As the Organisation of African Unity (OAU), now African Union (AU), celebrates its 60th anniversary from May 23rd to 25th 2023, the achievement of Africa’s economic transformation has taken centre stage, with the beginning of the implementation of the African Continental Free Trade Area Agreement (AfCFTA).
Background:
It has been six decades of operating small fragmented national economies designed by former colonial masters to export mainly raw materials to feed industries in Europe and America, where they are processed into finished goods, with some finding their way back to the African continent for consumption in a market that is now estimated at 1.4 billion people.
Trade among African nations stands at a mere 18%, while the continents of Europe and Asia enjoy 70% and 51% respectively. The vast natural resources and human capital notwithstanding, Africa’s contribution to global trade is just 2%. Studies after studies have recommended that Africa restructures its national economies through diversification and value addition by processing its own raw materials into finished goods for domestic consumption and export. Somehow, this appears to be the most difficult thing for AU member states to do.
Wishful Eyes:
Optimists and believers in Africa’s capacity to manage its own affairs are certain that Africa’s golden age of business and industrialisation have arrived, packaged in the AfCFTA framework and are calling on governments to seize the opportunity to develop and execute national economic policies that create the enabling environment for ease of doing business as well as provide the infrastructure and technology needed to facilitate implementation of the AfCFTA in return for the handsome reward of a combined Gross Domestic Product (GDP) of over US$4.5 trillion.
These lofty projections which are verifiable and based on sound assumptions generated by credible institutions like the Economic Commission for Africa (ECA) and the African Development Bank (AfDB) among others, ought to excite and motivate AU member states and their captains of industry to go to work, to claim their fair share of the African market that is cooking.
So far, the AfCFTA Secretariat has achieved some milestones including the protocols on Rules of Origin, Dispute Settlement, the Schedules of Tariff Concessions and Service Offers. Protocols on Investment, Competition and Intellectual Property have also been concluded, according to accounts rendered at the just ended AfCFTA Business Forum in Cape Town, South Africa.
Given that the 54-member states of the AU that have signed on to the AfCFTA, are at different stages of development with some, still struggling for sheer survival due to internal conflicts (as is raging in the Sudan), jihadist threats to peaceful and free movement of goods and persons; lack of infrastructure, irrational non-tariff barriers, poor or non-existent corporate governance culture, lack of capacity to produce for export and public sector corruption etc, the most incorrigible optimist may be persuaded to kick down to cautious optimism.
There is nevertheless a small number of AU nations including South Africa, Nigeria, Egypt, Kenya and Morocco that have demonstrated readiness and capacity to produce for export and thereby make the most of the AfCFTA. But just five out of fifty-four nations is woefully inadequate. Some extraordinary measures have to be taken by AU member states to bridge the yawning production capacity gaps.
To that end, politically stable countries with the potential to produce for export under the AfCFTA need to be nudged into action from their slumber. Cote d’Ivoir, Senegal, Tanzania, Rwanda, Zambia, Ethiopia, Namibia and Ghana among others, must make extraordinary efforts to build their capacities to produce for export. A closer look at Ghana’s circumstances may drive the point home.
Ghana:
At the 36th Ordinary Session of Heads of State and Government of the AU, held earlier in February, the year 2023 was declared as the year for “Accelerating the Implementation of the African Continental Free Trade Area (AfCFTA)” The declaration coincided with the African Peer Review Mechanism (APRM)’s targeted review of Ghana, on “Corporate Governance as a Catalyst to the Implementation of the AfCFTA.”
The review assessed Ghana’s corporate governance architecture, policies, culture, norms and practices; to find out how they could support the diversification, value addition and scaling up of production to meet the requirements for businesses that want to access the AfCFTA market.
The assessment framework insists on listing in its report, gaps identified and passing them on to the government of Ghana as questions, for which answers shall be required of Ghana’s Head of State by his peers at the next Ordinary Session of Heads of State and Government of the AU. Modeled as a friendly “doctor patient” session, the answers must be truthful to guarantee that validations and proposed solutions by peers, as the case may be, are fit for purpose, with nothing left to chance.
Production Capacity:
Micro, Small and Medium-sized Enterprises (MSMEs), constitute about 80% of Africa’s private sector. In Ghana, the private sector is positioned as the “engine of economic growth”, which allows for reasonable expectations that it would come alive to the challenges of building capacity to produce for local consumption and scale up exports under the AfCFTA.
There is however, evidence that the current capacities of indigenous Ghanaian companies to access and supply the huge AfCFTA market is weak and, in many sectors, non-existent. The lack of production capacity is not peculiar to Ghana. It is the same for the majority of African nations. Simply put, majority of Africa and Ghana’s MSMEs lack the capacity to produce for export in commercial quantities.
Corporate Governance:
There is also evidence that, the fundamental guide to good corporate governance in Ghana, contained mainly in the Companies Act 2019, (Act 992) is erroneously considered by the private sector to be neither friendly nor the go-to-guide on operating a business in Ghana, despite the strenuous efforts policy makers and business sector stakeholders have put in to make it business friendly. This gap requires intense public and business sector education in massive proportions.
And so must the related issues of investment, taxation, immigration, banking and finance; labour laws and unionisation, winding up and liquidation, intellectual property and foreign exchange regulations among others, be refreshed for compatibility with implementation of the AfCFTA.
Good Political Governance:
The role of good political governance in attaining Africa’s economic transformation cannot be overemphasised. It takes good political governance to create the truly enabling environment for investments to be translated into development. It is only when good, open and accountable governance exists, that resources earmarked for massive infrastructure development for instance, would be applied diligently to derive value for money.
With good governance, the ‘Dutch Disease’ and ‘Paradox of Plenty’, that have plagued many resource rich African economies, would give way to domestic mobilisation of massive revenue from natural resources to build the infrastructure required to implement the AfCFTA, for the “Africa We Want”
When traced from the Yamoussoukro Declaration, through the Lagos Plan of Action, the Abuja Treaty to the New Partnership for Africa’s Development (NEPAD), the single missing key success factor to Africa’s economic transformation has been good political governance, sometimes called “the political will”. It apprears African leaders now have political will in abundance, even among former heads of state. They have it for Agenda 2063.
At long last, the vehicle for Africa’s economic transformation has arrived in the AfCFTA. All that is required, is to prepare and get on board with a moral compass. Happy Au Day!
This writer is the Executive Director of Free Trade Network Africa (FTNA), to mark African Union Day 2023. E-mail: [email protected]
