A free trade future for Africa – The Property Chronicle
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A free trade future for Africa A pan-African free trade area has the potential to be bigger than the EU's single market

Political Insider

While President Trump has been preparing to rock the global trading system with aggressive moves to impose tariffs on Chinese imports, African leaders have been moving in a very different direction

In February, under the auspices of the African Union (AU), 44 of the continent’s 55 nations took a high-profile step towards integration by backing the African Continental Free Trade Area (AfCFTA) to create a single market in goods and services. The accord now needs ratification by 22 governments to become effective, which will then be followed with years, if not decades, of haggling over efforts to eliminate tariffs, remove regulatory obstacles, and agree investment, intellectual property and competition regimes.

With the continent’s two powerhouses, South Africa and Nigeria, lukewarm about the AU plan, which they fear will impede industrialisation, there is plenty of work to be done to turn the blueprint into a reality. But, eventually, the AfCFTA could become a bigger trade bloc than the EU’s Single Market or the Trans-Pacific Partnership.

The February agreement builds on decades of attempt to boost intra-African trade that were first clearly articulated in a 1991 declaration to construct an African Economic Community. Those steps have included efforts to create a common aviation market, which also took a lurch forward this year with 23 states signing an accord on a decision that was first taken in 1999.

In addition to Africa’s nation states, the building blocks of continental integration are the Regional Economic Communities (RECs), which involve some overlapping membership. The Common Market for Eastern and Southern Africa (COMESA) is a traditional free trade grouping, which aims to resolve disputes, lower tariffs, create a customs union with a common external tariff, and agree shared rules to facilitate cross-border transactions.

Others are less developed, like the Intergovernmental Authority on Development, and some more integrated like the West African Economic and Monetary Union, which has a currency pegged to the Euro. Meanwhile the East African Community aspires to full political integration for Burundi, Kenya, Tanzania, Uganda, Rwanda and South Sudan — a goal that is, admittedly, a long way off because of internal strife.

Another part of the picture is an ongoing effort to create a Tripartite Free Trade Area between three of the main RECs. While these efforts to boost trade are laudable, the process is tricky because of this convoluted structure, competing interests and institutions, governance challenges, and varied approaches to economic development. Although there are few who contend that freer trade is undesirable in principle, many governments are tempted by Trump-like measures to support strategic industries or protect their farmers from cheap imports.

Such debates stem from broader arguments about the history of economic development, with increasing emphasis on the fact that wealthy countries got rich partly by protecting their markets and industries before opening them to the rigours of competition. Additionally, the inequitable dynamics created by colonial exploitation are still evident in the predominance of raw material exports. That means much of the value added to products like industrial minerals, rare metals, or agricultural goods occurs outside the continent.

“If we look at the details of African trade, we know it’s still very much predominantly commodity trade; it’s not processed industrial products. It is therefore an absolutely legitimate concern to have on the agenda how we build industrial capacity and diversify economic activity,” says Trudi Hartzenberg, the Executive Director of Trade Law Centre in South Africa, which closely tracks integration efforts.

The consequence is that the AU’s focus is as much on themes like infrastructure development, education, and agricultural modernisation as it is on core trade issues such as rules of origin, regulatory standardisation or streamlining customs procedures.

Hartzenberg, however, sees a clear links between the two agendas, as liberalising service markets should mean boosting investment in sectors like energy, transport, telecommunications, and banking, all of which manufacturers rely on.

“These are the backbone of development and all economic activity, and those issues also come to the fore with the integration agenda. So, industrial policy must reference the trade in services agenda, otherwise its impact will be circumscribed,” she says.

The frictionless trade goal of the AfCFTA masks a great deal of complexity that can be seen in the position of COMESA, which is headquartered in the Zambian capital, Lusaka. The group has a free trade area that has removed most tariffs and many regulatory barriers. The only two of its 19 members that don’t participate in its FTA are Ethiopia and Eritrea, which run state-dominated, heavily guarded economies.

The bloc also largely contains the nations of the East African Community, which aspire to become a federation under a single political authority after following the EU route of a customs union, common market and single currency. Senior COMESA official Francis Mangeni lists only five areas where regulatory barriers remain, such as Egyptian companies being unable to export
ceramic tiles to Sudan and Zambian concerns about Kenyan palm oil and milk quality.

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