The Challenges Ahead of AfCFTA (African Continental Free Trade Agreement)

The Challenges Ahead of AfCFTA (African Continental Free Trade Agreement)

By Samuel Nwite

On July 7, the long awaited signature from Nigeria was finally given in Niamey, the Niger Republic capital by President Muhammadu Buhari, to the African Union (AU). It was received with a resounding applause because it’s keen to the implementation of African Continental Free Trade Agreement (AFCFTA) that started signature collection since 2018, and so far has 44 signatures of the continent’s 55 countries. AFCFTA was constituted in March 2018, with the goal of creating a single market enabled by free movement and a single currency. However, the unwillingness of some states to embrace the pact from inception created a shadow of doubt on the success that it projects.

For instance, Nigeria, the largest economy in the African continent that was expected to spearhead the move was until July 7, an observer of AFCFTA, even though it was already in force in 27 African countries. Kenya and Ghana were the first countries to tender their ratification instrument on May 10 2018, and others followed suit. On April 29, the threshold of 22 ratifying states for the free trade area to formally exist was reached, after Sharawi Republic tendered her ratification instrument, and AFCFTA became a force on 30 may 2019.

Although the late involvement by AU member countries delayed the trade pact that would have seen Africa gearing toward competition with their counterparts in Europe (Common Market) and Asia (ASEAN), it didn’t stop the good news that came from Niamey on July 7, “AFCFTA has become operational.” It was such a news that the world has waited for. The United Nations Economic Commission for Africa (UNECA) said the implementation could increase intra African trade by 52% in 2020. GDP and employment are expected to grow by 0.97% and 1.17% respectively. Intra-African growth is estimated at 33% and the continent’s trade deficit is expected to drop by 50.9%.  But there are challenges, apart from issues ranging from tariff to patent rights to duties etc. Africa has more integration barriers to beat in the markets than in agreements. And they come in their sizes as follows.

Language

There are over 2000 languages spoken in Africa, each commanding a profitable business interest. And to those who have been in the Intra-African trade, it’s a problem, a transaction stymieing barrier that usually takes a ton of losses before it could get even. And to get even, it must be narrowed to colonial languages of European origin, mainly, English, French, Portuguese and Spanish. But that doesn’t solve it in every case, there are those who word in Arabic, and the vast majority that can only communicate in local African tongues that could number in tens in one locality alone. For instance, Nigeria has a population of over 200 million, but only 53% of this number of people could speak the official language “English” fluently, the rest are divided into over 200 local tongues, relying on the Pidgin English to communicate. What this means is that a ‘Zulu only’ speaking South African who has a business to run in Nigeria may need more than 3 interpreters to function – one for ‘Zulu to English,’ Hausa, Yoruba, Igbo or pidgin to English, then back to Zulu. And this is the case with every other country in AFCFTA. Integration is stalled when mutual goods and services are disconnected by tongues.

Telecommunication

Intra-African telecommunication is the most expensive in the world. And as such, a bane of business facilitations, especially, for SMEs and startups struggling with so many other infrastructural deficiencies in their respective countries. Voice and broadband qualities don’t commiserate with the charges, and it becomes worse when you roam. Telecommunication companies in Africa, especially those of African origin are yet to reach a compromise that will enable affordable communication or augment their infrastructure to facilitate quality communication networks. And businesses that depend on them to execute financial and other transactions are at the receiving end of the brute spikes.

Transportation 

The African continent operates the most expensive air transport system in the world. A situation made possible by many factors that ‘poor intra-African rail line infrastructure’ is heading. The movement of people, goods and services depends mostly on road transportation for countries in the same region, and airplane, when you are going beyond your region. And that comes with costly price. A situation that has been blamed on the high cost of operations. Although there is Single African Air Transport Market (SAATM) designed for the implementation of open sky and integration in Africa, it doesn’t change the cost. Poor infrastructure, corruption, mediocrity and multiple taxation have taken deep seated positions in African aviation industries that the cost of flying is finding a place for itself in the sky. An African travelling to another African country may need to transit through European countries before he could get back to his African destination. Although the AFCFTA pledges to resuscitate SAATM, there are operational cost differences varying from country to country to contend with. So affordable air transport may not be attained soon and there is a need for practical alternative through rail transportation that will ease the movement of goods and services.

Single Currency

For Africa to integrate to the implementation AFCFTA, the currency barrier must be eliminated. Although the proposed single currency comes handy, Africa is not prepared to deal with the consequences. A single currency will mean a collective economic responsibility to member states, just like in the EU. The 2009 Greek economic crisis tested the EU’s support to member states to the tone of 320 billion euros in bailout funds. Member states like Germany took the lion share of the loans and made recommendation of austerity measures to be implemented by Greece, all in a bid to prevent the economic crisis from escalating to other EU member states. But Germany was only able to stand tall behind Greece because she was commanding a GDP of $3, 423, 470 million in 2010, and the proceeding years yielded more GDP per capita for her. In Africa, almost every member of AU is dealing with debt crisis, and her supposed economic giants, Nigeria and South Africa are still looking for loans from China and World Bank. So who will bail who? Everyone may be taking a fall for the financial indiscretion of one state.

There is also the issue of currency regulation that is usually done by the apex banks. Will AFCFTA member states be willing to bequeath currency control to one AU established bank? Will the Bank be able to establish a unified payment system that will facilitate easy, fast and secure payment from every corner of the continent? When regions like the ECOWAS is pushing for a regional currency (ECO) in the nearest future, these questions need to be answered in the future negotiations of AFCFTA.

Insecurity

Free movement and integration are attainable only when there is safety. In many African countries, civil unrest, terrorism, militia and ethnic violence are norms. Talk about Nigeria, Cameroon, Mali, Ethiopia, Kenya, South Sudan, Libya, Central African Republic (CAR) Democratic Republic of Congo (DRC) etc. Each of these countries are recording scores of death on the daily or periodically, and there is no solution in sight. The ravages of these conflicts are visible in concretes as well as humans. There are no markets, there are no buyers and there are no sellers or providers of goods and services in places where the utmost goal is survival.

The proposed AU passport will enable free movement of Africans no doubt, but not without security consequences. Boko Haram, Al-Shabbaab, ISWAP, ISIS and every militia group in Africa are likely going to see it as a means of exploiting the already damning security loopholes. And no African country is ready to contain the activities that may ensue thus.

Xenophobia

History has shown that getting across the border to the next African state isn’t where the integration lies, it lies in becoming part of the community that you crossed to mingle with.

In May 2008, streets in South Africa witnessed disturbing scenes of xenophobic attacks, stemming from unbridled intolerance of fellow Africans. Shops were looted, people were killed, and the South African government helplessly watched it all. The attacks perpetrated on the excuses of “foreigners are taking our jobs,” “they are committing crimes in our country,” were foreshadowing the discriminate barbarism that will hunt Africa’s integration in the future. It’s 2019, and Malawians, Nigerians, Zimbabweans (even members of SADC) are being asked to leave the country at the slightest provocation. So other nationals in South Africa live in xenophobic paranoia, even those who worked hard to establish private enterprises.

And so it is in West Africa. Ghana and Nigeria have been in sibling contentions that has resulted in one throwing out the other. In February, about 720 Nigerians were deported from Ghana, on the allegations of prostitution, Cybercrime and illegality. There have been subsequent complaints from Nigerians living in Ghana about maltreatment by the Ghanaian government and its people that on many occasions, the Ghana’s High Commission to Nigeria has to be summoned by the Nigerian government. (For instance, there was a complaint by the Nigerian Union of Traders Association Ghana (NUTAG) that the Ghanaian Government was asking them to raise their capital to $1 million or leave. In other case, there are just laws demanding that they shut their businesses down to make room for investments of Ghanaian origin. Ghana and Nigeria are leading members of ECOWAS that should be setting a leadership example in honoring the ECOWAS free movement and integration pact, unfortunately, some nationalistic elements stemming from ethnic jingoism have not only trumped the pact, but have set pessimistic precedents that place future engagements in doubt.

These unfortunate incidents are indications of some AU member states’ inability to control xenophobic revolution that usually plunges non-nationals to the ruin of everything they have worked for. The reason being that some of these governments see national interest in xenophobia. Therefore, the success of AFCFTA depends not only on documents signed in a conference room but mostly on the functions of elements beyond African borders.

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2 thoughts on “The Challenges Ahead of AfCFTA (African Continental Free Trade Agreement)

  1. Most of the things highlighted could be turned into business opportunities, but the challenge is the capacity to execute; something Africa never demonstrated she has.

    When we give too much importance to a mere paper agreement, it questions our appreciation or understanding of history. We have been signing all sorts of papers for decades, but our fortunes are yet to turn around.

    If The EU is our reference, then it simply means we do not understand our current realities. Part of our continent is heavily indebted to China; and we sign agreements as though these countries are really independent. The former French colonies are yet to completely decouple themselves from their old headmasters, maybe AfCFTA will facilitate that as well…

    Now that we have AfCFTA in place, it’s time to look forward to the gains. If at the end of the day the challenges outweigh its supposed gains, all the member states will still live their lives as though nothing was signed in the first place.

    As for single currency, you need to stand on both feet first, before looking for whose responsibility to shoulder. I don’t know which of the economies that could play the big brother role in the time of crisis; Nigeria isn’t viable yet.

    Reply
    1. I do agree – even in the challenges, opportunities can be found. The clock has started to begin to evaluate the gains: “Now that we have AfCFTA in place, it’s time to look forward to the gains.”

      Reply

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