Individuals, businesses and countries trade with a view of capturing mutual benefits that last long. When it is being done by governments, it is largely theoretical and stresses no tariffs, taxes or duties on imports, or quotas on exports. This indicates that as much as possible, there should not be protection on the part of the traders regarding individual’s interest capable of eliminating possible competition.
Having realised the need of coming together and the benefits of free trade, African leaders established the African Continental Free Trade Area (AfCFTA), signifying a critical achievement in the Pan-African trade journey. The agreement has been predicted to enhance the combined consumer and business spending across the continent. The projection is that intra-African trade would be increased by at least 53.2%.
Like various issues that trailed its acceptance, since May, 2019, different reactions have been trailing the implementation of the agreement. Experts and public analysts have expressed their concerns about the level of the leaders’ commitment to the realisation of the agreement. Various views have indicated that the governments are having problem in striking a balance between flexibility and commitment to the continent highly celebrated trade agreement.
Engineer Femi Akintunde, the Chief Executive Officer of Alpha Mead Group and Dr Henrietta Onwuegbuzie of the Lagos Business School, Lagos are among the professionals who lend their voice to the agreement recently on a professional medium. This piece examines the duo’s views and brings insights for the concerned stakeholders on the continent.
Border Closure: Is It Protectionism or Violation of the Agreement?
Dr Henrietta Onwuegbuzie believes closing borders with some countries has created implementation crisis. She cited Kenya, Eritrea, Sudan, Nigeria and Rwanda as the countries that have closed borders with the expectation that Ghana is likely to follow the same step. “This reveals a crisis of implementation that needs to be resolved over time.” However, it appears that the border closure will not be resolved soon as the Lagos Business School’s Don expected because the Federal Government of Nigeria has announced extension of the closure till January 31, 2020.
The land borders with Benin and Niger republics were closed on August 20, 2019. Nigerian government says the closure is necessary because of the need to achieve its strategic objectives such as improved internal security and economic benefits, especially encouraging consumption of local goods by its citizens. But, experts such as the Group Manager of Alpha Mead and the Don believe that the Nigerian government is contradicting itself on the free trade agreement. To them, this has reemphasized inconsistent with its 44-year long commitment to ECOWAS. Engineer Femi Akintunde hints that the lack of capacity of most African countries to control the influx of foreign goods from outside Africa into their countries will provide the access into other African countries under AFCFTA. Africa then becomes a bigger dumping ground for these foreign goods rather than benefiting from the intra-regional trade agreement. According to him, “solution is not to close borders, but to insist that only goods produced in Africa or with at least 60-70% Value Add African local content can be covered under AFCFTA. Leaders of countries that feel exposed need to protect the economy of their countries. People should stop blaming Nigerian Government,”
Absence of Comparative Cost Advantage
The lack of comparative cost advantage is another issue identified by Engineer Akintunde. This further reinforces the position of Adam Smith who said in his seminal work titled “The Wealth of Nations” that countries should focus their efforts on producing and selling goods in which they have an “absolute advantage” over their trading partners. Engineer Akintunde believes that most African countries are deficient in this and always called for protective policies such as the border closure. This needs to be solved through conscious and determined efforts by the leader in reducing recurrent expenses and invest more capital in infrastructure. “This is the surest and most proven ways to improve the economy and take people out of poverty,” he points out.
The duo identified cultural issues using different approaches, our analysis suggests. Dr Onwuegbuzie observes that “African citizens tend to be strangers to each other and sometimes their knowledge of each other is limited to negative stereotypes.” According to her, this has resulted in mistrust and inhibits trade on the continent over the years. This shackle must be removed through inter-regional meetings that allow familiarisation that facilitates trust. For instance, the recent World Export Development Forum afforded participants the opportunity to find great business opportunities to export to other African countries, she points out.
When we examined the duo views within the context of the national norms peculiar to the countries that have closed borders and made some policy initiatives since the signing of the agreement, we discovered that the superiority, which has been contextualized within the high power distance, and the fear of the unknown, which has also been defined within the uncertainty avoidance by Professor Hofstede remain the significant factors [see exhibit 1].
Exhibit 1: National Norms of Select African Countries
Source: Hofstede Insights, 2019
Supporting Engineer Akintunde’s earlier position on the infrastructure gap on the continent, Dr Onwuegbuzie observes that the continent lack “the basic infrastructure to facilitate the logistics of goods and services and the ability to produce all we need to prevent us from being a big market for other economies, rather than ours. I completely agree with you. We need to get experts to work with the AU, to ensure that private sector contracts are granted to Africans in construction to get these things in place through a PPP of “build operate and transfer” (BOP), such that they recoup their investments through tolling the roads for example.
“The EU, which is much smaller than Africa took 35 years to integrate, so we mustn’t rush things. The devil is in the planning. Once a master plan can be agreed and made foolproof, such that no compromised African president can modify it to suit external powers, we may well then be on our way to greatness.” To meet up with the specific agreements of the Free Trade, Morocco, Tunisia, Egypt, Ethiopia, Senegal, Guinea, Côte d’Ivoire, Ghana, Benin and Rwanda need to invest $2.4trn by 2040.
Dr Onwuegbuzie notes that the world has keyed into the opportunities that the African Continental free-trade agreement (AfCFTA) portends, but African countries are still wallowing in the implementation shackle because many remain economically colonized. However, AfCFTA provides an opportunity for the rest of Africa to free them, by making laws such as Engineer Akintunde proposed, Dr Onwuegbuzie stresses.
Engineer Femi Akintunde believes that trading blames and threatening trade wars should be stopped, while the leaders should revisit the ideas suggested by the African CEOs during the last conference held in Kigali, Rwanda. Blames and trade wars should not be the focus at this time. “Africans must find solutions to own problems. Solutions from any foreign party will benefit them more than us. African leaders should wake up to this reality. For some of us doing business across the region know the enormous challenges we are facing to start up and to scale up outside our base countries. This should not be so if we want to develop the continent. Governments should enable businesses for economies to prosper.”