Declining global trade volumes and the continuing reality of US-China trade war emphasise the need for African countries to seize on a spirit of unity and start tearing down barriers to regional trade.
African political and business leaders at the World Economic Forum in Cape Town will be urged to follow through with commitments made to regional integration, trade experts say.
As the African Continental Free Trade Agreement (AfCFTA) enters the implementation phase, WEF Africa can jumpstart discussions on the process of dismantling barriers to regional trade, says co-chair Arancha González Laya.
“I hope to shine a spotlight on integration of the African market, because it is very important to keep the momentum that has been generated with the launch of the African Continental Free Trade Agreement,” says González.
“What’s important is that the negotiators don’t drop the pen the day the agreement has been signed. The most important phase starts now and it’s called implementation.”
The road less travelled
African countries have traditionally sold raw materials to global powers rather than trade among themselves. As the only continent in the world trading more externally that internally, Africa is missing out, González says.
“Essentially Africa is to a large extent trading outside the continent in lower value-added raw materials and commodities and it’s foregoing the opportunity to trade more value-added [products] within the African continent. We know that what Africa trades within its borders has more value-added than what it trades outside its borders. So it’s important that Africa finds a way to better integrate its markets, to provide opportunities for all those entrepreneurs that can build the regional value chain.”
Within the new economic zone, 90% of tariffs would be scrapped within five years, but poorer countries such as Niger and Malawi will have up to a ten-year extension to protect producers from cheap imports.
In order for businesses to tap into the opportunities of a larger single market, African leaders need to start removing tariffs and non-tariff barriers to trade, González says. They also need to start the process of connecting Africa’s fragmented markets, and give entrepreneurs the tools to access them, she says.
Held under the official theme ‘Shaping Inclusive Growth and Shared Futures in the Fourth Industrial Revolution’, WEF Africa will focus on the global digital economy, and Africa’s ability to crack it.
The programme will focus on scaling up the transformation of regional infrastructure in a new era of international trade.
With the percentage of goods traded online now reaching 15% and rising, now is the time for African countries to get on board in shaping new legislation, González stresses.
“More that 36 countries in the world are negotiating agreements in the World Trade Organisation in electronic commerce, and only 3 African countries are part of the negotiations. It is important that Africa doesn’t miss out on the legislation that will determine the rules of international electronic trade.
“Africa has always felt uncomfortable with the rules of international trade because they were not part of the negotiations in the first place. Now is the opportunity to have ownership for participating in setting the rules of electronic commerce. That’s why I think it is important that this topic is being showcased in Cape Town.”
Niche African players
In order for a single market to succeed, African nations need to integrate the markets where their comparative advantages lie, such as mobile money and services, González says.
“Why? Because they have hugely growing middle classes in need of education, health care, insurance and banking,” she says.
“The digital space is an important one – countries like Rwanda and Ghana and Kenya are moving very clearly to focus on tapping their comparative advantage in this sector.
While Ghana, Côte d’Ivoire and Nigeria are leading the agricultural revolution by investing heavily in processing raw exports, countries like Burkina Faso, Mali and Ghana should mine their arts and creative industries, she says.
“They’ve got a combination of traditional knowledge, artistic inclination and a hugely young population that is very big and capable of transforming these traditions and arts into a taste of today.”
“I don’t think there is just one recipe for the country, each country will have to look at its own profile, endowment and assets. What we at the national trade centre are doing with a lot of African countries is looking at strategies to help them tap into the free trade agreement. This requires looking at where is it that they have a competitive advantage.”
Lessons from Europe
Despite the unravelling fortunes of the European Union, the African Union can use the trade bloc as a template to guide its own process of regional integration, González believes.
The AU’s strong secretariat, solidarity between rich and poor nations, and clear programme for implementation is an important starting bloc for policymakers, she says.
“It’s good to have a grand vision, but this grand vision has to be accompanied by regular integration plans that target specific areas and remove the obstacles in those specific areas.”
Amid rapidly declining growth rates in global trade, growing protectionism, and rising fears that the US-China trade war will lead to a global recession, González emphasises the need for emerging markets to create new avenues for growth with their own neighbours.
Trade wars have “no winners” she says, while the effects of trade conflicts of this scale ripple “through the entire world economy and no one is sheltered from that.”
WEF Africa will provide an opportunity for African countries to club together with partners in the EU, Canada, Latin America and Asia, to send a clear signal to the world’s biggest economies that trade unilateralism and conflicts are not the way to solve differences.
“I do hope that WEF in Cape Town will send a signal from the African side that they do not want conflict and turbulence, that this is not going to help them integrate and create jobs and generate growth and stability for the rest of the world.