Saturday, February 24, 2024

We Are Progressively Creating One African Market

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By Albert M. Muchanga

At the time of the creation of the Organization of African Unity in May, 1963, some of our leaders there called, in their statements, for the eventual establishment of an African Common Market.

The call was heard, but could not immediately be acted upon. This is because, at that time, many of the African countries lacked inter-country connections in the strategic sectors of transport, communication and energy.

However, the idea did not die. It started being acted upon in the 1970s, with the creation of regional economic communities across Africa. Today, we have eight regional economic communities recognized by the African Union, successor arrangement, since 2002, to the Organization of African Unity. These are: Arab Maghreb Union (UMA); Common Market for Eastern and Southern Africa (COMESA); Community of Sahel-Saharan States (CEN—SAD); East African Community (EAC); Economic Community of Central African States (ECCAS); Economic Community of West African States (ECOWAS); Inter-Governmental Authority on Development (IGAD); and, Southern African Development Community (SADC). These regional economic communities are at different stages of regional economic integration. Some are still developing inter-country connections while others are the stages of either free trade area or customs union/common market.

Building on this, our leaders signed on June 3, 1991, in Abuja, Nigeria, the Treaty Establishing the African Economic Community (also referred to as the Abuja Treaty) which entered into force on May 12, 1994. The Abuja Treaty has a six-stage process of attaining the vision of creating the African Economic Community over a period of 34 years from 1994.

The stages are: strengthening of existing regional economic communities and establishing new ones in regions where they did not exist then (in a period of five years); elimination of tariff and no-tariff barriers (in a period of eight years from the first stage); establishment of inter-regional free trade area (in a period of 10 years from the second stage); establishment of continental customs union (in a period of two years from the third stage); establishment of an African common market and adoption of common policies (in a period of four years from the fourth stage); and, ultimately, establishment of the African Economic Community with an African Central Bank and single African currency, leading to the creation of an African Monetary Union and a legislative Pan-African Parliament.

Life is not linear and because of this fact, there has been a dynamic process of moving towards one African Market. We currently have a deliberative Pan-African Parliament based in South Africa which will eventually evolve into a legislative Pan-African Parliament.

With respect to the establishment of an African Central Bank and single African currency, our leaders, in 2021, adopted the macroeconomic convergence criteria. The criteria will facilitate economic policy harmonisation and convergence among African economies.

We are also in the process of establishing the African Monetary Institute to be based in Abuja, Nigeria. The Institute will review progress and submit annual reports on the implementation of the macroeconomic convergence criteria; and, when all benchmarks in the macroeconomic convergence criteria have been met, evolve into the African Central Bank that will facilitate establishment of a single African currency.

In 2012, our leaders decided to start the process of creating an inter-regional economic community free trade area by adopting the action plan on boosting intra-African trade. Within this action plan was commitment to negotiate an agreement establishing, what was then called, a continental free trade area. After three years of preparatory work, our leaders, in 2015, in Johannesburg, South Africa adopted principles and roadmap for the negotiation of the continental free trade area, with a deadline to conclude the negotiations by 2017.

To implement the roadmap, we established a team of chief negotiators from all the member states of the African Union and these were receiving policy guidance from the African ministers of trade. The negotiations were largely completed by December, 2017, in Niamey, Niger and in January, 2018, our leaders decided to have an extra-ordinary session of the Assembly of the African Union Heads of State and Government on March 21 in Kigali, Rwanda to sign what was now called the Agreement Establishing the African Continental Free Trade Area (AfCFTA).

As we stand now, the AfCFTA is not a theoretical construct. It is an institution that is operating, backed by policy and legal instruments.

The Secretariat of the AfCFTA has been in existence in Accra, Ghana since 2020, with staff, annual budget and work programme focused on growing intra-African trade under the policy guidance of the Council of Ministers of Trade and Assembly of the African Union Heads of State and Government.

Other than the framework Agreement, there are also protocols on trade in goods, trade in services and newly approved protocols on intellectual property rights; competition policy; and, investment. In addition, there is an African Quality Policy which has facilitated our work in coming up with a Made in Africa standard.

Before proceeding further with the issue of quality standards, it is also important to point out that after signature of the AfCFTA Agreement, sustained advocacy for signature and ratification was mounted. This was led by the then President of Niger, His Excellency Mahamadou Issoufou, who still continues as Champion of the AfCFTA.

This advocacy resulted in reaching the minimum threshold of 22 ratifications required for the Agreement to enter into force in a period of one year, one month, one week and one day.

On average, it takes five years for African Union legal instruments to enter into force. We currently have 54 signatory states and 46 ratifications.

Eritrea is the only African Union member state which has not yet signed the AfCFTA Agreement. The following African Union member states are yet to ratify the AfCFTA Agreement: Mozambique (Southern Africa); Madagascar, South Sudan; Sudan (East Africa); Liberia; Benin (West Africa); Morocco; and, Libya (North Africa).

This record number of ratifications reflects the vision and passion that our leaders have in transforming our small, fragmented and uncompetitive national markets into a large, competitive and unified continental market.

This is also reflected in the vision of the African Continental Free Trade Area, which is: ‘Creating One African Market.’

Let me come back to the issue of quality standards. This is pertinent because at the end of the day, the AfCFTA market will fully operate if business takes centre stage and this can only happen if the private sector that is investing in Africa supplies quality goods and services. There are three broad criteria for a company to qualify to make use of the Made in Africa standard which is still under development. These are: quality of products; conformity with AfCFTA rules of origin; and, conformity with intellectual property rights protection. Quality standards organizations from across Africa, with expert guidance from the African Organization for Standards (ARSO), are currently working to develop substantive criteria for the Made in Africa standard in these three broad areas. Once the Made in Africa standard is in force, consumers will be assured of harmonised safety and quality standards of products across Africa.

At the level of industrial development, only companies who, in addition to the quality criteria, meet the provisions of the rules of origin negotiated under the AfCFTA Agreement, will have their products meet the next broad criteria of qualifying to use the Made in Africa standard.

Furthermore, they should also meet the standard of intellectual property rights protection. So, quality will be a key feature of the AfCFTA market in addition to suppression of dumping of industrial goods through transhipment or trade deflection as well as suppression of counterfeit industrial goods which, if left unchecked, can undermine our industrialization drive. As for the counterfeit goods, some are harmful to human health.

At the end of the day, the Made in Africa standard will also contribute to the elimination of technical barriers to trade, bringing us closer to one African market, and in the process, creating a competitive market capable of attracting investments.

The attractiveness will be enhanced by the fact that the Protocol on Investment, earlier mentioned, will facilitate the creation of one African common investment area.

In 2018, our leaders approved the Protocol to the Agreement Establishing the African Economic Community Related to Free Movement of People, Right of Residence and Right of Establishment. This Protocol, which is undergoing signature and ratification, will, as the title states, facilitate free movement of the African people across our continent (ultimately with an identify card issued by the African Union); freedom for an African to reside and set up business in any country across Africa as well as mutual recognition of academic and professional qualifications of Africans.

The Protocol is, in this regard, a key ingredient to the establishment of an African common market. This Protocol may for now look like a far-fetched idea. However, when the African economy grows, and this will be very soon, demand for labour will increase and many African governments will, in response, move towards signing and ratifying this Protocol to meet that demand for labour.

For now, however, we are advocating to member states to facilitate visa-free or issues of visas on arrival to business people investing and trading across Africa as a way of contributing to reducing the cost of doing business.

In a spirit of not taking a linear approach to the establishment of an African Customs Union/Common Market, we are, in collaboration with the European Union and United Nations Economic Commission for Africa working on readiness assessments towards an African Customs Union/Common Market. We plan to finalise the studies by the end of this year. Once a customs union/common market is established, the national external tariffs which currently exist under the African Free Trade Area will be replaced with a Common External Tariff, thereby, again, bringing us closer to a single African market.

This will also be the stage at which we will commission another study on how to incorporate the institutions, staff, programmes and knowledge resources of the eight regional economic communities into the African Customs Union/Common Market. As we live in the digital era, we have also started work, in collaboration with the African Development Bank, to develop a digital single African market.

Africans, especially those in business should take note of these developments. Through these developments, we are creating a large market of 1.4 billion people with huge potential to grow, both in terms of size of the population and market value. The key message to business people here is that to thrive in business in the emerging African environment, each and every business person on the continent should target this market and not individual national markets.

It is in this respect that I always characterize the AfCFTA as the new domestic market for Africa. To leverage this large continental market requires scaling up investments across Africa in production, warehousing and, among others, distribution. And this also means developing partnerships. Working with the African Business Council, we are facilitating partnerships among African businesses which want to expand investments and trade across Africa or export manufactured and agro-processed goods to the rest of the world.

Already, the management of a cashew nut processing company in Tanzania, which has gained a foothold in exporting to the United States of America, recently came to see us, with a request that we facilitate their partnering with African businesses involved in the processing of cashew nuts and other agricultural products.

This pursuit of partnering is driven by the large size of the global cashew nut market. The current global value of the cashew nut industry is one trillion US dollars and will grow as populations around the world expand, compounded by increasing demand for health foods like cashew nuts. In this connection, I invite other African businesses to appreciate that to compete effectively in a large market like the AfCFTA, scale matters and that this can effectively be leveraged with strategic partnerships.

There are other huge growth prospects for growth and partnerships in other sectors such as manufacturing anchored on green minerals which Africa has in great abundance. Furthermore, we have come up with programmes of women in processing and African youth start-ups to leverage the entrepreneurial spirit of these hitherto marginalized but highly productive members of the African society, from which partnerships can emerge.

From the foregoing, it can also be pointed out that one of the common refrains in market analysis is that demography is destiny. Africa is well positioned here. We are a young continent with a median age of 19 years. We currently account for 17 percent of the global population.

The rates will rise to 25 percent and 38 percent in 2050 and 2100 respectively. This positions Africa to be a major consumption hub of the future. Already, demand for industrial goods in Africa is 1.5 times of the global average.

Therefore, it is not just investors within Africa but also foreign investors who should take advantage of the huge and growing opportunities offered by the emerging African market. Indeed, when we bring in the vast natural resource endowments of Africa, it is only capacity to exploit them that limits the scope.

Let me end by saying that way back in 1963, our leaders imagined an African common market. Building on this, future generations of our leaders designed a roadmap towards an African common market.

The process of creating an African common market continues. The current generation of our leaders is executing that roadmap, with appropriate pragmatism and adjustments; and at each stage, amplifying the impact and progress with action, in order to, as, in the words of the Constitutive Act of the African Union: ‘accelerate the political and socio-economic integration of the continent.’ This journey, as indicated, continues. Inter-generationally, the task of creating one African market is shifting to the young Africans, our present and future leaders.

The author is African Union Commissioner for Economic Development, Trade, Tourism, Industry and Minerals

7 COMMENTS

  1. A common currency is also key in completing this transition and we need a currency that delinks us from the hegemony of the USD, an African Union currency or one that is pegged to a gold or natural resource standard seeing we in Africa have abundant natural resources. This is the way to go, we need our own resources based currency to be a hedge against constant exchange rate volatility which is affecting all areas of economic development.

  2. Ctn… We should not belittle the immense challenges we face on infrastructure, the roads and railways to connect one country to another that were there after Independence have been destroyed and vandalized. We need to rebuild this infrastructure and it should not be the role of a single nation alone to do that, no…African nations through this Common Market being discussed must pool resources and use those funds to pay for these large earmarked developmental projects that will not just benefit one country but many. Look at Zambia’s case we are connected to 8 countries and beyond…alot of cargo also goes and comes from as far as Kenya and South Africa, all these nations must contribute funds to see that out roads and railways are maintained and up to international standards.

  3. Ctn… This is what regional sustainable development in a Common Market requires, real practical steps and sacrifices from each country, a true realization that the collective as a whole are the ones to benefit and not rhetoric. Should we truelly accomplish in this task then the sky will be the limit and a very bright future will be there for not just Zambia but all Africans.

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    • If African neighbouring countries can’t live in peace with neighbors then how can they have a common market? Racism against blacks in Tunisia, Xenophobia in South Africa, DRC vs Rwanda war, Islamist extremists in West Africa, etc.
      This won’t work

  4. “As we stand now, the AfCFTA is not a theoretical construct. It is an institution that is operating, backed by policy and legal instruments.” Anything that doesn’t produce results is theoretical.

    Free trade area will just make countries like Zambia dumping grounds for all sorts of goods produced elsewhere

  5. How can you have a common market in a continent where there is no free movement of people? If people need visas to visit other African countries then there is no free movement. You are just writing such artciles to appease your employer and yet deep down you that what you are saying is not feasible. Hypocrite!!

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