Galloping FDI infrastructure in Africa stands to shred red tape blocking intra-African trade
 STEPS are being taken, admittedly small ones, to rectify Africa's key trade problem, that is intra- rather than inter-continental trade.
As Kenyan President Uhuru Kenyatta once said: "There cannot be a good reason why it is easier for us to trade with Asia, Europe and the Americas, than with fellow Africans" in a call to arms to African states to drastically reduce trade barriers.
Easier said than done as opening up economies, that is closing down trade barriers, entails many an important ox being gored - important at least to to the powers that be whoever and wherever they lurk.
This is where it is hoped that the Tripartite Free Trade Area (TFTA) and Continental Free Trade Area (CFTA) schemes will make a big contribution to boosting inter-African trade and responding to Africa's economic development challenges and opportunities.
For a fresh perspective we turn to Nigerian legal intern Ifeoluwa Ogunbufunmi, 23, the winner of the essay competition on the TFTA and CFTA sponsored by the Saana Institute, tralac (Cape Town trade law centre) and CARIS (Centre for the Analysis of Regional Integration at Sussex, U of Sussex).
The Tripartite Free Trade Area Agreement seeks to integrate the economies of the member states of three Regional Economic Communities (REC); Common Market for Eastern and Southern Africa (COMSEA), East African Community (EAC), and Southern African Development Community (SADC) into a free trade area.
"The aim is to reduce obstacles to trade in the RECs that stand as a deterrent to industrial production and the movement of people, goods and services," Ms Ogunbufunmi said.
The TFTA is based on three main pillars: market integration, infrastructure development and industrial development, and covers two phases: the first phase covers negotiations on tariff liberalisation, rules of origin and trade remedies, which are still ongoing, and the second phase will aim at liberalisation of trade in services and trade-related issues, such as intellectual property rights, competition policy and free movement of business people.
The expectations of the TFTA include the increase in trade among the countries involved, and most importantly, gains to consumers, as they get access to cheaper and better quality products.
The more ambitious Continental Free Trade Area (CFTA) aims to create a single continental market for goods and services, "with free movement of business people and investments, which would help turn African economies into a more coherent market", she said.
Last year's African Union (AU) declaration states that a CFTA is essential for the enhancement of intra-African trade and deepening market integration. Contributions such as sustainable growth, employment generation, poverty reduction, inflow of foreign direct investment, industrial development, and most importantly, better integration of the continent into a global economy.
"The need for enhanced trade within Africa cannot be
overemphasised. Both agreements seek to promote intra-African trade by focusing mainly on the following contributions: curbing unemployment by creating jobs and harnessing skills and resources, the improvement and development of trade-related infrastructure," said Ms Ogunbufunmi.
Enhancing intra-trade within Africa towards economic integration will make Africa a giant in regional trade, she said, thus requiring both agreements to harmonise regulatory frameworks and policies, "especially those relating to transboundary issues".
It was also necessary to have the recognition of the private sector as an active partner to both agreements and the involvement of stakeholders, which include the private sector, civil society organisations and all strategic partners.
"Africa can and should harness its ability through these agreements to strengthen the continent in global trade. If others adequately benefit from the wealth of African states, Africans certainly can. The TFTA and CFTA will see that the meeting of African leaders in the near future will be not be to discuss the problems of the continent but its future prosperity,"
How can such fine thoughts and sound argument from the young upcoming generation overcome the vested interests in maintaining the way things are? While Kenya's President Kenyatta is undoubtedly is right to say there is no good reason for such a state of affairs to exist, the fact that it is easier for Kenyan's to trade with Europe, American and China than it is to trade with South Africa, Nigeria and Tanzania is a fact - good reason or bad. And it is a reason that cannot be blamed on old colonial masters because it is entirely of native Africa's making.
But might one find hope in externally financed road and rail infrastructure, which is sweeping the continent largely unnoticed in this context. Last year a 1,344-kilometre rail line opened between the Angolan coastal city of Lobito and Luau on the border with the Democratic Republic of Congo. It is the second longest railway built by a Chinese company in Africa, after the Tanzania-Zambia line opened in 1976.
The new Lobito-Luau line has 67 stations and cost US$1.83 billion; it is the longest, fastest and most modern line in Angola. Beijing provided $500 million in interest-free loans towards construction and technical and equipment support.
This is the first step in a route linking the Atlantic and the Pacific, to be extended through Zambia, Malawi and Mozambique.
In East Africa, China is building a 472-kilometre line between Nairobi and Mombasa that will cut transit from 15 hours to four and a half hours.
Construction began in October 2014 and is due to be completed in 2017, at an estimated cost of $3.8 billion. The plan is for the line to be part of a new network linking Kenya, Rwanda, South Sudan and Uganda.
Next door the Tanzanian government has secured US$10.7 billion in finance from China and Oman to develop a mega-port in Bagamoyo with an annual container handling capacity of 20 million TEU able to dock 8,000-TEU ships within a year or two.
This involves building rail and road links, funded by Hong Kong's China Merchants Holdings International and Oman's State Government Reserve Fund, with the object of competing with Mombasa and Dar es Salaam.
In West Africa, news is just in that China is Ghana's biggest trading partner. "China's non-financial direct investment inflows into Ghana hit US$44.43 million, ranking 5th in that of Africa and number one in that of West and Central Africa," said the Chinese ambassador Sun Boahonghe.
Ms Sun stated that behind the figures are incredible trade cooperation between the two countries that is growing at a fast pace, making Ghana a strategic partner to Chinese businesses.
These developments throughout Africa, taken together, are potential game changers that may bear fruit in surprising ways just another development changed the course of world history 100 years ago.
Like intra-African free trade, this new measure was unpopular with the powers that be because it would destroy a way of life that had persisted for centuries, dividing one class from another.
This is the story of the difficult birth of the armoured fighting vehicle, otherwise known as the "tank". Protected against all logic, but by cohorts of high-born officials and generals, powerful forces of reaction, was the role of the horse in battle.
Generals of the day were horse soldiers and loath to see their beloved animals, which defined their social position, replaced by machines, and themselves by lowly mechanics, whose art - the development and use of the tank - would win the war by breaking the deadlock that had developed in the trenches of western Europe.
That's because only tanks were immune to the rifle and machine gun fire that cut down man and horse before they could arrive fit and in sufficient numbers to take over the enemy's trenches.
In perhaps, the first military application of supply side economics, the Minister of Munitions - tank champion Winston Churchill - simply manufactured tanks en masse whether horse-loving generals wanted them or not. They arrived in such numbers that tank regiments had to be formed simply to take care of them and were soon on the march to victory.
That's the way to look at today's galloping infrastructure gains in Africa. These are the developments that force the hand of the special interests. When the threat to Mombasa and Dar from Bagamoyo becomes clear, officials in all three will be forced to make adjustments and discard rules that were suited for another age.
One can expect such developments to bring a sea change to the business environment of Africa, requiring new methods to meet new circumstances, opening up new trade lanes to new buyers and sellers so many more can take advantage of the obvious opportunities for trade and poverty reduction.
While Ms Ogunbufunmi may lack support with the powers that be at the moment, one's money should be on her vision because it is the only thing that makes sense long term. |
