economic Commission for Africa , 2018).

The largest increases in trade volume are expected in the textiles and apparel, vehicles and transport equipment, wood and paper, leather, and electronics sectors. In agriculture and agri-food sectors, the largest gains would be in meat products, milk and dairy products, sugar, beverages and tobacco, vegetables/fruit/nuts and rice(Oloruntoba & Tsowou, 2019).

The AfCFTA will encourage the creation and development of regional and international value chains, and facilitate their integration into existing ones by taking advantage of economies of scale and improved business and trade practices. More fundamentally, ratification of the AfCFTA begins the process of continental integration to change lives, reduce poverty and contribute to economic development (Economic Commission for Africa, 2019).

In summary the AfCFTA is meant to achieve the following nine benefits (Saygili, Peters, & Knebe, 2017);

  1. Create bigger and integrated regional market for African products.
  2. Permit producers to benefit from economies of scale and to access cheaper raw materials and intermediate inputs.
  3. Improve conditions for forming regional value chains and integrating to global value chains (GVCs).
  4. Allow consumers to have access to cheaper imported products from other African countries.
  5. Lead to better allocation of resources and faster economic and trade growth.
  6. Catalyze the structural transformation of the countries from resource and low technology based economies to more diversified knowledge based economies.
  7. Eliminate some challenges associated with multiple and overlapping trade agreements in Africa (spaghetti bowl).
  8. Encourage both intra-African and external direct capital flows to African countries.
  9. Stimulate cooperation in other areas such as technology transfer, innovation, investment and continent-wide infrastructure development.

Globally the AfCFTA will contribute to strengthening Africa’s   position in global trade. With the failure of the Doha Round and the crisis of multilateral trade negotiations (and ultimately of the World Trade Organization’s ruling authority), the latest international trade rules have been fixed under preferential agreements negotiated at bilateral, regional (continental) or trans-regional levels, from which Africa has been almost systematically excluded.

The consolidation of African regionalism can therefore prove decisive, on the one hand, to develop an adequate negotiating power vis-à-vis relevant commercial partners such as the European Union and China; on the other, to promote economies of scale and value chains that can boost African companies to compete on international markets. The realization of these benefits, however, is conditioned by the overcoming of numerous infrastructural, legal, and political challenges (Cofelice, 2018).

Challenges to AfCFTA

A major challenge to implementing the AfCFTA is poor infrastructure that dots Africa. There is the need for governments to modernize and improve the road infrastructure of all the countries involved. When talking about road infrastructure, all forms of transport that are part of the channels of supply chains used in commerce must be considered.

The network of roads and highways are best to start with, as this should dramatically reduce the transit times of heavy transport and people throughout the treaty regions. More investment should also be made in the rail network, as well as in ports and airports. These infrastructures are critical for commercial development.

It will be important to accentuate the efficiency of infrastructure and customs personnel within borders, so that there is free transit of merchandise according to the bases of the treaty, combined with the internal laws of the country where it is only transited or is the end point of destination of the goods or people.

Among these challenges are establishing the minimum and necessary legal frameworks so that resolutions of conflicts and disputes can be carried out efficiently.

Another critical and major challenge is financial control, due to the high flow of transactions that will result from the opening of investment markets and the exchange of goods and services, as well as the mobility of people. This control should be aimed at monitoring monetary flows and their origins.

The scourge of money laundering is a global problem, and is also an issue within Africa. It may not be easy to apply more efficient controls and policies adapted to the reality of the way in which criminal structures operate. However, the support of countries with more development in establishing and enforcing financial controls could help Africa, supporting economic growth through trade and investment, and bringing development and prosperity for its inhabitants (Sobalvarro, 2019)

E-commerce is also an important part of the future of this vision, which should be supported by clear rules, together with a modern regulatory framework. It could create the conditions to generate the sale of millions of products, following the major global trends of retail and business to business (B2B).

Conclusion

In summary the AfCFTA seeks to remove tariff and non-tariff barriers on goods and services from member states in order to facilitate intra-African trade; promote regional value chains to foster the integration of the African continent into the global economy; boost industrialization, competitiveness and innovation, ultimately contributing to Africa’s economic development and social progress.

The Continental Free Trade Area (AfCFTA) represents one of the most ambitious plans and frameworks geared towards ensuring that African countries trade more with one another. Though the main objectives of the AfCFTA are ambitious, it is doable if the identified challenges, including poor infrastructure are addressed. The appropriate legal frameworks and customs and the necessary financial controls must also be put in place.

This ambition is attainable and will positively influence Africa’s impact in world affairs.

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