By Albert Muchanga
The Agreement Establishing the African Continental Free Trade Area and its Protocols (AfCFTA Agreement) is currently Africa’s biggest structural transformation programme. Through its focus on developing intra-African trade, it gives impetus to generating higher value and growth from sectors like the creative economy, transport and logistics, innovations, industrialisation, and agriculture, among several others. From this, it is clear it has huge potential to generate opportunities for decent livelihoods and prosperity for the African people. Against this background, its full and effective implementation is of utmost importance.
ETTIM will contribute its part to ensure accelerated and effective implementation of the AfCFTA Agreement. The starting point is to give life to the Purpose, Vision, Values, Mission, Principles of the African Union and the Aspirations of the African Union (AU) Agenda 2063. These, presented in Box 1 below, define the strategic direction of the AU, our continental body in addition to being sources of energy to power the growth of the AfCFTA as an active trading hub.
Purpose, Vision, Values, Mission, Principles, and Aspirations of the African Union
- Purpose
• Defend the sovereignty, territorial integrity and independence of Member States;
• Accelerate the political and socio-economic integration of the continent;
• Promote and defend African common positions on issues of interest to the continent and its peoples; and,
• Encourage international cooperation.
- Vision
An integrated, prosperous and peaceful Africa, driven by its own citizens and representing a dynamic force in the international arena.
- Values
• Respect for diversity and teamwork;
• Think Africa above all;
• Transparency and accountability;
• Integrity and Impartiality;
• Efficiency and professionalism; and,
• Information and knowledge sharing.
- Mission of the African Union Commission
An efficient and value-adding institution driving the African integration and development process in collaborationwith the African Union Member States, the Regional Economic Communities and African citizens.
- Principles
- • Subsidiarity and complementarity with other Organs, Member States and Regional Economic Communities;
• Results orientation, feasibility and impact focus;
• Close coordination and cooperation with Regional Economic Communities;
• Coherence of policies and programmes; and,
• A networking approach that takes advantage of available resources through other players.
- Aspirations of African Union Agenda 2063
- A prosperous Africa based on inclusive growth and sustainable development;
(Source: African Union website and African Union Agenda 2063).
What can be discerned from Box 1 are elements of complementarity, collaboration, alignment, and, among others, result focus all which are key to ensuring programme and organizational development across the AU system. It is these elements which made it possible for the Department of Trade and Industry (DTI) to facilitate negotiations and ratification of the AfCFTA Agreement. DTI was also the interim AfCFTA secretariat before a permanent secretariat was established and started operating in Accra, Ghana.
Beyond this, ETTIM is also contributing in several ways to the development of the AfCFTA market. The starting point is to leverage it as a key component of Africa’s productive transformation through the development of regional and continental value chains as the supply base. The chains are aimed at generating commercial opportunities for manufacturing, agro processing as well as production of intermediate goods. Productive transformation will in turn generate specialization and increased intra-African trade in both final and intermediate goods, thereby removing the race to the bottom and un-competitiveness. This will deepen market resilience by developing regional and continental supply chains as safeguards from unexpected global supply disruptions in future. Resilience is vital to sustaining Africa’s poverty reduction efforts and consequently, our social and economic progress. We have, in this connection, released the first Made by Africa report which identified 94 value chains and prioritised the development of pharmaceutical, clothing, automotive and baby food value chains. We are also on a mapping exercise of previous studies of regional and continental value chain development.
A key component of the Action Plan for the Accelerated Industrial Development of Africa (AIDA) is the development of Small and Medium Enterprises (SMEs). An SME strategy has been developed and is being implemented. At the Niamey Summit on Industrialization and Economic Diversification held on 25th November last year, we teamed up with pan-African financial institutions to address both the skill deficits of this group of entrepreneurs as well as their lack of access to finance. US$2 million will be sent by the pan-African financial institutions to promote skills development among micro, small and medium scale entrepreneurs. This training will also contribute to the on-going efforts of formalizing Africa’s large and growing informal sector. Furthermore, the pan-African financial institutions committed to make available over a period of one year, US$1 billion as credit guarantees to micro, small and medium scale entrepreneurs to enable them borrow from their respective national banks. If the trial run is successful, more and larger guarantees could be rolled out in future.
Africa is a young continent with a medium age of nineteen years. Self-employment and the capacity to generate decent jobs become very important in this context. We are hence coming up with a pan-African model legislation on start-ups which is also aimed at harmonising legislation on start-ups across Africa. The results could in future be transformed into a protocol on start-ups as part of the legal instruments of the AfCFTA. The current AfCFTA draft protocol on investment was started in the then Department of Economic Affairs as the Pan-African Investment Code.
Still on the issue of finance, it should be pointed out that the ETTIM played a cardinal role to establish buy-in from the African Finance Ministers and Central Bank Governors of the Pan African Payments and Settlement System (PAPSS) which is facilitating intra-African trade payments and settlements in local currencies with net settlements in foreign currency. PAPSS will overtime reduce demand for foreign currency in intra-African trade, in addition to reducing remittance costs. The system has also generated competition which will prompt other financial services companies to increase investments across Africa.
Following closely behind this is the development of macro-economic policy harmonisation across Africa. We are in this respect working to establish the African Monetary Institute, forerunner to the African Central Bank. One of the core tasks of the Institute will be to facilitate timely and full reporting by all African Union Member States on their implementation of the macro-economic convergence criteria adopted by the Assembly of the African Union Heads of State and Government in 2022. Policy harmonization will take us closer to a single African market.
For Africa’s industrialization to consolidate, upgrade and accelerate, we are also contributing to protecting the AfCFTA market from trade deflection or transshipments by engaging our trading partners to avoid introducing such practices into the AfCFTA market through bilateral trade and investment initiatives. Trade deflection, if allowed to play out, can both undermine industrialisation and defragmentation of the African economies in addition to reducing the capacity of the AfCFTA market to operate more effectively and develop.
Industrial skills development is equally important. We are in this connection collaborating with the African Capacity Building Foundation to commission a feasibility study on the development of a Pan African Manufacturing Institute with campuses in the regions of Africa. The institute will greatly contribute to training factory workers, supervisors and managers involved in manufacturing and agro-processing as well as contribute to research and development, all of which are vital to innovation, productivity, competitiveness. In addition, it will open up possibilities for increased investments in industrial design. This is indispensable for Africa to embark on product differentiation and become more competitive in her industrialisation process by developing uniquely African brands. Furthermore, we are working with the African Business Council to set up training schools for African women involved in adding value to precious stones.
We are also working on the development of quality infrastructure. We started with the adoption of the African Quality Policy by the Ministers responsible for Industry which was endorsed by the Assembly of Heads of State and Government. The next stage is to develop the Made in Africa standard which will make firms that qualify to use it become more competitive and, in the process, assist them to build brands and increased market share. The standard will also contribute to removing technical barriers to intra-African trade.
We foresee the carbon border tax, pioneered by the European Union, gaining prominence in international trade. In this respect, we are developing a programme on decarbonizing African industry. The Democratic Republic of Congo and Zambia have pioneered this with the electric car battery project. Africa’s abundant strategic and green minerals will be exploited to make decarbonization the anchor to the continent’s green industrialisation.
It is often said what gets measured gets done. Flowing from this, it is important that we develop statistics on intra-African trade flows. In this connection, we have proposed to the AfCFTA secretariat that we create a window on intra-African trade information and statistics in the African Trade Observatory. The Observatory will also have windows on Africa’s trade with the rest of the world, industrialization and investment.
Africa is also positioning herself to compete effectively in the digital future. ETTIM and the AfCFTA secretariat are in this connection working with the Ae Trade Group, a social enterprise, in the development of the Sokoukou e-commerce platform. We have complemented this with a project financed by the African Development Bank (AfDB) to lay foundations for the creation of a digital African single market.
Positioning Africa to progressively reduce heavy reliance on external debts and aid as sources of development finance are equally important elements of accelerating implementation of the AfCFTA Agreement. We are in this connection developing a programme on export diversification and development beyond intra-African trade. This programme will complement Africa’s production and export of commodities with exports of manufactured and agro processed goods as well as services, including carbon trading. Equally important is inclusive growth and sustainable development. A study, to be completed by December, 2023, is underway on this issue. The programme to emerge out of the study will be among the flagship programmes of the next ten-year implementation of the African Union Agenda 2063 to run from 2023 t0 2033.
The lessons learnt from facilitating intra-African trade will be better captured by the AfCFTA secretariat by commissioning an annual report on intra-African trade covering, among others, special themes, directions of trade across Africa as well as their commodity composition, volumes and financial values. We will, in this connection share our experience with the AfCFTA secretariat in the publication of our annual Africa’s Development Dynamics report.
Mobilising the African private sector to develop shipping, railways, road connections as well as inter-country energy linkages around and across Africa is critical to the effective implementation of the AfCFTA Agreement. In addition, wholesalers and retailers across Africa are being encouraged to invest in warehousing and distribution centres which are critical to ensuring constant supplies of goods in intra-African trade. Members of the private sector are also being mobilized to make use of the annual Investment Forum sponsored by the AfDB and the Intra-African Trade Fair, sponsored by African Export Import Bank (Afreximbank) to expand their operations through increased investments and sales. In addition, work is at advanced stages in rolling out, in collaboration with the African Stock Exchanges Association, a Pan African Stock Exchange.
The tagline of the AfCFTA is: ‘creating one African market’. From this, we are commissioning a readiness assessment towards an African customs union/common market. The results of the assessment will provide benchmarks for deeper continental economic integration, and consequently, contribute to accelerated implementation of the AfCFTA Agreement.
Acknowledging the fact that peace and security are indispensable to inclusive growth and sustainable development and that inclusive growth and sustainable development are similarly indispensable to peace and security, we are collaborating with the Department of Political Affairs Peace and security on a programme to leverage the nexus among peace and security on one hand economic integration, inclusive growth and sustainable development on the other hand. Within the spirit of inclusivity, we are also collaborating with the United Nations Economic Commission for Africa to mainstream informal cross border trade into intra-African trade flows.
By way of concluding, let me say that when it comes to strategy formulation and implementation across the world, the trend is that a majority of organizations fail to effectively implement the strategies they formulate. The African Union system suffers the same fate with respect to implementation of decisions, policy and legal instruments. However, the AfCFTA Agreement can avoid a similar fate if we all work in sync to generate new momentum that leads us to leverage Africa’s domestic demand. Our 2019 Africa’s Development Dynamics report shows that domestic demand is the most important driver of the continent’s growth performance. It accounted for 69 percent of annual growth between 2002 and 2018. This demand is now shifting towards more processed goods and is growing 1.5 times faster than the global average. The publication goes on to show that demand for many other products such as motor vehicles, manufactures of metals and industrial machinery is also expanding faster than the global average. From this, it is clear that there is huge potential to generate internally driven inclusive sustainable development across our continent by making the AfCFTA work and deliver to the expectations of ordinary people who want dignity by being liberated from poverty through decent jobs and better living standards.
The author is Commissioner for Economic Development Trade Tourism Industry and Minerals (ETTIM)
