Overcoming the barriers for intra-African trade to double in a decade can feel like a Sisyphean task – impossible to complete. But that is the objective of the Boosting Intra-African Trade (BIAT) action plan, which targets to double flows between January 2012 and January 2022.
Many individual African nations will not, on their own, have significant production or purchasing power any time soon. To accommodate such young populations and produce or enable meaningful employment, GDP growth has to sky-rocket, not hobble along. That requires clubbing together.
Yet global and regional trade agreements are grappling with shifting geo-politics or are being tripped up by populism. Or both. So, on a continent not known for its speedy cohesiveness, will leaders have the pragmatism to give up lofty individual ambitions that may be more realisable at a regional level?
Traditionally, governments have sought the hegemony given by a national airline, stock exchange, broadcasting corporation and grid. But when, in November 2017, an east African chief justice broached the idea of a regional court to handle electoral disputes, it sounded sensible and not just because it would mitigate the risk of bias. It would also enable the building of expertise.
Of course, there is no shortage of plans and accords in Africa. Most political leaders can put together a team of policy wonks, legal eagles, technology experts, financial pundits. Eventually a reasonable agreement is likely to be born, preferably capturing the many disparate, uneven needs and desires across the continent, after behind-the-scenes retreats and maybe even Skype calls.
Once agreed, implementation creates a whole new world of opportunities. It also opens a Pandora’s box of Machiavellian tricks that can appear as suddenly as police officers on our roads.
This requires leadership at another level. Leadership that is about anticipating, preventing and removing blockers to make way for a common good. Leadership that is equally about promoting the upside and advocating compliance (in actions, not just words), as well as celebrating success just long and judiciously enough to make it feel worthwhile. There is still too much to be done.
The BIAT action plan focuses on seven interlinked areas. The objectives, at times, reiterate the obvious, such as harmonising and simplifying customs and transit procedures and documentation.
One of the worst legacies of colonialism is a disproportionate passion for forms, stamps and (in some cases) queues. All reinforcements of an outdated authority. Even introducing technology has not always been radical enough. We need to go back to basics. Allow the trader to transport that food product or spare part container to its destination quickly, safely and legitimately.
The plan’s success rate will be improved if it uses African and global lessons learnt where appropriate.
Coupled with BIAT – as closely as possible if we are to avoid duplications and contradictions – is the Continental Free-Trade Agreement (CFTA), due finally to be adopted in March 2018. How it will overcome the hurdles that the current regional economic communities have not remains to be seen.
The president of Niger and the executive secretary for the United Nations Economic Commission for Africa consider intra-African trade to be “different from the trade goods that flow from Africa to the rest of the world, which are mostly crops, mineral products, metals and oil” — presumably because all of these are susceptible to globally-determined prices and bought by companies that want to create their own end products in factories that have reliable, cost-effective power, trained labour, good transport links, scale and so on.
Instead, President Mahamadou Issoufou and Vera Songwe believe that the CFTA will allow local small and medium-sized enterprises, the continent’s overwhelming employer, to manufacture and sell “value-added and industrial products like processed agricultural goods, basic produce, and financial and retail services” to neighbours, both next-door and a few thousand kilometres away. This could force infrastructure and education to improve. It could even substitute imports.
It is incumbent upon BIAT and CFTA to enable and require Africans to:
- Produce physical and digital products and services that Africans need or want
Here’s a list to start with:
- Dairy, especially in West Africa. I know Hausa-Fulani cows can produce yoghurt, as I saw it on sale in Ibadan, Nigeria. I went back to buy it the following day, having been assured I would find the shop open. It was firmly closed. (Will the trade agreement encourage better service?)
- Suitable textiles and clothes for the different climates across the continent.
- Solar PV panels. Renewable energy is a significant new employer in countries like the United States of America, Germany, India, China and Brazil.
- Integrated inter-city and urban transport using renewable energy (carriages and stations) and offering modern payment options and amenities such as Wi-Fi.
- Affordable financial services (not only plain vanilla collateralised loans) for small and medium-sized enterprises. Fintech platforms such as loans4SME.com, Lendingkart Finance and incomlend.com already exist and, where appropriate, could be adapted for Africa.
- Patent lawyers. Generally, I am concerned Africa is producing too many lawyers, given the advancements in artificial intelligence, but this is a specialisation the continent needs.
- Make it easier to pay for them
Ever tried buying cotton from Burkina Faso when you’re in Nigeria? Flutterwave is a Nigerian/US payments solution that can be used across the continent. Binkabi is allowing cross-border trade to take place without using the US dollar.
- Resolve disputes quickly and online
To encourage cross-border (including high volume, low value, business-to-consumer) trade, buyers and sellers must have confidence that any issues will be resolved in a timely and efficient manner.
Consumer ombudsmen have signed up twenty large, voluntary retailers (including supermarkets) in some European Union countries on a single platform. Once a customer inputs a case onto this platform, the retailer has to respond, otherwise it gets heavily penalized. This gives a controlled environment, with a centralized authority.
In Africa, we require functioning ombudsmen in the major economies where there are common retailers. How will the CFTA/BIAT address this?
- Protect personal data
Governments in Africa must start taking data protection and encryption far more seriously. Only then can they get the private sector to do so. And not just for financial transactions – data can be worth more than the money.
- Protect intellectual property
The capacity for evaluating and protecting intellectual property varies vastly across the continent. It needs to be in place in order to improve the quality, relevance and timeliness of research and development on the ground.
- Have affordable, reliable Internet access
“The ability for businesses and consumers to use the Internet requires an enabling environment – a set of laws and institutions that support the process of buying, paying, and delivering digital [and physical] products”, hence the points above. Robust Internet and communications technology is the infrastructure to enable e-commerce, which will in turn bolster cross-border trade.
- Selectively use blockchain
Nuts don’t require sledgehammers.
It is, understandably, tempting to use technology that can combat corruption, even at a price. However, scalability, latency, lack of mainstream understanding, resistance (deliberate or otherwise) by some sectors to rely exclusively on data in digital form, outdated legacy systems (which may not always be the case in Africa), lack of national/cross-border regulation (which may appear counter-intuitive, but is it being discussed by CFTA/BIAT?), standardisation, interoperability, accountability, legality of smart contracts, privacy/security, and competition/anti-trust are all open challenges. Private distributed ledgers could help, but the cost-effectiveness still needs to be evaluated.
- Cede national pride for the benefit of the continent
CFTA has to be phased in if it is to work. Competition will, like IP and e-commerce, only “be part of the second phase of CFTA negotiations – expected to be launched after the conclusion of negotiations on goods and services”. However, it is one of the causes for any regional trade agreement to unravel. Still, African governments that are ready to stop hanging onto old, territorial ways of doing business and share the cake (or kola nut or other equivalent) may be pleasantly surprised at the results. (The Citizen)
Zimbabwe has invited bids for stakes in up to eight loss-making state-owned enterprises, including its national airline and power utility, to help plug a ballooning budget deficit, its deputy finance minister said on Wednesday.
President Emmerson Mnangagwa, who took over from Robert Mugabe two months ago, is under pressure to deliver on his promises to ease spending pressures on the budget and revitalise the economy, which collapsed especially after violent and chaotic seizures of white-owned commercial farms in early 2000s.
Zimbabwe’s budget deficit hit $1.82 billion or 11.2 percent of GDP in 2017 from an initial target of $400 million, while its economy hardly grew in 2016.
Over the last four years, Zimbabwe has failed to cut its deficit despite promises to do so, mainly due to high government spending on public sector salaries, which accounted for more than 90 percent of the 2016 budget.
“We are diluting our shareholding in those entities and our shareholding might go to zero percent in some entities,” Terence Mukupe told Reuters.
Zimbabwe either partly or wholly owns 92 companies, most of which have been making losses for years due to mismanagement, high operating costs and old equipment. In 2016, 38 such parastatals ran losses totalling $270 million, according to a report from the president and cabinet office last October.
National airline Air Zimbabwe, which runs four aircraft, is sitting on a more than $300 million debt pile while railway operator National Railways of Zimbabwe recently received a $400 million recapitulation from South Africa’s Transnet.
Power utility Zesa Holdings has struggled since 2000 to generate enough electricity to meet demand and power outages have hurt businesses in recent years, according to the Confederation of Zimbabwe Industries (CZI).
In 2016, Zesa suffered a $224 million loss due to higher electricity import costs and because it is selling power at below cost.
Zimbabwe is also selling off its shareholdings in several other companies, including bankers, ZB Holdings and Agribank as well as insurer, Zimre Holdings, which has operations in several regional countries. (Reuters)
The Communications Authority of Kenya (CA) has released a revised competition report that proposes the country’s leading telecommunications company separates into business units.
The report has been subject to criticism, especially from Safaricom’s rival and Kenya’s second largest telecom, Airtel.
Airtel has argued that the report could be damaging for smaller operators due to its failure to finalise the dominance debate.
“We strongly think that the CA urgently needs to reassure all stakeholders of its independence and commitment to ensuring a properly regulated telecoms industry,” stated Airtel.
The CA has responded, stating that the report was revised following wider consultations and input contributed by all industry stakeholders.
The report’s first draft was disclosed to the media in February 2017, releasing the suggestion that Safaricom split its voice and mobile money units, becoming competitors of rival firms.
This would have also led to the telecommunications company sharing its infrastructure with its competitors.
“The proposed remedies are rather weak and not comprehensive,” Airtel added.
“We can’t quantify the direct impact [of the delays] on Telkom,” said Telkom Kenya, Kenya’s third largest telecommunications firm.
“However, from a general perspective, the failure to deal with the issue of dominance in this industry is tantamount to having no regulation of competition in our market.” (African Business Chief)
OVERVIEW : Paper _ Implications of External Trade and Investments Agreements on CFTA
The purpose of this paper is to provide an overview of the interaction between Africa’s main external trade arrangements(EPA, AGOA) and the CFTA.
Section A provides an overview of EU trade agreements with Africa and their implications for Africa. Exportoriented industries are likely to benefit or at least stay competitive in the EU market, but various local industriescould be negativelyaffected as a result of the implementationof the EPA.
Subsequently, Section B provides an overview of US trade arrangements with Africa and discusses US trade and investmentpolicy with Africa.
SectionC discussesinteractionsbetween EU and US trade arrangementsand the CFTA.
SectionD concludes with some recommendations.
OVERVIEW : Paper _ Private Sector in CFTA negotiations and Implementation
Section A of this paper describes the state of play of Continental FTA (CFTA) negotiations and possible contours of a deal by the next AU Summit in January 2018. It shows that negotiators have done a lot of work but Phase 1 of the CFTA which focuses on trade in goods has not been fully completed. Thus, the CFTA negotiations remains an on-going process which provides a lot of room for business advocacy .Furthermore, the negotiation mandate for Phase 2 of the CFTA negotiations, which might contain issues of investment policy,e-commerce competitionpolicy,services liberalisationand regulation,has not yet been agreed.
Section B discusses the possible role of the private sector in the CFTA negotiations and implementation. In 2012, Heads of State agreed to the need to immediately establish regular formal platforms for organized private sector for trade policy dialogue, including at the level of African Union. In policy papers leading up to the CFTA negotiations, the African Union Commission had proposed an African Business Council as part of the institutional structure of the CFTA. However none of these decisions or proposals have been implemented and the current draft CFTA text does not contain references to organized private sector nor does not seem to recognize business as a vital partner/stakeholder in the CFTA. Yet, models from other regions suggest that business should be given a formal place in the institutional structure of the AU or CFTA, while at the same time leaving it to business to self-organize themselves. Examples discussed include the ASEAN Business Advisory Council (BAC), MERCOSUR Economic-Social Consultative Forum, Andean Business Advisory Council and the Business 20 (B20).
Finally, Section C provides some recommendations for increasing private sector participation in the negotiationand implementationof the CFTA.
“THERE is life after Buenos Aires,” soothed Susana Malcorra, chair of the 11th ministerial meeting of the World Trade Organisation (WTO). Multilateralism may not be dead, but it has taken a kicking. Expectations were low as the meeting began in the Argentine capital. They sank even lower as it progressed. Delegates failed to agree on a joint statement, let alone on any new trade deals.
Many arrived with a culprit already in mind. Robert Lighthizer, the United States Trade Representative, was the face of an administration that is both questioning the benefits of multilateralism and jamming the WTO’s process of settling disputes. As negotiations progressed, some delegates groused that American leadership was lacking. Some even speculated that the Americans might be happy if multilateral talks foundered. What better proof, after all, that the system is broken?
Ms Malcorra, without mentioning the Americans by name, warned against creating scapegoats out of those who might recently have “shifted gear”. The WTO, after all, had problems before Mr Lighthizer took up his job. Decisions are made by consensus, which leaves deals vulnerable to hostage-takers. In some cases, the victim is the negotiating agenda. Still hanging over the WTO is a 16-year-old negotiating round, in theory meant to further global development. Until that round is concluded, members such as South Africa are reluctant to negotiate on any new issues, like rules on e-commerce or investment facilitation.
Members arrived in Buenos Aires in disagreement, and refused to budge. The Indian delegation wanted to lift restrictions on its government’s ability to distribute stockpiles of food. When the Americans refused, the Indians looked for a way to retaliate. They ended up killing an agreement to ban subsidies for illegal, unreported and unregulated fishing—as national leaders had agreed to do by 2020 as part of the United Nations’ Sustainable Development Goals. Cecilia Malmstrom, the European trade commissioner, called this failure “horrendous”.
Amid the triumph of self-interest over the greater good, there were some grounds for cheer. For now, it seems Mr Lighthizer is planning to influence the multilateral system from within. A joint statement released by America, Japan and the European Union pledged “to enhance trilateral co-operation in the WTO” when dealing with excess capacity, forced technology transfer and local-content requirements.
Perhaps more importantly, members are actually moving ahead on some issues. A coalition of countries ranging from America and the EU to Cambodia has signed up to negotiate new rules on e-commerce on a plurilateral, rather than a multilateral, basis. As long as enough members agree among themselves for the deal to be worthwhile, and do not discriminate against other members of the WTO, a deal is possible. The message was clear: if some members want to block discussion, then they will be left behind.
It seems unlikely that a surge of plurilateral agreements will be enough to jolt the WTO into life. For that, the organisation’s members will need to show more commitment to it—and to learn the art of compromise. Roberto Azevêdo, the WTO’s director-general, wrapped up the conference by reminding members that “multilateralism doesn’t mean that we get what we want. It means we get what is possible.” (The Economist)
The EPAs are ongoing negotiations expected to create a free trade area between the European Union and African, Caribbean and Pacific Group of States (ACP).
Although they are a response to rules set by the World Trade Organisation (WTO) to enforce reciprocity in trade with the European Union, the African continent has been indifferent over them.
Several countries in blocs such as the Economic Community of West African States (ECOWAS) signed the agreement on the conviction that it would boost their exports to new European markets. While other countries, particularly in the East African Community, have been indifferent over the deal arguing that it does not offer enough protection for local industries against goods imported from Europe.
While discussing his paper titled "Economic Interactions Based on Free Trade Agreements between European and African Countries", Leleng Kebalo argued that African states should consider ratifying agreements that include technological factors that improve the quality of their exports.
"If the agreement includes technological transfers, then this can lead to economic transformation. Free trade with Europe or any developed region, without technological transfers is harmful for the evolution of less competitive economies in Africa," he told a session at the African Economic Conference in Addis Ababa on Tuesday, December 5.
"We advise African leaders to improve competitiveness of their economies through a gradual opening of their economies to European goods, in return for freedom of learning and adapting innovations," the researcher from the University of Lomé added.
Another researcher from the Food and Agriculture Organization of the United Nations (FAO), Davide Del Prete, said that trade policies and agreements must be analyzed deeply because they impact food and agriculture global chain participation in Sub-Saharan Africa.
"We find that trade policies are key determinants of the heterogeneity of the quality of agricultural transformation across the Sub-Saharan region. Policy-makers should test alternative trade policy measures on bilateral trade relationships, including agricultural value chain interactions," he said.
The research papers were commended by John Anwanyu, Lead Research Economist in the Macroeconomic Policy, Forecasting and Research Department at the African Development Bank (AfDB).
He encouraged the researchers in the session and asked them to continue their role in advancing fact-led policy implementation of trade agreements.
"Political will and evidence-based implementation are encouraged by facts and quality research that is specific and relevant to the African situation. With vast majority of African economies advancing free trade and pursuing overseas markets, research is a vital key that will ensure positive policies," he said.
The AfDB has supported the growth of exports and trade for countries across the Africa continent.
The Bank has also advanced intra-African trade as a sure channel with the greatest potential for building sustainable economic development and regional integration.
The Bank's flagship report - the African Economic Outlook 2017 - cited that trade among African countries expanded from a mere 10% in 2000 to 14% in 2014, reflecting gains in policies advancing intra-African trade. (African Development Bank)
The Dangote group has opened a $300 million cement production plant in the Republic of Congo. The facility which has a capacity of 1.5 million metric tonnes per annum is expected to be the biggest such facility in the Central African country.
The plant is located at the Mfila area of the capital Brazzaville. The event which was graced by Congolese president Denis Sassou Nguesso brings to five the Dangote Group’s African footprints in the cement production business.
The Nigerian president Muhammadu Buhari was represented by a government delegation led by the Mines and Steel Development Minister, Kayode Fayemi. He emphasized the Buhari administration’s desire to help indigenous companies to thrive.
Africa’s richest man Aliko Dangote who was present for the event also commended the Congolese government for its economic decisions in the wake of fall in global commodity prices. He also announced that the group was aiming at becoming one of the top global 10 producers of the product.
Speaking on the new plant Dangote said: “It is envisaged that this will contribute substantially to the availability and affordability of cement in the country and the Republic of the Congo will no longer need to depend on imports to bridge the gap between demand and supply.
“It is our hope that the inauguration of the plant will boost Congo’s economy, conserve foreign exchange that would otherwise have been spent on imports for the country, and create employment opportunities down the value chain.”
Dangote cement has so far commissioned cement plants in four African countries namely: Ethiopia, Zambia, Cameroun and Tanzania. The Congo-Brazzaville plant, which began operations in the third quarter of 2017, will be the fifth cement plant that would be inaugurated in the last two years. (Africa News)
An effort that hopes to draw billions in investment in Africa from Europe wrapped up at the Palace of Culture in Abidjan this week. In many ways, there couldn’t have been a better place for talk of a free market drive to revive the economies of Africa.
For Cote D’Ivoire, for all its economic difficulties, scarce capital and heavy taxes, has a claim to being an economic phoenix rising from the ashes of a violent civil war. Ever since the Ivorian army marched back to its barracks, in 2011, the country has seen signs of an economic revival akin to that of post-Genocide Rwanda and post-war Singapore. In fewer than seven years of peace, Cote D’Ívoire has thrown its doors open to foreign investors on its way to a growth rate of more than 8%, albeit from a very low base.
The European Union-Africa Forum, in Abidjan this week, was here to discuss an ambitious plan to help unleash the entrepreneurial spirit of Africa to create jobs and wealth. The EU is pushing a plan to prise investment out of a tight European financial market – especially from the big pension funds – to plough into entrepreneurs with emphasis on women and the youth.
The plan revolves around a fund of around $4 billion. The EU hopes to leverage this money up to around $44 billion by encouraging powerful financial institutions and pension funds in Europe to get behind it in the hope of high returns. In achieving this, around $1.5 billion of this money will be used as investment guarantees to take the risk out for foreign investors.
“It is done. We passed everything through our legislators in September and you will see the first projects taking shape next year,” says Roberto Ridolfi, in Abidjan, one of the technocrats at the EU who helped guide the plan.
At the conference, young entrepreneurs were given the chance to pitch their ideas to earn the chance of a sliver of the seed capital.
Academic and director general of DEVCO at the European Commission, Stefano Manservisi, is an expert on international and economic integration. He says the EC is in discussions with African nations in a bid to ease the flow of goods and services across borders to encourage investment.
One of the areas that the EU scheme is targeting is technology. I put it to Manservisi that these kinds of investments do not create many jobs in a content that needs about 20 million in the next 20 years.
“You have to remember that Facebook was created in a garage. There are many garages in Africa and people can create wealth and jobs in them if they are given the support and capital,” says Manservisi.
There are also reservations among African leaders about a lack of consultation over plans in this effort to create jobs. People on the ground in Abidjan question whether the benefits will trickle down to the millions living in poverty.
In a year when thousands of Africans died trying to flee this poverty – heading for Europe on leaky boats across the Mediterranean – the EU admits this investment effort may not be a quick fix, but at the very least it is a start. (CNBC Africa)