Free trade, reality or myth in Africa?
LEVIOUS CHIUKIRA
It is certain that man traded extensively with his immediate relatives or associates long before he was in a position to make records. This means that trade has been vital in the development of mankind and there is need to support it and ensure that as people come together to trade they all benefit.
The concept of free trade arose from the doctrine of comparative advantage advocated in the early 1800 by British economist David Ricardo. The basic foundations of the concept was that nations would reap the most benefits if they specialised in the production of goods in which they have greatest advantage or least advantage compared to other countries. It was mainly developed to explain the integration of Europe and later moved to other parts of the world.
With the current US-China trade wars being experienced, the standoff between EU and the BREXIT and the failure by the WTO to conclude the Uruguay negotiations, one is persuaded to ponder the necessity of these trade agreements and their genuineness in addressing developmental issues.
Free-trade agreements involve reciprocal opening of markets for substantially all trade, generally going beyond tariffs and quotas and increasingly covering standards (including mutual recognition agreements) and regulation, trade facilitation, services, investment and competition and in some instances public procurement. With increasing push for trade liberalisation more effort was directed towards ensuring that markets were opened and removal of tariff and non-tariff barriers by member states. The assumption was that free trade combined with liberalisation of investments, deregulation of the private sector and financial system and sale of public entities would facilitate the process of sustained economic growth. As markets were predicted to grow there was anticipated higher levels of productivity which would result in expanded employment opportunities.
Little or no attention has been put in place to evaluate the impacts the Free trade areas have on the local industries and poor at large. It has been noted that there has been a disjunction between the trade policy makers and the private sector including the population when it comes to trade policy making and implementation. This has resulted in the failure by these policies to have a positive impact on the adopting countries. It is imperative for trade policy makers to ensure that they are equipped by the voices of all before they go for trade negotiations to ensure the trade policy addresses the multi-disciplinary challenges rather than concentrate on single discipline. When economies fail the political actors are held accountable by the people that put them in power and they should consider the effects of such policies on their people. Some of these economic policies need to be considered from both the socio-political and economic sides.
Zimbabwe is a signatory to a number of free trade areas which include the COMESA Customs Union, SADC FTA, ACP _EU EPAs and the recent African Continental Free Trade Area. The question which follows is with all these FTA agreements has our trade been better or worse within these arrangements? IMF statistics shows that between the period 2000-2004 intra trade between COMESA countries was an average of 4,1% as compared to trade with the rest of the world and SADC was 10,4 % as compared to the rest of world. With these trade statistics and our failure to grow trade at regional level for the past 2 decades, can the coming in of the ACFTA change anything? Africa needs to understand its challenges and address them before it can be economically integrated.
These challenges include the artificial borders created by colonisation and its fragmented cultures. The AcFTA will inherit the failures of its fragmented trading blocs which include the SADC EAC, ECOWAS and COMESA among others. The challenge will be the fate of these regional trade blocs as the issue of overlapping membership has not been dealt with up to now as we move into one continental free trade area. Overlapping membership prevents the establishment of a common external tariff unless all of the concerned integration initiatives harmonise their common external tariffs. Such problems, if unaddressed, will result in costly arrangements for the member states through subscriptions fees and administration costs and nothing should not be anticipated from the AcFTA which has failed to be addressed by these regional trading blocs.
The trade barriers most often mentioned as concerns were cumbersome customs procedures, red tape at licensing and regulatory authorities and corruption, divergence of standards and requirements across markets in the region, high transport costs due to both regulation and infrastructure problems and non-tariff barriers in the form of import bans, suspended duties and the like.
There is need to promote harmonious continental economic development and effective regional economic cooperation via the elimination of obstacles to free trade, movement of goods. These issues include customs delays and too much Free trade, reality or myth in Africa? The African tech and startup ecosystem is moving towards market correction this year. According to the WeeTracker’s Venture Investments Report 2018, US$725,6m was invested across 458 deals in Africa in 2018 – a 300% gigantic leap in the total funding amount, and over 127% increase in the number of deals as compared to 2017. A total of 243 investors participated in the investment landscape in Africa. A good 458 startups raised funding in various rounds throughout 2018, of which 80% was concentrated in South Africa, Nigeria, and Kenya. Fintech retained its top position as the sector with most funding while 30 startups made it to the 5 million club of fund raising across the continent. documentation especially for transit shipments which are required to process documentation at each border until they clear for consumption in the country of import. Imagine a shipment from South Africa to Tanzania by road needs export documents in South Africa which shall be acquitted at the border by the South African side before processing documentation for Zimbabwe, Zambia and then finally Tanzania. Measures such as the coordination of border controls, transit guarantee schemes or pre-arrival customs processing can facilitate cross-border trade but they also require collaboration among neighbouring countries. It is significant that these regional programmes be strengthened, and that the private sector is involved in their execution. The ACFTA also needs to be firm on funding and promotion of Small and Medium Enterprises (SMEs) which have remained relegated at the periphery of the economies in Africa despite their contributions and employment creation.
The ACFTA was negotiated by 55 countries in Rwanda in and only forty-four signed the treaty excluding South Africa and Nigeria which was a big blow and aimed at doubling the intra African trade and create more jobs for the upcoming youths. Over the past decade, only about 12 per cent of Africa’s total trade took place within the continent. Africa requires a vibrant and energetic private sector to grab prevailing prospects in the trading system. There is need for member states to challenge the status quo of exporting raw materials by funding and promoting value addition in their countries and the region at large before exporting. This entails coming together through bilateral agreements on the issues of comparative advantages and ensure members prioritizes other members before looking for other alternatives. If ACFTA fails to grow intra-African trade then it would have failed. There is need for member states to invest in infrastructure especially transport and communication to ensure that the cost of transporting goods and people are cut and become competitive as compared to imports from other continents. It is estimated that the poor infrastructure in Africa reduces the productivity of companies by 40 percent and per capita output growth by about 2 percentage points. There is need to consider the continued decline in revenues which shall be experienced by member states as most of the African countries still rely on customs duties as a source of revenue.
The world is continuously urged to embrace international trade as one of the tools for sustainable development and this was noted in the mentioning of trade nine times in the 17 goals of the Sustainable Development Goals (SDGs). In Africa as a continent the concept has historically been evaluated to be critical means to achieve a sustained economic growth and development and to overcome the regional problems which include political fragmentation low pecapita incomes and small intra-regional markets This buttresses the importance of trade in achieving these goals. The integration of developing countries into regional and global markets is a central theme for the SDGs as trade is expected to boost growth and tackle poverty. There is need for trade policy makers to understand that the success of trade policies depends highly on the realisation by member states `s willingness to prioritise the basic developmental needs of their own citizens so that meaningful progress to regional ‘integration’ that benefits the vast majority of people can be achieved
