Kobla Nyaletey - Director, Global Markets, Ghana and Nigeria, Barclays Bank
Kwame Nkrumah used the “Africa going together” approach in the political liberation struggle, the continent failed to take a cue economically.
Kwame Nkrumah famously proclaimed on the night of Ghana’s independence that “Our independence is meaningless unless it is linked up with the total liberation of Africa”. Africa, a continent rich in natural resources, holding around 30% of the world’s mineral resources is at the same time home to 5 of the 10 poorest countries in the world. In a recent report, the World Bank projects that a staggering 90% of the world’s poor may reside in Africa by 2030. Barriers to free regional trade, political turmoil, inadequate infrastructure and weak financial institutions remain key hurdles to economic advancement. Despite how grey the narrative looks, Africa’s growth outlook remains buoyant and continues to attract high foreign direct investment. Nkrumah’s vision was to restore Africa’s identity, “We are going to see that we create our own African personality and identity. We again rededicate ourselves in the struggle to emancipate other countries in Africa”. His desire was to see a well-functioning continent capable of harnessing its rich resources to become a global economic powerhouse. Kwame Nkrumah saw the need for neighbourhood/regional political independence – for he knew Ghana cannot be the only free country in Sub-Saharan Africa. He accordingly spent a great deal of his time, Ghana’s time and resources supporting the political liberation of fellow African countries.
The going together, working together approach that Kwame Nkrumah and our political forefathers adopted in the political sphere is needed in economic development. Though recognized, the focus and zeal with which it was deployed in the political liberation struggle has been absent in the economic arena. Over the decades, the need for African economic co-operation and integration has been recognized but implementation has been half-hearted. Africa currently has 8 regional economic blocs, the 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), Intergovernmental Authority on Development (IGAD) 2, Southern African Development Community (SADC). The need to integrate these regional economic blocs and ensure synergy called for the establishment of a continental free trade agreement to create a single market for goods and services.
The birth of the Africa Continental Free Trade Agreement (AfCFTA)
At the heart of most of the social, political, economic challenges that confront Ghana and the entire African continent are jobs, income and access to economic resources. From illegal mining (galamsey) on the banks of river Adaso in Obuasi to struggles with foreigners operating retail shops in Makola in Accra, to some South Africans chasing out Africans in Johannesburg, the common thread is clear – peoples competition and search for jobs and incomes. The continent’s response to these issues needs to be thorough and fundamental. Global developments and advancement is shrinking today’s global pools of employment avenues. Sitting in faraway San Francisco, Airbnb takes out the estate agent in Adabraka. And with the next wave of technology, Papa Nii the taxi driver is at risk from driverless cars. Global competition will continue to increase but to meet the needs of its people in search for jobs and retain economic resources for needed development, the continent must unite and in a focused manner pursue the opportunities at its door step. The Africa Continental Free Trade Agreement (AfCFTA) presents that unique opportunity.
AfCFTA background; The Africa Continental Free Trade Agreement (AfCFTA) is a culmination of a vision set forth nearly 40 years ago in the Lagos Plan of Action, adopted by Heads of State in 1980. That undertaking led directly to the Abuja Treaty, establishing the African Economic Community in 1991. The Africa Continental Free Trade Agreement was brokered by the African Union (AU) and signed by 44 of its 54 member states in Kigali, Rwanda on March 21, 2018. The agreement entails the removal of tariffs from 90% of goods, allowing free access to commodities, goods, and services across the continent. Currently, African countries conduct only 11% of their foreign trade with other countries on the continent. In comparison, Asian countries do 50% of their trade with each other, while European Union countries do 70%. This is what the African Continental Free Trade Area seeks to address; to promote intra-Africa trade by covering a market of 1.3 billion people, and with a gross domestic product (GDP) of $2.5 trillion, across all 55 member States of the African Union. The realization by most African leaders that untapped benefits from a single market for goods and services and intra-Africa trade far outweigh foreign aid played a big part in the ratification of the agreement by member states.
A look at what the AfCFTA means for Africa and benefits for African businesses
When the AfCFTA is implemented, African businesses will enjoy elimination of trade barriers, and cross border standardized licensing of goods and services to ensure easy movement of goods and services across borders. Domestic products in African markets will be given priority than imports originating from outside the continent. The below table highlights certain key features of the Africa Continental Free Trade Agreement.
• A single, bigger, closer market for goods and services
The goal of this colossal pact is to establish a single, large and integrated market which will encompass removal of tariffs and market fragmentation, improve flow of goods, labour and capital, and push the African continent to be competitive in the global marketplace.
• The new trade pact will attract investment
The AfCFTA is expected to boost economic growth and investment into the continent. Low intra-Africa trade and the fragmented nature of the Africa market is a hindrance to sizable investment flows into the continent. One single unified market will send positive signals to investors that the sheer scale that a unified African market presents can now be tapped. Infrastructural developments needed for successful implementation of trade agreement will be synchronised and can be executed on a large scale to be commercially viable.
• The AfCFTA will bring Africa closer together
Nkrumah once said “Africa is one continent, one people, and one nation”. The AfCFTA provides an avenue for the continent to come together and give meaning to Kwame Nkrumah’s statement. And by so doing, the benefits that the AfCFTA offer go beyond economic – there are ancillary political, social benefits to be achieved.