The African Continental Free Trade Area - more hills to climb

The African Continental Free Trade Area (AFTA) has garnered the required 22 ratifications for it to enter force, the latest ratification coming in on April 1, 2019 from The Gambia; just 11 days after the first anniversary of the signing of the Agreement on 21 March 2018 in Kigali. What was thought unthinkable has happened. It was the Icon Nelson Mandela who said, it always looks impossible until it is done.

He said also, that after climbing one great hill, you only realise you have more hills to climb. The real hard work now begins; that of Implementation, on which Africa doesn’t have a very proud record. Besides, there is quite a bit of unfinished work to be done.

In addition to trade in goods, AFTA covers also services as well as innovation, competition and investment. Adding these areas was a stroke of genius, given the psychotic fear of these issues by many developing countries in international trade agreements particularly the World Trade Organisation.

However, way back in 2006, the African Ministers at a conference in Nairobi chaired by the then Kenyan Trade Minister Mukhisa Kituyi, now Secretary General of UNCTAD, took a fundamental decision to include these issues among programs for regional economic integration in Africa.

It all came together one day at the Africa Trade Forum, before AFTA negotiations started. The die was cast, and a certain old man took the podium. He called out to the 200 strong audience that it would be a huge wasted opportunity of a lifetime if services were left out of the Agreement, giving the example of the European Union where services sectors have provided the bulk of the integration agenda and benefits for the people.

Before that, at a working lunch of five protagonists who worked behind the scenes as influence- peddlers, the argument for excluding services as complex and controversial had been vigorously advanced by the very guys who had services excluded from the first phase of negotiations for the Tripartite Free Trade Area. The argument rang hollow this time round, and being without much support, it was abandoned. So, we have all agreed that services be proposed for inclusion in the first phase of AFTA negotiations, was the conclusion, as they went off in different directions to their various constituencies.

Various services sectors are already fairly liberalized in much of Africa, such as tourism, financial, communication, computer, transport, certain professions, energy, cultural and entertainment services. This follows years of autonomous liberalisation under economic liberalism programs, regional economic integration, and participation in negotiations at the World Trade Organisation and other fora.

In COMESA, for instance, services liberalisation negotiations have been completed covering transport, communication, financial (banking and insurance), and tourism services. These same areas have also been negotiated in the East African Community and the Southern African Development Community. They are now among the priority sectors identified under AFTA for the first round of negotiations, together with business services. Building on progress in the regional bodies, and as acquis but subject to reciprocity, some early harvest can be obtained towards an African integrated services market.

Innovation is the cri de coeur for social economic transformation in Africa, and indeed the world over. It’s through technological change and innovation that economies sustainably grow and increase in size. Mechanization in transportation, instantaneous and miniature communication equipment, advances in medicine and agriculture, robotisation of factories and plants, and the prevalence of servification of manufacturing, are all faces of technological leaps that have changed economic activity and daily life beyond recognition over the years.

Over the millennia, major turning points in the structure of economies have been marked by new technologies. Some examples include the innovation of fire, bronze, iron; horse transport, the steam engine, the internal combustion engine, aircrafts; anaesthesia, penicillin; the telegraph, the internet; robotics and sensors, and big data.

Innovation will remain the basic way forward towards speedily growing our economies especially in Africa, tapping into the benefits from learnt lessons and ready availability of cheaper technology arising from being a late-comer. There are innovations and skills around the world that can be readily harnessed, customised or adapted, and deployed to boost social economic transformation in Africa, while encouraging local and regional innovation eco-systems.

In COMESA, for instance, a mere US $ 10,000 in prize money for innovation awards, has been used by winners as seed capital to grow whole industries, with far-felt impacts in the region. A large number of prizes can be given out, especially to youth and women groups as well as institutions, with such manageable amounts.

Competition law and policy deliver and maintain functional markets, by checking monopolistic practices, including abuse of a dominant position, and cartels. On this basis, competition law and policy form a key pillar of free trade areas, through keeping markets open and fair.

COMESA, for instance, has a functioning regional competition law and policy, overseen by the Regional COMESA Competition Commission, being the second regional competition authority in the world, after the European Union’s.

The COMESA Competition Commission can provide a suitable template for Africa. Better still, it could be rolled out or scaled up to cover the entire Africa, through adjustments to its current instruments.

Generation of foreign, regional and domestic investment is a ranking priority for practically every economy on earth. The dire poverty challenge in Africa, raises this priority to an existential question.

South Africa now provides a best practice par excellence for balancing rights and obligations of various stakeholders particularly government, investor and grassroot organisations. While the government must protect investments, it reserves the right to regulate. While investors have rights to non-discrimination and due process, they must respect domestic laws and policies and be good corporate citizens. They should respect human rights and protect the environment.

These issues are up for negotiation mostly in the second phase which starts later this year, but services negotiations started already.

The first phase, however, has some outstanding issues to be completed though it has already been a phenomenal success in achieving the AFTA Agreement, which is now ratified by the minimum number of 22 countries required for its entry into force.

Rules of origin and tariff negotiations need to be completed. Tariff schedules should be produced. A mechanism for addressing non-tariff barriers is also required. Some Regulations and Guidelines are also needed, in areas such as infant industries and export processing zones.

Other areas to be completed, include operationalisation of the Africa Trade Observatory, which has already been launched; and establishment of continental payment systems, perhaps building on the existing COMESA and SADC regional payment systems. The very good news is that work in all these other areas has started and is proceeding well.

One systemic lesson Africa has learnt is that clear political leadership and proactive engagement of peers at the highest level can dramatically achieve results. The panafricanist energy and activism at the highest political level that has achieved the ratification of AFTA in just over a year, should now be equally deployed to ensure due completion of all key outstanding matters, so that AFTA is operationalised. It’s time for Africa to get cracking yet again.

The author is the Director of Trade and Customs at the COMESA Secretariat