On May 30th, 2019, thirty days after the 22nd African state had deposited the instruments of ratification, the African Continental Free Trade Agreement (AfCFTA) came into force. For many, the AfCFTA is a cause for significant optimism. As the wider world (mainly the west) is increasingly questioning globalisation and integration, Africa is moving closer together. The AfCFTA is at the centre of that, a pan-continental free trade area that the African Development Bank thinks ‘will stimulate intra-African trade by up to $35 billion per year, creating a 52% increase in trade by 2022; and a vital $10 billion decrease in imports from outside Africa’.
The ambition is incredible, “a single continental market for goods and services, with free movement of businesspersons and investments”, but, as they say, the proof is in the pudding. Africa has tried this before (although on a smaller scale). There are a number of Regional Economic Communities (REC’s), around the continent. However, when it comes to trade, they have never quite hit their potential.
For the AfCFTA to work we need to learn from the lessons that have held our own REC’s back as well as lessons from economic and trade areas such as the EU. Most important is that we must be the understanding that for the AfCFTA to meet its potential it must be designed with people at its centre and the social, economic and political realities of the diverse continent in mind.
1 – The Brexit lesson: a people-centred union
When it comes to trade unions, the elephant in the room is Brexit. One of the main drivers behind the Brexit vote was that it was seen as a project of the elite, benefiting certain people and groups while leaving another behind. If it is to work the AfCFTA cannot be seen as an elite project, it must be centred around the people that it is intended to serve this can be done in three critical ways.
First and foremost, African’s must be involved in the technical design of the AfCFTA. This means the team putting together the rules, regulations and policies that will govern the free trade area, must consult African people, civil society and business both big and small. Their input will be critical to ensuring that it is designed around the needs and aspirations of African’s.
Second, freedom of movement must not just apply to goods and money. If people cannot travel, meet, learn and engage with each other, the continent will not be able to pull together at a grassroots level. Thus, the AfCFTA must not just be about trade but about African’s coming together as well.
Third, it’s not just enough to sign a trade agreement, you must engage and educate people about them. In a previous post, I wrote about how good communication is a critical part of any policy this applies to the AfCFTA. People and business across the continent must be educated on what it is and how they can take advantage of it.
2- Learn from the EU: equality, flexibility and tempered ambition
After two devastating wars that had engulfed the world, integration was seen as the antidote to the rivalries and interstate competition that had been so destructive. As the world’s most successful trade union (despite its recent troubles) there is much that Africa can learn from the EU as it embarks on its own integration.
The first takeaway is matching ambition to reality. The first organised form of economic integration that emerged in Europe after the war was the European Coal and Steel Community. Which established a common market for coal and steel between 6 countries (France, Italy, Belgium, The Netherlands, Luxemburg and West-Germany). Though the Community was limited it went on to form the core of what we now know today as the EU, an ambition that the architects of the community held but knew they had to work towards. And therein lies the lesson for Africa. We are an incredibly diverse continent, with various countries pursuing development in their own way. Institution an all-encompassing trade union on July 1st, 2020 may be too much of political and economic shock for many to take. However, if – like Europe – we start a little smaller, with a group of goods and services that everyone can agree should be traded freely. We can, together, build the trust, institutions and relationships that will allow a wider system to succeed. This does not mean shelving the dream of a pan-African trade area, rather it means working towards it, building and expanding our common experience of it until it matches the vision.
Second, is that the political and economic power of the big countries must be balanced. As can be seen below the AfCFTA has the greatest levels of income disparity of any continental free trade agreement, and more than double the levels witnessed in blocs such as ASEAN and CARICOM.
This means that smaller countries must have genuine power in the institutional and decision-making design of the AfCFTA. The EU has historically faced a similar problem, Germany, France and the UK (though not for long) as the big political and economic powers in the union could dominate it. However, the political institutions of the EU are structured in such a way as to require consensus from all countries and that ensures that all countries have a say. It can be cumbersome and time-consuming but has been largely successful. Furthermore, the EU has been willing to be flexible, allowing some countries extra time to comply with certain rules, or like the UK to stay outside the Schengen and Euro. What this does is give some allowance for the political and economic realities of various states, thus making itself more acceptable to a wider section of the populace.
Africa’s diversity will require flexibility. We will not be able to move at the same pace, and the very real concerns that people have of being dominated by the two economic giants of the continent must be taken into account. Furthermore the aspirations and ambitions will differ from country to country, Kenya may want a trade deal with the USA but that shouldn’t mean it cannot trade with the rest of Africa within the framework AfCFTA. Flexibility allows for diversity, through which different countries and economies can develop different strenghts and specialisations. Combined, this diversity will boost trade within the contient, and beyond as Africa will be able to compete in a number of industries and products.
3- learn from ourselves: empower SME’s
Most businesses on the continent are Small or Medium Enterprises. If the AfCFTA is to be a success, it must learn from the existing regional economic communities, specifically what they fail to do – foster trade, by and between SME’s. The AfCFTA must put African SME’s front and centre. Doing this will require some imagination and bold policy moves as i have written about previously. This also ensures that the trade area won’t be the preserve of elite big businesses, and hopefully some of those SME’s will take advantage of the opportunity to grow.
Policy to make a dream a reality
I am not a sceptic. In fact, I am incredibly excited by the possibility that the AfCFTA can bring, I am in awe of the ambition and vision behind it and as an African, I am immensely proud that not only have we managed to get this far, but we are on the cusp of implementation.
However, the realist in me is afraid that if we do not get the design of the AfCFTA right it will be another in a pantheon of acronyms that litter the continent, shadows of the intent and ambition they were supposed to fulfil.
This need not be the case, if we learn the lessons from the failures of Brexit and the successes of the EU, and endeavour to keep the aspirations and endeavours of Africa’s people at its centre the AfCFTA can be the game-changer that we all hope it will be.