United World International | 4 May 2020

African Continental Free Trade Area: hope or neo-colonialism?

Due to the Covid-19 pandemic, implementation of the African Continental Free Trade Agreement (AfCFTA), scheduled for 1 July 2020, has been postponed.

However, it is obvious that after the epidemic comes to an end, the project will still be implemented, one way or another. The AfCFTA has brought up questions about the future of the entire continent: some call the AfCFTA the hope of exploited Africa, while others call it a neoliberal globalist project, others compare the idea with the European Union.

Let’s try to understand the pros and cons of the initiative and why countries like Nigeria have resisted joining the bloc for years.

What is the AfCFTA?

If implemented, the AfCFTA, with its 55 member countries and a total population of 1.3 billion, will become the world’s most powerful economic bloc.

The main idea of the block is improved coordination of African countries and a gradual transition from an export-import model (unfavorable for the continent) to a self-sufficient and strong unit capable of competing with other major economies – first of all, the United States and China – and finally to achieve to make products labeled “Made in Africa”.

As for the structure of the organization, it has been proposed that the bloc’s secretariat be relatively autonomous, but closely cooperate with the AU (including receiving the budget from the Union).

The AfCFTA agreement was brokered by the African Union (AU) in Kigali, Rwanda, on 21 March 2018, when 44 countries joined the initiative. The first negotiations at the forum began in 2016, while technical work has been underway since 2017.

In March 2018, at the tenth extraordinary session of the African Union, three separate agreements were signed related to the AfCFTA (although not all countries signed all three):

– the African Continental Free Trade Agreement

– the Kigali Declaration

– the Protocol on Free Movement of Persons

By 2019, 54 of the 55 AU countries had signed the agreement. Formally, only Eritrea remains out of the picture, but the delay was mainly due to military action – now the country is ready to join the bloc.

More technical details were already discussed at the Kigali Summit: customs cooperation, trade facilitation, etc. One of the main ideas was to remove tariffs from 90% of goods between the participating countries, providing free access to goods and services throughout the continent. Thus, it is a question of standardization and universal border posts, Patrick Khulekani Dlamini, Chief Executive Officer and Managing Director of the Development Bank of Southern Africa argued.

The problem of exports and imports

For many years, Africa has mainly been oriented toward the export of raw materials and the import of finished products, while domestic trade remained at a very low level (16.6% of total exports in 2017, compared to 68% in Europe and 59% in Asia). If the project is successful, the UN Economic Commission in Africa believes the agreement will increase intra-African trade by 52%.

The problem of Western colonialism and CFA

Africa’s most pressing theme is the continuation of neocolonialist policies by Western countries, especially France and the United States.

One of the points that African patriots are fighting against is the use of Western currency and control of African finances by French banks. As we have written before, the word Francafrique itself is becoming increasingly rejected on the continent and locals are increasingly intolerant of French intervention and exploitation.

Overpopulation

Another obvious problem in Africa is rapid population growth. This is putting pressure on Africa’s weak infrastructure as a new generation of Africans emergie with nowhere to work. One of the consequences is migration to countries with more advanced economies, both on the continent and in the West. The only chance to solve this crisis is for Africans to create their own industries locally.

It is important to stress that economic activity in sub-Saharan Africa is growing at a slower pace than the population. The region is home to more than half of the 800 million people living on less than $1.90 per day. Experts note that this may be the only region in the world where the number of people living in extreme poverty has increased since the 1990s, despite openness to trade with the West and China.

Why is Nigeria against the project?

If the possibilities are so positive, according to its initiators, why has Nigeria, the continent’s largest economy, long been sharply opposed to joining the bloc?

With a population of 200 million, Nigeria is the most populous country in Africa, with a nominal GDP of $376 billion, about 17% of Africa’s GDP. Nigeria is even ahead of South Africa, which accounts for 16% of Africa’s economy.

As President Muhammadu Bukhari previously commented, Nigeria is unwilling to frame its own producers and entrepreneurs – because Africa’s economy is too uneven – from poor to rich, increased economic pressure could put pressure on workers, condemning them to difficult and unsafe conditions. The Association of Manufacturers of Nigeria, representing 3,000 Nigerian producers insisted on refusing to join AfCFTA. In addition, Nigerians fear that AfCFTA will not be able to prevent anti-competitive practices such as dumping on the continent.

As Ayuba Wabba, President of NLC, Nigeria’s largest labor union said, that the [AfCFTA is] an extremely dangerous and radioactive neo-liberal policy initiative.

However, under pressure, Nigeria eventually agreed to join the bloc.

The problem of big finance

Many experts (and not just those on the left flank) are concerned that major entrepreneurs, banks and lenders are particularly interested in the AfCFTA, emphasizing the need to establish a capital and lending system in Africa familiar to the Western world. At worst, Africa runs the risk of repeating the mistake of the same Western countries where people have been put so deeply indebt that they are unable to start their own businesses or provide basic housing for families. The Yellow Vest protests in France were the most obvious example of the hopelessness of a situation ruled by the president of a clan of bankers.

Terrorism and jihadism as a destabilizing element

Another major challenge for the continent that will seriously complicate any attempt at African integration is the steep rise in terrorism and jihadism, and generally the growth of informal tribal or militant groups. Despite efforts by foreign forces (French and American), terrorists are launching ever-increasing attacks on control points and government military. Conducting free trade under such conditions seems difficult.
Sceptics: the risk of economic destruction

Critics of the AfCFTA initiative note that the liberalization of African markets and open trade zones can lead to a massive destruction of jobs and trade balance, which could further destroy the economy.

They argue that the economy still imports over 70% of goods and services that are cheaper than local goods and services, and local producers are already facing lobbying competition from recognized international players. In many sectors, whether industrial or agricultural, local actors are unable to compete because of their limited capacity and lack of a reliable production ecosystem.

Protectionism or death?

Infoguerre’s Jaber Ali notes that the same free trade agreements in Western countries have contributed to the predatory destruction of Africa. In his assessment, the continent must be guided by a new paradigm: for Africa, it is more urgent than ever to tell the capitalist world that it is not a commodity and that it must rely on its production, its labour force and its resources.

In that regard, the expert insists that, under the current circumstances, Africa will not survive without a certain degree of protectionism.

“But this protectionism must be intelligent and finely calibrated so that the measures taken do not end up penalising the sectors concerned and the populations. In other words, protectionist measures must be accompanied by sectoral policies to stimulate local production, but they must also be planned and understood by the actors”, he writes.

The main thing he insists on is maximum distance from Western funding and Western imports. As for the industrial sectors, these measures can only work if they are coordinated on a regional or even continental scale – and with the condition of protecting local producers.

Kako Nubukpo: rejecting globalisation and the IMF

The Togolese antiglobalist economist and writer Kako Nubukpo, formerly of the International Organization of la Francophonie, says the most important thing is to keep Africa out of the so-called “colonial slavery” model.

In his assessment, the time has come to recognize the failure of neoliberal theories that have been tested in Africa for 35 years.

“More than an argument for rejecting globalization in these countries, it is above all a strategic issue for the rise of African companies, because if they really want global growth shared by all, then we must create the possibility to protect ourselves”, he said in a Le Monde interview.

“More than sixty years after independence, the countries of the continent are still integrated into an economic system that pushes them to produce raw materials and then export them without transforming them. On the other hand, these states import processed products from the rest of the world. It is a model of deadly growth, because it is in the processing of raw materials that jobs, added value and therefore income are created. This model pushes our youth to migrate to where the wealth and jobs will be created.”

Structural adjustment plans that were imposed by the International Monetary Fund (IMF) and the World Bank in the 1990s under the auspices of promoting good governance have had disastrous consequences, the economist stresses. These plans have cut off the possibility of creating social states at the root, as state enterprises were privatized and economies were liberalized. The African gap with the IMF and World Bank is vital, says Nubukpo. Demand for explosive population growth will only increase and it will be impossible to continue to depend on external countries. Now any funds must be invested in infrastructure and factories, creating jobs for young people.

Nubukpo believes that the trade zone initiative is still an open question – most importantly, it must not become a Trojan horse, because the market mechanism for African survival is not enough to feed a large population: production is needed to generate income, and will. Thus, the block is a possible lever for production to emerge, but it cannot be trapped by the West.

Africa must protect itself against once again falling under the control of Western financing: international development consulting firms in Africa do not discuss financing questions, leaving African heads of state to ask for help from the West.

In another interview: Nubukpo stresses the importance of a change of guard among the African elite:

“Unfortunately, the African elite has replaced the colonial elite under international pressure. It has not at all assumed its mission, that of advancing Africa in the global concert, other than through its integration into international markets through the export of raw materials.”

Conclusions

The AfCFTA is an opportunity for countries and companies to help each other grow, but trade liberalization and Western control can harm the poor and local producers in these countries, and Africa will repeat the mistakes of the European Union.

Although infrastructure is improving very slowly, there is still a long way to go to facilitate trade between countries. It is impossible to build a supply chain across the continent when there are countless customs stamps, signatures and certificates required to simply move a container from one country to another.

But as the experts above have pointed out, Africa must take all possible precautions to avoid reproducing colonial relations. In addition to local protectionism, there must be a legal and fiscal framework that can put an end to the ongoing looting of African resources.

It might go without saying that it is time to abandon the current CFA franc system, which makes it easy and absolutely legal to withdraw large amounts of capital. As we wrote earlier, the new ECO currency is not a solution to the problem, because it will still be attached to the Euro, and thus to the large banking system of the West. Experts emphasize that simply renaming the currency will do no good, it must be transferred from Paris to currency coordinating centers in African capitals.

The most critical step is to buck the IMF and the World Bank, the earlier the better. Just the other day, it was announced that Nigeria will receive $3.4 billion from the IMF to overcome the serious economic consequences of COVID-19 and the sharp fall in oil prices. This is the largest tranche in the world from the Coronavirus Recovery Organization. This only shows that supranational corporations are seriously afraid of Africa’s potential flourishing, and are struggling to prevent the development of its own infrastructure with gifts and loans.