Implementing Africa’s Free Trade Pact The Best Stimulus For Post-covid-19 Economies
Wamkele Mene was recently appointed Secretary General of the African Continental Free Trade Area Secretariat. Because of the effects of COVID-19, free trading for countries that have ratified the agreement cannot begin on 1st July 2020, as was originally scheduled. In this interview with Africa Renewal’s Kingsley Ighobor, Mr. Mene explains the way forward, and how increased intra-African trade can help lift economies post-COVID-19. These are excerpts:
Describe the impact of COVID-19 on AfCFTA so far?
The African economy was set to grow at about 3.4 % in 2019 and projected to increase to 3.9% in 2020, but COVID-19 has had a very negative impact. We know that over 53% of Africa’s exports go to countries, particularly Europe, that are themselves suffering from the pandemic. That has had a subdued effect on our export markets. Our services sector is set to fall by between 20% and 30%, particularly travel and hospitality. We must find ways to mitigate the effects of the pandemic, but the primary focus for now is to save lives.
Given the current situation, any idea when free trading can begin?
We have recommended to the AU Assembly of Heads of State, which is the body with the authority to delay the trading date, that given the current public health crisis and the need for some technical work to be concluded, that we cannot meaningfully trade [under AfCFTA] on 1 July.
Does this mean free trading will not begin until the pandemic is defeated?
We are exploring other ways of continuing our technical work if the pandemic continues. Trade negotiations are very technical. We negotiate in four languages (English, French, Arabic and Portuguese). We must make provision for the different time zones in Africa. And there are requirements for confidentiality. All these have to be taken into account before we can continue the negotiations, if at all we are able to continue the negotiations on virtual platforms. We would like to resume our work as soon as the pandemic is contained. But if for whatever reason, the pandemic continues, which we hope it will not, we are exploring other ways of advancing our negotiations.
The pandemic could potentially decimate African economies. How will you regain momentum?
We have short and long-term tools. A short-term tool is that our Heads of State agreed to establish trade corridors to enable the transit of what the African Union Centers for Disease Control and Prevention (Africa CDC) refers to as “essential goods” or germ-killing products such as soaps that are essential to combat the pandemic. These products get priority transit through the borders, particularly in landlocked countries. Second, the African ministers of trade are exploring the possibility of reducing duties on these essential products so that they become affordable and accessible to people. This is a temporary measure.
In the long-term, it is our view that accelerating Africa's industrial development is very important for reconfiguring our supply chains, establishing regional value chains and boosting the manufacturing of essential value-added products.
There is a review of our intellectual property rights; the extent to which our intellectual property regimes enable Africa to have a generic drug industry to ensure that we have access to affordable healthcare.
Finally, we are looking at the actual AfCFTA agreement. Many countries in Africa do not have the monetary policy space, the fiscal policy space to provide large bailouts in the trillions of dollars for economic recovery. Therefore, for Africa, the stimulus package is the actual AfCFTA, the implementation of this agreement. Increased intra-African trade is what will drive economic development post-COVID-19.
Free trade in Africa was expected to boost intra-African trade from 18% to about 50% within a given timeframe. Is your original timetable still valid?
We have an objective of reaching 50% intra-African trade between now and the year 2030. There is not much time remaining. Apart from COVID-19, reaching 50% intra-African trade, and hopefully above that, depends on our capacity to accelerate regional value chains and the manner and pace in which we implement the agreement.
Will COVID-19 encourage or discourage the more than 20 countries that have not ratified the AfCFTA from doing so?
We hope it encourages them to ratify the agreement. Governments need a stimulus package in a time of an unprecedented crisis as well as tools of trade such as this agreement to accelerate economic recovery. Countries that are outside of the agreement, of course, will not enjoy the benefits of liberalized trade. I think the countries that have not yet ratified are engaged in domestic consultations and processes. So, I would hope that they will look at it very, very positively. The AU Assembly of Heads of State encourages all countries to ratify the agreement.
Are there fears that the pandemic could lead some countries to adopt protectionist policies?
The AfCFTA makes provisions for countries to take temporary measures to protect or advance public health in times of crisis. Our job as the Secretariat will be to ensure that where there are measures in place that have created protectionism, and where they do not meet the necessity for public health, that those measures are removed. So, it will be our job to undertake that monitoring function. This has been the fastest ratified trade agreement in the African Union because countries recognize the importance of an integrated market as opposed to isolationism and autarky.
You have said that digital trade is the next big thing in Africa. Given that most trading in Africa is informal, mostly carried out by women, how does digital trade fit in?
Digital trade is possible by mobile phones that enable access to distant markets. Africa has one of the fastest-growing mobile phone penetration rates. It is a question of leveraging technological innovations that already exist for trading.
Secondly, even in countries where women traders are most active and contribute significantly to the economy—I am thinking here of Kenya, Nigeria and other countries that have many neighbours—there are examples of women in informal trade who use mobile telephones for trading. So, we seek to establish the requisite regulatory environment, legal architecture, for example, for trade to be further harnessed. Also, we need to digitize our customs capabilities to make them seamless across the continent.
Are there any plans to capture the imagination and innovation of young people and bring them on board?
Young Africans and women traders must benefit from the implementation of this agreement, otherwise it will have failed. If it benefits only the big multinational corporations in Africa, it will have failed. We are going to create a platform for engaging young Africans and women in trade. We don't have all the answers. We know that if you go to Kigali, you will find young African software engineers at the forefront of innovation. We want to establish conducive regulatory frameworks within the context of the AfCFTA for young people to benefit from the agreement.
Do you encourage countries to sensitize young Africans many of whom may not be aware of AfCFTA’s lofty goals?
It will be a joint effort between the Secretariat and the individual countries. We will perform advocacy and outreach functions. The Secretariat is only one month old. We take advocacy and awareness raising very seriously. We will engage each of the five regions of Africa. We will have regional outreach and advocacy programs. We will complement the efforts of national governments to raise awareness of the benefits of the agreement, the potential risks, because there are risks, and advise populations—young people, women in trade—on how to take advantage of this agreement.
Do you discourage countries from entering into bilateral trade agreements?
Under the agreement, countries can enter into agreements with third parties provided they give African countries similar or better treatment than they are giving to the third party. So, in terms of AfCFTA law, it is allowed. But as a political objective, it is obviously desirable that countries desist from doing so.
What's your idea of success?
In the short term, success is having an institution that functions smoothly. Building a Secretariat on behalf of 55 countries is not easy. Establishing a dispute settlement mechanism to signal to African investors that they should have confidence in the market. Operationalizing a credible dispute settlement mechanism will be a short-term success. In the long term, on industrial development, having value chains in priority sectors, critical areas such as agro-processing and automobiles would directly impact job creation and economic growth.
What is your message to potential investors and traders outside of Africa?
My message is that we have established an agreement for a single market—from Egypt to South Africa, from Senegal to Djibouti—of 1.2 billion people with a combined GDP of over $2.5 trillion; we have a young African population and a growing middle class whose purchasing power is increasing. Investors will be able to do business on a single set of trade and investment rules across the African continent. Investors will achieve economies of scale and overcome the challenges of market fragmentation.
What is your message to Africans across the continent and in the diaspora?
I think that since the end of colonialism, Africa has not had such a big opportunity as we do now. I think all Africans see this, including myself, of course, as an opportunity to turn a new page on Africa's economic development, on Africa's growth trajectory.
We want to succeed for Africa. It is not going to happen overnight but I think Africa is moving rapidly toward an integrated market. I want to tell the doubting Thomases that we will implement the agreement. This will be a shining example of how a trade agreement is negotiated in that it takes on board the segments of society that have been left behind before. We are determined to ensure that the biggest and the smallest countries benefit from this agreement.
For more information on COVID-19, visit www.un.org/coronavirus