In Summary
  • The summit also endorsed the Action Plan on Boosting Intra-Africa Trade (BIAT) which identifies seven clusters such trade policy, trade facilitation and productive capacity
  • Collaboration among regional economic blocks through the AfCFTA will also help to accelerate progress in regional projects aimed at unlocking binding constraints to trade and industrial development, such as cross-border infrastructure, helping to connect Africa’s urban centres and to lower the costs of intra-African trade

To turn around the economic fortune of Africa, governments must open up borders to embrace intra continental trade.

This, according to a seasoned economist, is the only way through which Africa can build a large border less market that can perfectly compete with the likes of EU.

However, some economists argue, there are no guarantees that every country on the continent has built enough capacity to protect its industries to benefit from the market.

In a recent communique, Nigeria manufacturers, under the Manufacturers Association of Nigeria umbrella organisation, praised president Muhammadu Buhari for delaying to sign the continental free trade area deal, citing a threat on local industries.

However, that notwithstanding, a number of economists and analysts have come out to support the deal, arguing that African governments have limited choices to pick from when it comes to the transformation of the continent.
Speaking in an interview last week in Kampala, the executive director of African Economic Research Consortium (AERC), Lemma Senbet, said the only way out for African nations such as Uganda is to connect their markets with others so as to allow uninterrupted business flow.

Anything less than that, he said, predicts that the continent chats an uncertain destiny for African economies.

“We have to integrate our economies or disappear into oblivion,” he said, adding that: It is high time we [Africa] integrated our infrastructures, finance [as a sector] and capital markets among other things.”

“Otherwise no matter what we do, it will be business as usual, unless we integrate our economies,” he says but argues that there must be social, economic and political will if the integration is going to achieve anything.

For the continent’s economic integration to succeed, he says, there will be need for abundant political will from leaders.
This is because they will have to cede some of their “unlimited” control and authority, something that, for many, will not be easy.

However, to allay such fears, more than half of the continent’s leaders have endorsed the establishment of the continental integration process.

This, economists and policy analysts, say shows the willingness of political leaders to open up and benefit from the new market.

At a seminar held recently at Lake Victoria Serena Resort in Kigo, Wakiso, policy, analyst argued that what matters at the moment is the political will to see through the economic integration and nothing more.

As for the political federation, although the matter is on the table, can wait for now as the leaders push through economic integration processes.

Continental free trade area
According to the African Union Assembly, the supreme organ that comprises the heads of states from 55 member countries, the desire to have the continent integrate its economy is a no brainer. The issue now is how to go about it smoothly and collectively.

The African Continental Free Trade Area seeks to create a single market for goods and services, with free movement of business persons and investments across the African continent.

This will expand intra-African trade through better harmonisation and coordination of trade across Regional Economic Communities (RECs) across Africa in general.

According to Senbet, the aspirations of the economic integration are achievable because every trader or manufacturer would want to have a wider market for their products.
Importantly, it is worth noting that the 18th Ordinary Session of the Assembly of Heads of State and Government of the African Union, held in Addis Ababa, Ethiopia about five years ago adopted the decision to establish the trade zone.

Therefore, this has given implementers enough time to learn from the best trade blocs such as EU as well as share experiences.
The summit also endorsed the Action Plan on Boosting Intra-Africa Trade (BIAT) which identifies seven clusters such trade policy, trade facilitation and productive capacity.

Other clusters are trade related infrastructure, trade financing, trade information and factor market integration.
The AfCFTA, if achieved, will bring together 55 Africa countries with a combined market of more than one billion people and a combined gross domestic product of more than $3.4 trillion.

According to the Economic Report on Africa 2017 compiled by the UN Economic Commission for Africa, this market promises to enable countries enjoy economies of scale as well as attract solid and large investments.

The report also says that this augurs well with boosting incentives to source inputs and intermediates from within the continent.
Thus, it supports the expansion of manufacturing and enhancing competitiveness and productivity of Africa’s industrial producers.
Collaboration among regional economic blocks through the AfCFTA will also help to accelerate progress in regional projects aimed at unlocking binding constraints to trade and industrial development, such as cross-border infrastructure, helping to connect Africa’s urban centres and to lower the costs of intra-African trade.

LOW SHARE
Despite efforts to industrialise, Africa’s share in world manufacturing and export is still less than 1 per cent, as its exports to the world are poorly diversified and dominated by primary commodities.

At the same time, Africa’s share in global trade in services remain low, standing at an average of just 2.2 per cent over the period of 2010 and 2015, lower than its share in global merchandise trade.

TO BE OR NOT TO BE?

According to Adam Mugume, the Bank of Uganda executive director in charge of research and policy, to be part of a larger market is good but there must be protection as government must ensure that they protect the countries industries by making them competitive.
At a recent economic summit in Kigo, Wakiso District, Mugume said the integration will depend on how governments are prepared to implement policies that will pave the way for industrialisation.
Africa’s problem, he said, is not the lack of policies but a laxity in enforcement, which will be a major setback in the course for economic integration.

iladu@ug.nationmedia.com